Hire Employees in the United Kingdom

The UK is one of the few markets where hiring without a local entity is technically possible: an overseas company can obtain a PAYE reference and operate UK payroll. In practice this creates an administrative burden most companies underestimate, real-time PAYE reporting every pay run, auto-enrolment duties, and exposure to the Employment Rights Act 2025 without local HR support.

An Employer of Record signs the UK contract, operates PAYE and National Insurance, runs pension auto-enrolment, and holds the employment-law risk. Given the pace of UK reform through 2026 and 2027, that last point is doing more work than it used to.

IR35 matters more than most incoming companies expect. For medium and large end clients the responsibility for determining employment status, and the tax liability if that determination is wrong, sits with the client, not the contractor. A US company engaging UK contractors can inherit a PAYE bill for work it believed was outsourced.

Break-even rule of thumb: EOR fees begin to exceed the running cost of a small UK entity somewhere between 15 and 20 employees. Model both before committing, see EOR vs Entity for the full comparison, and plan any later migration so employees keep seniority.

Already paying someone in the United Kingdom as a contractor? Run the risk check before the arrangement is tested by an audit.

Not sure which model fits? A GX specialist will cost EOR vs entity for your exact headcount, free, within two business days. Get a model recommendation

The National Living Wage is the statutory floor for workers aged 21 and over, with lower National Minimum Wage rates for younger workers and apprentices. Rates change each April.

There is no statutory pay frequency, but monthly is near-universal for salaried roles. Itemised payslips are a legal right and must show gross pay, each deduction with its reason, and net pay. Employees must receive them on or before payday.

The employer cost structure is simple but has one feature worth planning around: employer National Insurance has no upper earnings limit. Unlike most European systems where employer cost caps out, the UK charges 15% on everything above £5,000. A senior hire costs proportionally the same as a junior one, which is unusual and affects how you model executive packages.

Employment Allowance of £10,500 offsets employer NI for eligible employers, and the previous £100,000 liability cap was removed, so businesses of any size can now claim.

UK employer National Insurance has no upper limit, which sets it apart from most systems in this dataset. The employee rate drops to 2% above £50,270; the employer pays 15% on every pound above the £5,000 Secondary Threshold at any salary level. That threshold is frozen until April 2031. The April 2025 change fell hardest on lower salaries, the rate rose from 13.8% to 15% while the threshold fell from £9,100 to £5,000, lifting employer cost by around 50% on a £20,000 salary but only 14% on £100,000. Any model built before that date understates most for part-time and lower-paid staff. The Employment Allowance is the offsetting relief and it is widely under-claimed: it doubled to £10,500 and the £100,000 eligibility cap was removed, so employers of any size can claim. For three employees on £30,000 it cuts a £11,250 bill to £750. It must be claimed through the Employer Payment Summary and cannot offset Class 1A or 1B.

Four representative profiles, costed with the 2026 contribution rates above. Salaries are illustrative market midpoints, not GX operating data, use them to see how the on-cost percentage behaves as pay rises, not as a salary benchmark for a specific role. Employer National Insurance at 15% on everything above the £5,000 secondary threshold, uncapped, plus 3% auto-enrolment pension on qualifying earnings between £6,240 and £50,270. Neither element is capped on the NI side, but pension contributions stop at the £50,270 upper limit, so the percentage barely moves. For real market data on your roles, ask for a costing.

Benchmarks pending GX UK payroll data. Note that UK employer NI has no earnings ceiling, so unlike capped systems the on-cost percentage stays close to 15% at every salary level.

Scotland is the trap for incoming employers. Scottish income tax is determined by where the employee lives, not where the employer is based, and HMRC signals it through an S-prefixed tax code. Payroll must handle both regimes.

The personal allowance tapers away above £100,000 at £1 for every £2 of income, creating an effective marginal rate well above the headline additional rate between £100,000 and £125,140. This affects senior-hire package design.

A written statement of employment particulars is a day-one right. Most employers issue a full contract instead, which satisfies it. Employment is indefinite by default.

