Employer of Record in United Kingdom

The United Kingdom has always been a strong, stable and progressive hiring market because it offers a gateway into Europe, and is backed by strong trade relations. Companies that enter the UK labor market find a large pool of local expertise that are skilled in financial services, technology, life sciences, and professional services.

For centuries, the UK has had comprehensive labor laws that protect UK workers. These protections are so much a part of the UK working culture that they are automatically assumed by companies and workers alike. Global hiring will be strictly monitored according to the local employment laws, and business operations should aim to understand the implications of these UK labor laws before finalising employment contracts.

Business operations are attracted to the UK for high-level skills that sit mostly in finance and technology hubs like London and Manchester, with Birmingham and Bristol also offering attractive opportunities. Birmingham, in particular, is seeing a huge increase in demand for the gaming market, software development, manufacturing, and fintech.

Currently, the UK has a shortage in the healthcare sector and the engineering and construction industry. Remote workers and contractors fill many of these scarce-skills positions, but the UK has also opened these industries to foreign professionals through the UK work visa.

For a smooth transition into the UK labor market, an Employer of Record (EOR), such as Rivermate, is a company that legally employs workers on your behalf and takes care of UK employment contracts, UK payroll, and tax compliance. This includes remote workers, contractors, or full-time employees. This setup allows you to hire local talent, test the market, and scale quickly without the cost of setting up a legal entity in the UK.

How an Employer of Record (EOR) Works in United Kingdom

Using an EOR in the UK follows a straightforward process. The EOR becomes the legal employer, while you focus on managing your team.

This is how it will work:

• You Find the Candidate: You are responsible for sourcing and selecting the person you want to hire.
• The EOR Hires the Candidate: The EOR provides a UK-compliant employment agreement and officially hires the employee.
• Onboarding: The EOR manages the onboarding process, ensuring all necessary paperwork is completed correctly. This process takes 1-2 weeks if the worker is a UK resident, and 3-4 weeks if the worker is outside the UK.
• HR and Payroll: The EOR handles all HR administrative tasks. This includes processing payroll, managing employment taxes, and making National Insurance contributions, as required by UK law.
• Compliance: EOR services ensure that all aspects of the employment relationship comply with UK employment laws, such as the Employment Rights Act 1996 and the Equality Act 2010. You can find more information on employer responsibilities on the official UK government website (https://www.gov.uk/browse/employing-people).
• You Manage the Employee: You direct the employee's daily tasks, projects, and performance, just as you would with any other team member. Anytime you want to check up on employment matters or payroll processing, you can do this on Rivermate’s easy-to-use platform.

Why use an Employer of Record in United Kingdom

Using an EOR in the UK is about cost savings and risk reduction, especially if you are not familiar with UK employment regulations. This makes expanding your global team much simpler.

Here are some key reasons to use an EOR:

• Stay Compliant: Adherence to UK employment law is strictly monitored by the government. An EOR understands the regulations, from working hours to pension contributions, and ensures you are always compliant. This includes adhering to laws like the National Minimum Wage Act 1998.
• Save Time: An EOR handles the administrative tasks of employment. This frees you up to onboard new team members quickly and add to your UK workforce within 1-2 weeks.
• Offer Better Employee Benefits: EORs can often provide competitive benefits packages, including health insurance and pension schemes, helping you attract and retain top talent.
• Reduce Risk: The EOR takes on the legal responsibility for employment, eliminating discriminatory practices that will end up costing you financially (such as misclassification of employee status).

Rivermate's transparent pricing model eliminates complexity with a single, competitive monthly fee per employee. Unlike traditional PEO providers, our pricing in United Kingdom includes comprehensive HR support, benefits administration, compliance management, and access to our proprietary dashboard for real-time workforce analytics. No hidden costs, no setup fees—just straightforward pricing that scales with your business needs while ensuring full legal compliance in United Kingdom.

When you hire employees in the UK, the first thing to keep in mind is that the job market is highly competitive. In-demand candidates (especially those with scarce skills) tend to accept job offers quickly. This means you could lose your preferred candidate if you haven’t provided a competitive compensation package upfront.

One surprising detail for first-time employers in the UK is that the nature of contract work is often tested through labor audits. These audits ensure that ‘off-payroll’ workers pay the same income tax as employees (as per IR35). Therefore, it is not automatically the best option for hiring workers in the UK. The definitions for a contractor are strictly applied, and companies can end up paying misclassification back pay and penalties.

Also, UK workers are very aware of their rights and the mandatory benefits provided for by their labor laws. Employment offers should include all these mandatory benefits, and elements like performance bonuses, which are a huge drawcard for top talent.

Employment contracts & must-have clauses

In the UK, you must provide employees with a written statement of employment particulars. This document serves as the employment contract.

Here are some essential clauses to include:

• Job Title & Responsibilities: Clearly define the employee's role and their main duties.
• Salary & Payment Terms: Specify the rate of pay, salary, and any bonus structures.
• Working Hours: Outline the expected working hours, including start and end times.
• Holiday & Sick Leave: Detail the holiday entitlement and sick pay policy. Full-time employees are legally entitled to a minimum of 28 days of paid holiday per year, which can include public holidays.
• Notice Periods: Specify the notice required from both you and the employee to terminate the contract. For employees who have worked for you for one month to two years, the statutory minimum notice period is one week.
• Pension & Benefits: Include information on pension contributions and any other benefits like private healthcare.
• Confidentiality: Add a clause to protect your business's sensitive information.

