Considering a PEO in the UK? Here’s everything you need to know

Expanding your business into the United Kingdom is an exciting venture, offering access to one of the world's largest economies and a gateway to European markets. From London to Bath, the UK's rich talent pool, robust infrastructure, and business-friendly environment make it an attractive destination for global expansion. However, hiring employees in the UK comes with its own set of challenges, including navigating complex employment laws, tax obligations, and British cultural nuances unique to England, Scotland, Wales, and Northern Ireland.

One effective way to simplify this process is by partnering with a global Professional Employer Organisation (PEO), also called an Employer of Record, or EOR. An EOR can help you hire and manage UK employees without the need to establish a legal entity, allowing you to focus on growing your business. In this article, we'll explore everything you need to know about using a global PEO in the UK, from understanding how it works to the benefits it offers, so you can make informed decisions as you expand your global footprint.

Here’s everything you need to know about using an international PEO in the UK.

What is a PEO?

A Professional Employer Organization (PEO) is a company that provides comprehensive human resources solutions, often including payroll, benefits administration, compliance assistance, and more. In a traditional PEO arrangement, the PEO enters into a co-employment relationship with your company. This means that while you retain control over daily operations and management decisions, the PEO can use a combination of technology and expertise to streamline and automate many manual, administrative employment-related tasks.

The terms PEO, international PEO, and Employer of Record (EOR) are often used interchangeably in the context of global expansion, even though there are important differences between them that employers should know, especially if they’re considering a partnership with one of these types of service providers to support their global expansion goals.

PEO vs. international PEO vs. EOR

Understanding the differences between a PEO, international PEO, and an EOR is crucial when considering international hiring solutions. While these terms are frequently used interchangeably, they represent different service models.

Professional Employer Organization (PEO)

A PEO operates under a co-employment model, which is most common in the United States. The PEO and its client company share employer responsibilities; the PEO manages HR tasks like payroll and benefits, while the client company handles day-to-day management.

Partnering with a PEO can be part of a global expansion strategy in countries where PEOs operate. Typically, in order to partner with a PEO, you’ll have to establish a local entity in the country first so that you can co-employ your workforce. And PEOs aren’t available in the UK—while you may see UK PEO services advertised, they’re actually international PEOs, or Employers of Record, who act as the sole legal employer for their client companies’ UK employees.

International PEOs or Employers of Record (EORs)

“Global PEO” and “international PEO” are two other names for an employer of record (EOR). An EOR becomes the full legal employer of your international employees, handling associated legal responsibilities including compliance with local labor laws, tax regulations, and benefits administration. 

This allows you to direct the employees' work without the need to establish a local entity; the EOR acts as a partner to ensure that your employment practices meet local laws. In countries like the UK, this gives you the freedom to focus on your business and day-to-day work without worrying about the legal complexities of international employment.

Why use a global PEO (EOR) to hire in the UK?

As a foreign company, there are limited ways to legally hire and pay employees in the UK. Understanding all your options will help you make an informed decision that aligns with your business goals.

Setting up your own legal entity: Complex and time-consuming

Establishing your own legal entity in the UK involves registering a subsidiary or branch of your company with the British government. This process typically includes:

• Registering your company with the English government: Filing the necessary documents with Companies House, the UK's registrar of companies
• Registering for local taxes: Registering for Corporation Tax, Value Added Tax (VAT), and Pay As You Earn (PAYE) for employee income tax
• Setting up local banking and legal compliance: Opening a UK bank account and adhering to local laws and regulations

While this option gives you full control as a UK employer, it's not always ideal. Setting up a legal entity can be time-consuming and resource-intensive. It involves navigating complex legal requirements, which can take several months and significant financial investment. Additionally, without expertise in UK labor and employment laws, your business is exposed to substantial compliance risk, including potential fines and legal penalties if you get any of the process wrong or miss any requirements.