Probation is not a statutory concept in the UK. Three to six months is customary, usually with a shorter contractual notice period during the period. What matters more is the two-year qualifying period for ordinary unfair dismissal, which the Employment Rights Act 2025 is phasing out, making day-one protection the direction of travel and probation a weaker safeguard than it once was.

Workers are entitled to 11 consecutive hours of rest between working days, one uninterrupted 24-hour rest period each week, and a 20-minute break where the working day exceeds six hours. Night workers have additional protections and a right to a free health assessment.

No statutory overtime premium is a genuine difference from most of Europe and Asia. Where overtime is paid, the rate comes from the contract. What cannot be avoided is that overtime counts toward the 48-hour average unless a valid opt-out is in place.

Statutory annual leave is 5.6 weeks, which is 28 days for someone working five days a week. It applies from the first day of employment, there is no qualifying period.

The employer may count bank holidays towards the 5.6 weeks. That is the point most often misread by employers from jurisdictions where public holidays sit on top of the annual entitlement. With eight bank holidays in England and Wales, a contract offering "28 days including bank holidays" is at the statutory floor, not above it.

Part-time employees accrue the same 5.6 weeks pro rata, so a three-day week gives 16.8 days.

The statutory maximum is capped at 28 days, so a six-day week does not generate 33.6.

The UK has eight bank holidays in England and Wales, nine in Scotland and ten in Northern Ireland. There is no statutory right to take them off, they normally count toward the 5.6-week annual leave entitlement unless the contract says otherwise.

The statutory package is pension auto-enrolment, statutory sick pay, and the family leave entitlements. Employers must enrol eligible workers into a qualifying pension scheme and contribute at least 3% of qualifying earnings.

Private medical insurance is the most common enhancement at professional level, and is a taxable benefit in kind attracting Class 1A National Insurance at 15%. Group life assurance, income protection and enhanced pension contributions follow closely.

Enhanced parental leave, typically full pay for a period well beyond the statutory minimum, has become a significant differentiator in competitive sectors, and is often the benefit candidates ask about first.

From April 2026 employer reimbursements for homeworking equipment, eye tests and flu vaccinations become exempt from tax and National Insurance when processed through payroll, which slightly reduces the cost of equipping remote staff.

Contracts frequently specify longer, and the contractual period governs where it exceeds the statutory minimum. Employees must give one week after a month of service unless the contract says more.

Redundancy

Statutory redundancy pay requires two years of service and is calculated by age band and years of service against a capped week’s pay of £751 from 6 April 2026, giving a maximum statutory payment of £22,530. Collective consultation obligations apply at 20 or more proposed redundancies, and from April 2026 the maximum protective award for failing to consult doubled from 90 to 180 days’ pay per affected employee.

Unfair dismissal

The maximum compensatory award is £123,543 or 52 weeks’ gross pay, whichever is lower, from April 2026. In 2027 the qualifying period falls from two years to six months and the compensatory cap is removed, the single largest change on the horizon for employers hiring in the UK.

The route is employer-tied: the sponsor issues a Certificate of Sponsorship for a specific role at a specific salary, and a change of employer requires a new sponsorship. Obtaining a licence from scratch typically takes several weeks and involves a compliance assessment.

UK corporation tax and an extensive treaty network mean the analysis usually turns on the dependent-agent test. Engineering, support and back-office roles are generally low risk; UK-based sales roles concluding contracts are the common trigger.

The middle category is what catches foreign employers. A “worker” is not an employee but still gets holiday pay, minimum wage and pension auto-enrolment. Many arrangements intended as self-employment land here.

Right-to-work checks must be completed before the first day. A correctly performed check gives a statutory excuse against a civil penalty; a retrospective one does not.

Work backwards from the start date. For a local hire through an EOR, 1 to 2 weeks is realistic once identity documents, bank details and the signed contract are in hand. For a foreign national requiring a permit, add the immigration timeline set out above before promising a date.

Confirm three things before making an offer: that the candidate has the right to work in the United Kingdom; that the salary clears any statutory or sector minimum that applies to the role; and whether the work involves concluding contracts locally, which can create a taxable presence for the client entity.

Collect the statutory registrations early. Social security enrolment, tax registration and any mandatory insurance generally must be in place before the first payroll runs, not after it.