Probation periods

Probation periods are common in the UK and are used to assess a new employee's suitability for a role.

• Length: A typical probation period lasts between three to six months.
• No Legal Requirement: While not legally required, it's a standard practice for many employers.
• Employee Rights: Employees on probation still have statutory rights, such as the right to the National Minimum Wage and protection against discrimination.
• Dismissal: It is easier to dismiss an employee during their probation period if they are not a good fit for the role.

Working hours & overtime

The Working Time Regulations 1998 govern working hours in the UK.

• Weekly Limit: Most employees cannot work more than an average of 48 hours per week.
• Opting Out: Employees can choose to work more by signing an opt-out agreement.
• Rest Breaks: Workers are entitled to a 20-minute rest break if they work for more than six hours in a day.
• Overtime Pay: There is no legal requirement to pay employees for overtime. However, their average pay for the total hours worked must not fall below the National Minimum Wage. Any agreement on overtime pay should be included in the employment contract.

Public & regional holidays

The number of public holidays, known as bank holidays, varies across the UK.

• England and Wales: 8 bank holidays
• Scotland: 9 bank holidays
• Northern Ireland: 10 bank holidays

Here is a list of the 2025 bank holidays for England and Wales:

Hiring contractors in United Kingdom

In the UK, there is a particular focus on ensuring that contractors operating through intermediaries (such as Employer of Record services) pay the same taxes as other employees.

Companies assume they can hire self-employed workers and that these workers will then pay their own taxes. Another reason for doing it this way is that contractors are not entitled to the same rights as employees, such as the right to mandatory holiday pay.

For contractors to be correctly classified in the UK, they must pass the key-status test set by Her Majesty’s Revenue and Customs (HMRC). A contractor must have full control over their own work, the right of substitution (someone else can do the work), and mutuality of obligation (the right to accept/decline certain tasks). Any worker who fails this test can be reclassified as an employee.

With an Employer of Record, you won’t need to manage this risk. Whether it’s an independent contractor, member of a distributed team, or full-time employee, our UK experts ensure they meet the right classification criteria.

Managing compensation and payroll in the United Kingdom means following a structured system. The government's Pay As You Earn (PAYE) system is at the core of this process. As an employer, you calculate and deduct the necessary taxes and contributions from your employees' pay before you pay them. You then send these deductions to HM Revenue and Customs (HMRC). This process ensures that employees' income tax and National Insurance contributions are paid directly to the government.

Payroll cycles & wage structure

In the UK, you typically pay employees on a monthly cycle. Payments are usually made between the 25th and 30th of the month. While weekly and fortnightly pay schedules exist, monthly is the most common for salaried employees.

An employee's pay includes their basic salary plus any additional earnings. These can include:

• Overtime pay for extra hours worked
• Bonuses for performance
• Allowances for specific needs like travel or housing

You must provide a detailed payslip for each pay period that shows the gross pay, all deductions, and the final net pay.

Overtime & minimums

Overtime in the UK is handled through the employment contract. Any work done beyond standard hours is considered overtime. The specifics of overtime pay are determined by the agreement between you and your employee.

The UK has a National Minimum Wage and a National Living Wage, which are updated regularly. The rates depend on the employee's age. As of April 2025, the minimum hourly rates are:

• £12.21 for employees aged 21 and over
• £10.00 for employees aged 18 to 20
• £7.55 for employees aged 16 to 17
• £7.55 for apprentices

Employer taxes and contributions

As an employer, you are responsible for several contributions. These are calculated as part of your payroll process.

Employee taxes and deductions

Employees also have deductions taken from their gross pay. You are responsible for calculating and withholding these amounts.

In the United Kingdom, you must provide certain benefits and leave to your employees. Understanding these legal requirements is the first step. Many employers also offer extra benefits to attract and keep the best talent. This approach shows you value your team and invests in their well-being.

Statutory leave

By law, you must provide several types of paid leave.

• Annual Leave In the UK, full-time employees get 28 days of paid annual leave. This can include public holidays. Part-time workers receive the same leave on a pro-rata basis.
• Sick Pay You are required to pay Statutory Sick Pay (SSP) to eligible employees who are off work due to illness. From 6 April 2026, SSP is payable from the first full day of sickness absence and will be available to all employees regardless of earnings. The weekly rate of SSP will be £123.25 or 80% of the employee’s average weekly earnings, whichever is lower.
• Maternity and Paternity Leave Eligible employees can take up to 52 weeks of maternity leave. For the first six weeks, they receive 90% of their average weekly earnings. Paternity leave is up to two weeks.
• Parental Leave Parents can also share up to 50 weeks of leave and 37 weeks of pay through Shared Parental Leave (SPL).
• Carer's Leave Employees can take up to one week of unpaid leave per year to care for a dependent.