Using a global PEO (EOR): Faster, simpler, and less risky

Partnering with a global PEO (EOR) allows you to bypass the need to establish a legal entity in the UK. Here's how it addresses the drawbacks of setting up your own entity:

• It’s faster. Using an international PEO solution means you can start hiring almost immediately, significantly reducing the time to enter the UK market.
• It’s simpler. The EOR service handles many of the administrative and legal complexities of starting and staffing the UK part of your business, from payroll processing to benefits administration and full compliance with UK employment laws.
• It helps you mitigate risk. Speaking of compliance, by assuming much of the compliance responsibility, the global PEO (EOR) protects your business from potential legal issues related to employment regulations.

Using a global PEO (EOR) is a faster, less complicated way to expand your workforce into the UK, allowing you to focus on your core business activities.

What does an international PEO (EOR) do?

An international PEO provides a range of services that streamline and automate different aspects of international hiring and employment. Here's what a PEO can do for your business in the UK:

Employee onboarding

A global PEO can manage the onboarding process for your UK-based employees, ensuring compliance with local laws and regulations. This includes:

• Preparing and executing employment contracts compliant with UK law
• Collecting necessary employee documentation, like work permits or other employment authorization
• Setting up payroll and benefits enrollment

Payroll services

Handling payroll in a foreign country involves navigating different tax systems and regulations. A global PEO can take care of:

• Payroll processing, including calculating wages and taxes, generating payslips, and making direct deposits
• Tax compliance, like ensuring accurate withholding and remittance of income tax (PAYE), Social Security, and National Insurance contributions
• Providing necessary payroll reports for both the employer and employees.

Access to locally relevant employee benefits

Offering competitive benefits is crucial for attracting top talent. A global PEO can help by:

• Managing enrollment in compliant workplace pension plans
• Providing access to private medical insurance and other health benefits
• Administering statutory annual leave such as holiday pay, maternity leave, paternity leave, and sick leave

Compliance support

A global PEO can help make sure your business complies with all UK employment laws, which can be particularly complex. This includes:

• Drafting employment contracts that meet legal requirements
• Keeping up-to-date with changes in labor laws and regulations
• Advising on issues like notice periods for terminations to avoid wrongful dismissal claims
• Making sure employees receive statutory benefits, like vacation and sick pay

HR outsourcing

By handling day-to-day HR tasks, a global PEO allows your in-house team to focus on strategic initiatives. Services can include:

• Policy development, from creating employee handbooks and workplace policies compliant with UK laws to helping draft internal rules for requesting leave
• Assisting with performance management, dispute resolution, and other employee relations issues
• Ongoing HR support, providing guidance on HR best practices and legal requirements, especially for organizations that don’t have full-time HR teams in the UK

What are the benefits of using a UK EOR?

Partnering with a global PEO (EOR) when expanding into the UK offers several advantages:

Reduced compliance risk

The UK has stringent labor laws that protect employee rights. Noncompliance can result in severe penalties, including fines and legal action. 

A global PEO can help reduce this risk by keeping you up-to-date with the latest regulations, handling legal documents, preparing compliant contracts and policies, and advising on best practices to avoid legal disputes.

Time savings

Establishing a legal entity in a new country can take months. A global PEO allows you to start operations—and start hiring—in the UK almost immediately. It also helps you focus on your core business since you can spend less time on administrative tasks and more on strategic growth.

Cost savings

Setting up a local entity also involves significant costs, such as legal fees, office space, and hiring administrative staff. A global PEO can help you save by reducing some of the overhead associated with establishing a local entity, like physical infrastructure. It can also streamline some of your business costs by offering bundled services that are often more affordable than managing each function separately.

Local expertise and guidance

Navigating the UK's regional nuances and legal complexities is challenging. A global PEO provides cultural insights that help you understand local business etiquette and practices. It also comes with regulatory knowledge, expertise in national laws and regional differences within the UK, and strategic advice and guidance on market trends and employment strategies.

How to choose an international PEO

Selecting the right global PEO (EOR) is crucial for a successful expansion. Here are key factors to consider:

• Industry expertise: Choose a global PEO with experience in your specific industry.
• Service offerings: Make sure they provide all the services you need, from payroll to compliance.
• Technology and ease of use: Look for user-friendly platforms that integrate with your existing systems.
• Reputation: Research reviews and testimonials to assess their track record.
• Pricing: Consider transparent pricing models that fit your budget.

