Your Essential Guide to Hiring in the UK for foreign companies!
Yes, you can absolutely hire UK employees as an international company! The UK market is a magnet for businesses looking to grow. However, successfully navigating the compliance-driven landscape requires a strategic approach.
Hiring across borders comes with unique challenges – think foreign tax rules, UK employment laws, and running a compliant global payroll. At Go Ahead HiRe, we help organizations bridge that gap seamlessly before hiring for their new team.
Here’s what international organizations need to consider when hiring in the UK:
1. Choosing Your Hiring Model: Entity, EOR, or Foreign Employer?
Before you interview that perfect candidate, you need a solid legal foundation. Your choice here impacts your speed, cost, and legal exposure. Here are your options:
Establish a UK Legal Entity (e.g., an “Ltd.”)
- Pros: Full control, permanent base, ideal for long-term, large-scale operations. Simplifies banking and benefits.
- Cons: Time-consuming (weeks to months for setup), expensive, and comes with full corporate tax liability.
- Best for: Businesses with a confirmed, long-term commitment to the UK market.
Use an Employer of Record (EOR)
- Pros: Fastest and lowest-risk option. A third-party EOR legally employs staff on your behalf, handling all payroll, tax, and compliance.
- Cons: Higher per-employee cost, less control over the direct employment relationship.
- Best for: Testing the market, hiring a small initial team quickly, or minimizing admin hassle.
Register as a Foreign Employer with HMRC
- Pros: A middle ground approach. You operate the UK’s PAYE (Pay As You Earn) system directly under your foreign entity’s name, avoiding local company setup.
- Cons: Crucial Risk: This path can trigger “permanent establishment” (PE) status, potentially making your entire foreign company liable for UK corporation tax on profits. It requires you to fully manage complex UK employment law compliance internally.
- Best for: Specific scenarios where PE risk is confirmed by a tax specialist to be absent (e.g., purely preparatory roles with no sales or contract authority).
2. Mastering UK Employment Law
The UK is not an “at-will” employment country. Laws here are prescriptive and employee-friendly.
- Mandatory Employment Agreements: A written “Statement of Written Particulars” (employment contract) is legally required under the Employment Rights Act 1996. It must be provided by day one of employment.
- Termination: You can’t simply fire someone without cause and a proper process. Statutory minimum notice periods apply (1 to 12 weeks based on tenure). Employees with two years of service gain significant protection against unfair dismissal claims.
- Statutory Leave: Employers must provide a minimum of 5.6 weeks of paid annual leave (28 days for a full-time worker), inclusive of public holidays. Generous statutory sick pay (SSP) and parental leave provisions also apply.
3. Understanding Tax and Payroll (PAYE)
Compliance with HM Revenue and Customs (HMRC) is non-negotiable.
- PAYE & NICs: You must register for PAYE to withhold income tax and National Insurance Contributions (NICs) from employees’ paychecks. You are also liable for employer-side NICs (currently 13.8% above a certain threshold).
- Employment Allowance: Many smaller employers are eligible for an Employment Allowance, which can reduce your annual employer NICs bill by up to £5,000.
4. Mandatory Statutory Obligations & Cost of Hiring
Beyond payroll, budget for these crucial statutory costs:
- Workplace Pensions (Auto-Enrolment): A key legal obligation under the Pensions Act 2008. You must automatically enrol eligible employees and contribute a minimum of 3% of their qualifying earnings (employees contribute 5%, for an 8% total).
- Employer’s Liability Insurance: A legal requirement under the Employers’ Liability (Compulsory Insurance) Act 1969 for minimum cover of £5 million.
- Health and Safety: Under the Health and Safety at Work etc. Act 1974, you have a duty of care for employee safety, even those working from home.
5. Immigration and Right to Work (2025 Outlook)
Post-Brexit, a skills-based immigration system is in full swing.
- Right to Work Checks: You must conduct checks under the Immigration Act 2014 to confirm legal right to work before employment begins.
- Sponsor Licence: To hire non-UK/Irish citizens, you must apply for a Sponsor Licence from the Home Office.
Conclusion
Expanding into the UK is an exciting venture. The “how” you hire is just as important as the “who”. Understanding these legal and statutory obligations is critical for a smooth launch.
We advise all international clients to engage with local legal and tax specialists to ensure their chosen route is compliant and future-proof. Our specialists at Go Ahead HiRe are here and ready to advise you.