Public holidays & regional holidays

While employees are entitled to 5.6 weeks of paid leave, there is no automatic legal right for them to have public holidays off. An employee's contract should state whether they get paid time off for these holidays. Below are the public holidays for 2026.

Typical supplemental benefits

To compete for top talent, many companies offer benefits beyond the legal minimum. These are known as non-statutory or fringe benefits.

How an EOR can help with setting up benefits

As a legal employer based in the UK, an Employer of Record understands the UK labour laws, and mandatory benefits better than someone who isn’t familiar with the country’s employment regulations. The benefits of having an expert in the country falls to you when you want to either employ someone living in the UK, or send a top talent to the UK to work on a project.

Here's how an EOR helps with benefits:

• Provides Competitive Packages EORs have experience in the local market. They can advise you on the supplemental benefits that attract top candidates in your industry.
• Simplifies Administration From enrolling employees in pension plans to managing leave requests, the EOR handles the day-to-day work. This frees you up to focus on your business goals.
• Offers Better Rates Because EORs manage benefits for many employees across different companies, they can often access better rates for insurance and other perks.

Termination procedures are not the first thing you think about when you’re onboarding a new team member. However, it is often the stage of employment that costs foreign companies the most. The UK is an employee-friendly environment, and they heavily protect the rights of its workers. This is especially true when it comes to termination. Companies are expected to comply with notice periods and severance pay (if any is due).

Notice Periods

In the UK, you must give employees a minimum amount of notice before their employment ends. This statutory notice period depends on how long they have worked for you.

• One month to two years of service: 1 week's notice
• Two to twelve years of service: 1 week's notice for each full year they have worked
• Twelve or more years of service: 12 weeks' notice

Your employment contract can specify a longer notice period, but it cannot be shorter than the statutory minimum. If the contract gives a longer period, you must follow that.

Severance Pay

In the UK, severance pay is most commonly associated with redundancy. If you are making an employee's role redundant, they may be entitled to statutory redundancy pay.

To be eligible, an employee must:

• Have worked for you for at least two continuous years.
• Be in a role that is genuinely redundant.

The amount of statutory redundancy pay is based on the employee's age, weekly pay, and length of service.

Here is how it is calculated:

There are caps on the weekly pay amount and the total number of years that can be counted. For 2025, the maximum weekly pay is £719.

How Rivermate Handles Compliant Exits

In the UK, our Rivermate HR experts handle the offboarding process professionally, with respect and confidentiality to ensure that your brand reputation is maintained. Wherever possible, we aim to maintain a good relationship between the employee and your company during the exit process.

We do this with:

• Clear Documentation: We provide written notice of termination, clearly stating the reason and the final date of employment.
• Knowledge Transfer: We help you create a plan for the departing employee to hand over their tasks and responsibilities. This ensures a smooth transition for the rest of your team.
• Asset Recovery: We provide instructions for the employee to return all company property, such as laptops, phones, and access cards.
• System Access: We make sure to remove the employee's access to all company systems and software to protect your data.
• Final Pay: We work with you to process the employee's final paycheck, including any outstanding holiday pay or other entitlements.

When you don’t have insider knowledge of the UK's visa and work permit system, it can hinder the speed with which you place an employee. The processes are clearly laid out by the UK Visas and Immigration office, but there have been significant changes to the Skilled Workers visa for non-UK workers.

Many skilled-worker jobs no longer qualify for the visa, and for other jobs, the income thresholds for obtaining the visa have been increased. Foreign workers must also have a sponsorship from a UK company, and these sponsorships must meet minimum criteria.

So, can an Employer of Record (EOR) sponsor your visa? Yes, but only if the EOR has a sponsor license. An EOR acts as the legal employer and can handle the complexities of visa sponsorship, including managing the necessary paperwork and compliance. However, not all EORs have this license. Before you partner with an EOR, you must confirm they are an A-rated sponsor license holder.

Here are some practical routes for employment visas:

• Skilled Worker visa: This is for individuals with a job offer in an eligible skilled occupation. You must meet salary and English language requirements.
• Global Business Mobility visa: This route is for employees of multinational companies who are being transferred to a UK branch.
• Temporary Worker visa: This category covers a range of short-term work, including creative, charity, and religious work.

Other visas do not require employer sponsorship. These are usually for individuals with specific qualifications or backgrounds. Examples include the High Potential Individual visa and the Graduate visa.

Business travel compliance

You can visit the UK for business for up to six months without a visa, but the activities you can perform are limited. These short-term visits are for things like attending meetings, conferences, or negotiating deals. You cannot do paid or unpaid work for a UK company or as a self-employed person.

For frequent business travelers, it's important to understand the tax implications. A Short Term Business Visitor (STBV) arrangement can simplify tax and payroll obligations. This agreement with the UK tax authorities, HMRC, allows for a relaxation of the usual payroll requirements, provided certain conditions are met.

To stay compliant, you should:

• Know the rules: Understand what activities are permitted during a business visit.
• Track your time: Keep a record of the number of days you spend in the UK for work purposes.
• Get the right advice: If you're unsure about your obligations, seek expert advice on tax and immigration rules.