Best global PEOs (EORs) for hiring in the UK

Among the many different EORs that offer services in the UK, these are a few that deserve your business’ consideration—plus the top features they offer:

Rippling

Rippling EOR is more than just a global PEO—it offers global HR, finance, and IT all in one place. Every Rippling app is built on a single source truth for employee data, so when you're ready to scale up and establish your own local entity, transitioning your employees to your own entity takes just minutes. That’s a big part of why Rippling was ranked the #1 Employer of Record service in 2023.

Key features:

• Onboard international employees and independent contractors in 90 seconds
• Pay workers in their local currency in days instead of weeks and without waiting on transfers or conversions
• Automatically file and pay taxes globally
• Streamline and sync all your HR data with payroll, including hours, time off, deductions, and more
• Design worldwide and country-specific policies for employee benefits, leave, and more
• Automate your global compliance work
• Report on all your employee data across the world in one place
• Manage human resources, IT, and finance in one unified system for global employment

Papaya Global

Papaya Global has tools for hiring, onboarding, workforce management, multi-currency payments, and benefits administration in an EOR made for large enterprises.

Key features:

• Automated payroll
• Safe, simple, and fast global payments (in local currency or crypto)
• Integrations with HRIS, expense management, time and attendance, ERP, and financial software
• Dedicated customer success representative

Deel

Deel is a well-known EOR that allows businesses to expand around the world without setting up their own entities in new countries.

Key features:

• Onboarding and offboarding
• App management
• Compliance management
• Streamlined payroll
• Integrations with other HR platforms

Remote

Remote was built for remote teams and employers of remote workers. Its modern platform includes HR, payroll, and benefits features.

Key features:

• Payroll with no interchange fees
• Benefits management
• IP protection
• Self-service onboarding

Oyster HR

Oyster HR offers an EOR that includes hiring, compliance, payroll, and benefits support for companies expanding around the globe.

Key features:

• Document management
• Global payments in local currencies
• Localized benefits packages
• Dedicated customer service for enterprise users

Hire in the UK quickly and compliantly with Rippling

Rippling automatically handles the hard parts of hiring in the UK and around the world.

With Rippling EOR, you can:

• Onboard in minutes. Hire and onboard Canadian employees to maximize productivity on day one. Rippling handles everything from benefits enrollment to assigning required trainings.
• Pay locally in days—not weeks. Pay all of your employees in Canada—and around the world without delay. Rippling does the calculations and money movement for you. You’ll be free to focus on what matters.
• Automate global compliance. Double-checking compliance risks takes time. Rippling runs securely in the background, continuously flagging potential risks.
• Unify HR, IT, and finance. Data entry and duplicate systems waste time. Every team has one source of employee data, so speedy automation can take on manual work.

Frequently asked questions about UK EORs

What’s the difference between a PEO and an EOR?

A PEO offers services in a limited number of countries where both the PEO and the client company share employer responsibilities. This model generally requires that both the PEO and the client have local entities in the country. 

An EOR, on the other hand, becomes the full legal employer of its client company’s employees in a new country. The EOR takes on all employer responsibilities, including compliance with local labor laws, payroll processing, benefits administration, and tax obligations. This way, the client company can hire and pay in a new country without establishing a local entity. An EOR may be called a global PEO or international PEO.

Can a global PEO help navigate UK employment laws?

Yes, a global PEO (EOR) can provide assistance in navigating UK employment laws. They offer expertise in areas such as regulatory compliance, contract law, and employee rights.

Are there any limitations when using an international PEO (EOR) in the UK?

While global PEOs (EORs) offer extensive services, they do have limitations. Certain regulated industries may require specific licenses that a global PEO cannot provide. It’s also important to make sure that any service provider you engage with in the UK complies with GDPR regulations for data protection.

This blog is based on information available to Rippling as of October 29, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.