Expanding your business into the UK market can be a strategic move for growth, but navigating the complexities of hiring employees there — without a physical presence or local entity — can be daunting. Fortunately, using an Employer of Record (EOR) can make this process seamless. An EOR enables international businesses to hire employees in the UK without the need to establish a local legal entity.
In this step-by-step playbook, we’ll guide you through the process of hiring in the UK using an EOR, covering everything from legal requirements to tax considerations, so you can focus on growing your business rather than getting bogged down in legal and payroll complexities.
What is an Employer of Record (EOR)?
An Employer of Record (EOR) is a third-party service provider that assumes the legal responsibilities of an employer on behalf of your company. While your business retains control over day-to-day work activities, the EOR takes care of compliance, payroll, employee benefits, taxes, and other employer obligations.
This means that if your business is based overseas and you want to hire employees in the UK, the EOR will become the legal employer, assuming all legal obligations and ensuring compliance with UK employment law.
Why Should Overseas Businesses Use an EOR to Hire in the UK?
There are several advantages to using an EOR when hiring in the UK:
- Cost Savings:
Setting up a UK legal entity can be expensive and time-consuming. By using an EOR, you eliminate the need for office space, legal consultations, and the extensive paperwork associated with registering a company. - Faster Market Entry:
With an EOR, you can hire employees in the UK quickly — often within days or weeks. Without an EOR, it may take several months to set up a company and obtain necessary permits and registrations. - Compliance and Risk Mitigation:
The UK has strict employment laws, and failing to comply with them can result in heavy fines. An EOR ensures that your business complies with UK tax laws, employee rights, and payroll regulations, minimizing your legal risks. - Payroll and Benefits Management:
The EOR handles all payroll-related tasks, including salary payments, tax withholdings, national insurance contributions, and statutory benefits. This removes the complexity of understanding UK tax codes and employee benefits.
Step 1: Choose the Right EOR Provider
The first step in hiring in the UK without setting up a company is choosing a reliable and experienced EOR provider. Here are key factors to consider when selecting an EOR partner:
- Experience in the UK Market:
Ensure the EOR has expertise in UK employment laws, tax systems, and compliance regulations. Look for a provider that understands the nuances of hiring in the UK and can offer tailored advice. - Service Offerings:
Different EOR providers offer different services. Choose one that covers all aspects of employment, including payroll, benefits, compliance, and HR support. - Scalability:
Consider whether the EOR can handle your company’s growth. If you plan to expand your workforce in the UK, ensure the EOR can scale with you. - Reputation and Reviews:
Research online reviews and testimonials to ensure the provider has a strong reputation and has successfully worked with other international businesses.
Step 2: Employee Onboarding and Contracts
Once you’ve selected an EOR, the next step is to onboard your employees in the UK. Here’s how this process works:
- Job Description and Role Agreement:You’ll work with the EOR to create job descriptions that align with UK labor laws. The EOR can also help craft employment contracts that ensure your employees receive the right benefits and compensation.
- Offer Letter and Legal Compliance: The EOR will send out offer letters to your prospective employees, ensuring the contracts meet the legal requirements set forth by UK employment law. This includes aspects like minimum wage, holiday entitlement, and statutory sick pay.
- Employee Documentation: Employees will need to provide necessary documentation such as proof of identity, eligibility to work in the UK, and bank details for payroll purposes. The EOR will help gather and verify this information.
Step 3: Payroll and Tax Compliance
One of the biggest advantages of using an EOR is that it handles payroll and tax compliance for you. Here’s what happens during this phase:
- Salary and Benefits:
The EOR ensures that employee salaries comply with UK pay standards and tax thresholds. They will also take care of statutory benefits like annual leave, maternity/paternity pay, sick leave, and pension contributions. - National Insurance and PAYE:
In the UK, employees must pay National Insurance contributions, and employers are responsible for deducting income tax through the PAYE (Pay As You Earn) system. The EOR handles these deductions on your behalf. - Tax Filing and Reporting:
The EOR takes on the responsibility of submitting the necessary payroll reports to HMRC (Her Majesty’s Revenue and Customs), ensuring that all payments are made on time and in the correct amounts. - Compliance with Employment Law:
The EOR ensures that all employment practices are in line with UK labor laws, including worker rights, health and safety regulations, and anti-discrimination policies. This helps mitigate the risk of legal disputes.
Step 4: Ongoing HR Support and Employee Relations
The EOR will continue to provide HR support for your employees in the UK throughout their employment. This includes:
- Employee Benefits:
Offering healthcare, pension contributions, and other statutory benefits according to UK law. - Dispute Resolution and Legal Support:
If any employment disputes arise, the EOR can act as the employer in resolving issues, mitigating the risk to your business. - Employee Termination:
If an employee needs to be let go, the EOR will ensure that the termination process is handled in compliance with UK law, including severance pay, redundancy rights, and necessary documentation.
Step 5: Scaling Your Team in the UK
As your business grows, your EOR provider can easily scale to meet your needs. You can expand your team, onboard new hires, and ensure continued compliance with UK regulations without the need to set up a legal entity.
An EOR allows you to test the UK market with a flexible, scalable solution. You can hire employees for short-term projects, full-time positions, or contract roles without the commitment of setting up a permanent business presence.
Conclusion: Why an EOR is the Best Option for Hiring in the UK
Hiring employees in the UK without setting up a company is not only possible but also easier and more efficient with an Employer of Record (EOR). By using an EOR, overseas businesses can bypass the complexities of UK company formation, legal compliance, and payroll administration, allowing them to focus on driving their business forward.
Whether you’re expanding your team for the first time or entering the UK market as part of a global strategy, working with an EOR makes the process simple, fast, and compliant.
Take Action Today: Start Hiring in the UK with an EOR
Ready to start hiring in the UK without the hassle of setting up a company? Contact us via Email: [email protected] to find out how we can help you grow your team quickly and compliantly.
