Employer of Record UK Solutions Explained

Home to the fifth largest economy in the world,¹ The United Kingdom is an attractive country for ambitious business owners and expansion-oriented organizations. Not only does the UK have a highly educated workforce² and a relatively low corporate tax rate, but it's also a central hub for global commerce.

But if your company is thinking about expanding into the UK, you might be weighing up your options for establishing a presence there. For a lot of companies, setting up your own legal entity in the UK can be costly.

Luckily, you can outsource this process and its associated responsibilities to an Employer of Record (EOR).

To learn more about UK Employer of Record services, keep reading. We’ll explain how UK EORs work, what services they offer, and what benefits they provide.

The Benefits of Using an EOR in the UK

An EOR is a third-party organization that serves as the legal employer for a company’s workers in a foreign country, eliminating the need for the client company to go through the hassle and expense of setting up a legal entity on its own.

Setting up an EOR in the UK can be much simpler and cost-effective alternative to setting up a local entity of your own. Specifically, an EOR

• Ensures compliance with UK employment law, including employment contracts, maternity and parental leave, holiday pay  and health and safety legislation.

• Manages payroll, tax and National Insurance contributions.

• Manages the onboarding and offboarding of employees, including drafting up contracts and terminating employment as and when necessary.

• Administers health insurance and any other employment benefits.

In short, your EOR can serve as your in-country expert in the UK. As we’ll explore throughout the rest of this article, this can ensure that you’re offering a compliant, competitive and generally positive employee experience for any staff you choose to hire in the UK.

Let’s take a closer look.

Payroll Automation and Tax Compliance

The UK’s laws around payroll can seem complex, and it’s important to be familiar with them when considering whether to hire here.

The UK requires all employers to deduct and pay employment taxes to HMRC (His Majesty’s Revenue and Customs. This is known as the PAYE (Pay As You Earn) tax scheme. UK workers also have a statutory right to itemised payslips, which detail the number of hours worked and show what deductions have been made from their overall wage/salary (for example, income tax and National Insurance Contributions).

UK payroll laws also require all workers to be paid in GBP (Great British Pounds)

With many EORS offering advanced payroll automation,  they are able to assume the responsibility of ensuring that UK income taxes are paid promptly and in full, ensuring you remain compliant with HMRC rules and regulations.

Compliance with UK Employment Law

Whether it’s providing UK employment contracts, or presiding over the termination of a UK-based employee, there are a number of UK employment laws every UK company must abide by.

Employment contracts in the UK

Specifically, UK workers have a statutory right to an employment contract that lays out the key terms and conditions of employment. A standard UK employment contract must include any of the following.

• Employer's and employee's names.
• Start date of employment or engagement.
• Start date of continuous employment (for employees only).
• Notice period required by both parties to end the contract.
• An end date if it’s a fixed term contract.
• How pay is calculated and the pay scale or rate.
• When and how frequently an employee can expect to be paid (i.e. weekly, monthly)
• Details of how many hours or days a week the employee is required to work.
• Information on holiday pay and public holiday entitlements.
• Job title and/or a short job description.
• Work location(s) and employer's address, or if work locations vary.
• Any extra benefits not mentioned elsewhere.
• Details for temporary roles, like fixed-term contracts.
• Probation period details, if any.
• Mandatory training requirements, even if not paid for by the employer.

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Understanding UK labour and employment rights

Employees in the UK are protected by a number of labour laws and employment rights.

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For example, every business operating in the UK must be familiar with the Equalities Act 2010. This legislation protects UK employees from discriminatory practices and ensures that businesses recognise and adjust for any relevant disabilities their employees may have.

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Under UK employment law, businesses cannot discriminate against employees on the basis of age, race, disability, religious belief, or gender reassignment.

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How an EOR in the UK Can Ensure You’re Compliant With Employment Law

An EOR can help by drawing up employment contracts on your behalf. This ensures that your team members in other countries enjoy a seamless and compliant onboarding experience. Having an EOR in the UK also makes it easier to navigate the complexities of offboarding an employee, whether that’s an employee leaving of their own accord, or providing transition assistance in the unfortunate event that you have to reduce your workforce or make roles redundant. Understanding employment benefits and entitlements in the UK

Every country has a slightly different definition of employee entitlements and benefits, and the UK is no exception. Firstly, it’s worth covering some of the mandatory UK employee entitlements.

The UK minimum wage

The UK national minimum wage is set at different levels depending on the age of your employees. As of the 1st April 2024, the minimum wage will be set at:

• £11.44 for employees aged 21 and over.
• £8.60 for employees aged 18-20
• £6.40 for employees under 18.

The UK government continually monitors and updates the National Minimum Wage and the National Living Wage based on recommendations from the Low Pay Commission. An EOR can help you to stay ahead of any changes or increases.

Maternity leave in the UK

In the UK, employees are entitled to Statutory Maternity Pay (SMP), which is paid for up to 39 weeks. Women who are about to become new mothers are entitled to:

• 90% of average weekly earnings (before tax) for the first 6 weeks
• £172.48 or 90% of your average weekly earnings (whichever is lower) for the next 33 weeks

The UK has, in recent years, also rolled out more legislation entitling both parents to shared parental leave. Shared Parental Leave (ShPP) is currently also £172.48 a week or 90% of your average weekly earnings, whichever is lower.

Sickness pay

UK law requires that all employers offer sick pay of £109.40 a week for up to 28 weeks. In order to qualify for sick pay, your company’s UK employees need to:

• Have an employment contract
• Have done some work under their contract
• Have been sick for 4 or more days in a row (including non-working days) - in the UK, this is known as a ‘period of incapacity for work’
• Harn an average of at least £123 per week

The UK workplace pension

The UK government mandates that all employers must enroll their staff in a workplace pension, and pay an employer’s contribution to that pension. (Note: you’re classed as an employer who has to offer a pension if you also deduct tax and National Insurance).

A worker in the UK has to be making at least £10,000 a year to qualify for a workplace pension and must be aged between 22 and the UK State Pension age (currently 66 years)

Statutory annual leave entitlement in the UK

Employees based in the UK are typically entitled to 28 days of holiday if they work a standard five day week. It’s up to each company to decide whether to include bank holidays as part of your UK workers’ annual leave entitlement.

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Of course, you can offer your UK-based employees more than the statutory minimum. Indeed, many prospective employees may be more attracted to a role with a higher annual leave allowance, as this indicates you offer a good work/life balance in your company.

Understanding the different entitlements and benefits in the UK

As we’ve laid out in this section, the UK has its own specific definition of key employee entitlements. However, if you’re looking to be an attractive employer in the UK’s competitive and high skilled labour market, it might be worth going further with your benefits.

For example, because the UK has a National Health Service (NHS) it’s not as common for UK employers to provide health insurance benefits as standard. However, nothing is stopping you from offering additional health or dental insurance benefits to your UK-based employees.

Likewise, you can offer additional holiday allowance, gym membership or mental health support as part of your employee package in the UK. This demonstrates your willingness to go above and beyond other employees in your space.

Indeed, this can sometimes be a great way to increase employee retention, as companies that offer health insurance as extra perks increase their attractiveness to some candidates.

How an EOR can improve employee experience for your UK workers

In today’s labour market, you need to provide an excellent employee experience if you want to retain top talent. This is especially true in the UK, as its workers may be attracted to a wide range of global and remote employment opportunities.

A trusted EOR UK service can help ensure your employees are satisfied and engaged in their positions. They can also help your company overcome any potential language barriers.

The Benefits of Adopting UK Employer of Record Solutions For Your Business

Partnering with an EOR UK service can provide many benefits. Most notably, you’ll enjoy a quicker expansion into the United Kingdom since you won’t have to bear the cost and complexity of establishing a legal entity on your own.

This means that an EOR partnership can also help you save money while enabling you to get your UK team up and running faster.  Not only will your EOR reduce the required upfront investment involved in hiring workers abroad, but it will also assume liability for the contractual, compliance and HR related issues we’ve explored in this article. . While you’ll need to pay your EOR’s fees, these are less than the ongoing administrative costs of maintaining a legal entity in the UK.

Implementing EOR Solutions: A Practical Guide for Success

We’ve covered the benefits of using an EOR. But how do you go about finding the right EOR for your business needs?

First, you must select an EOR service with local expertise, an easy-to-use platform, and excellent customer service. At Omnipresent, we’re proud to report that we provide all three.

Once you choose your EOR, you can sign your contract and start onboarding. During this time, you’ll get to know your EOR’s point of contact, discuss your business goals, and upload your global employment data to their platform.

After the initial onboarding process, you can start hiring workers in the UK and enacting your expansion initiatives. As you do, you’ll enjoy hands-on support from your EOR’s team every step of the way.

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