Trying to expand to other countries usually requires an organisation first developing its workforce in that region. This raises the question of how to hire and pay in the United Kingdom. Things are not always as simple as they appear when it comes to global hiring. Because of the complexities of local regulations and requirements, each country of expansion faces a unique set of challenges.
When preparing to hire employees in the United Kingdom, it is critical to have realistic expectations, whether trying to navigate employment laws or maintaining yearly compliance.
Getting started with global hiring in any new country can be difficult, but there are a slew of complex regulations and restrictions to consider when preparing to hire and pay in the UK. We have created a comprehensive guide to help you navigate these different obstacles given the complexity of international hiring.
United Kingdom Country Guide – Accounting, Taxes, HR and more
If you intend to hire full- or part-time employees in the United Kingdom, you must first establish a legal entity in that country. Creating a legal entity is a time-consuming and costly process that can take anywhere from three to six months to complete.
This is because the company must follow all the setup requirements, which include things like establishing proper bank accounts and tax information.
Collaborating with a specialist is highly recommended throughout this process because it is critical that the structure is not unproductive or expensive to maintain. Legal entities, as the foundation of a country’s operation, can have an impact on every aspect of a business, including finance, accounting, information technology, and other supply chain functions.
There are three components to incorporating in the United Kingdom:
#1 Incorporation & Registration
- Prepare entity registration documents
- Prepare local entity articles of incorporation
- Advise on corporate governance structure – local director/shareholders requirements
- Apply for and obtain business license and entity registration approval
- Apply for and obtain tax ID
- Register the newly incorporated entity to be a local employer
#2 Post Incorporation
- Setting up Payroll Services
- Statutory benefits and NI registration
- Registering for Data protection
- Accountancy setup, bookkeeping, reporting etc.
- Setting up UK bank accounts
- Tax Requirements – VAT
#3 Corporate Annual Compliance
- Preparation of financial statements, company tax returns etc.
- Tax, payroll, and statutory returns.
- Administrative duties such as the handling of correspondence.
United Kingdom Employment Law
Employment Contracts
Employers and employees in the United Kingdom must follow the terms of the employment contract, which must include specific employment conditions, rights, responsibilities, and duties.
These terms must be followed until the contract expires, which can be caused by either an employee’s notice or an employer’s dismissal. It is the employer’s responsibility to explain which aspects of the contract are legally binding. Depending on the hiring criteria, fixed-term employment contracts and collective agreements should also be considered.
If an employee has a problem with their employer, they must try to resolve it informally. Employees can then what? If the problem is not resolved. If the problem persists, it will be brought before an employment tribunal.
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Employee Terminations
When it comes to firing employees, the United Kingdom has extremely strict policies. A fair dismissal necessitates an obvious reason for the termination as well as information on how the employer acted during the dismissal process. Any issues that arise during this process may lead to the employee bringing the case to an employment tribunal.
Payroll Requirements
When it comes to payroll in the UK, there are numerous legal requirements that must be met for your company to remain compliant. Certain tasks must be completed during each tax month if your company uses PAYE (Pay as You Earn) as part of its payroll. These timeframes range from the sixth of one month to the fifth of the following month.
Each pay period, businesses must record their payroll. When an employee is paid, the employer is required to:
- Record their weekly/monthly salary
- Calculate pay deductions such as national insurance and tax.
- Calculate the National Insurance contribution that you will need to pay as an employer on an employees’ earnings above £184 a week.
- Generate pay slips for each employee
- Report all pay and deductions to HMRC (HM Revenue and Commissions)
If you are an employer and provide expenses or benefits to employees or directors, you may be required to notify HM Revenue and Customs (HMRC) and pay tax and National Insurance on these benefits.
Hiring Requirements
Before hiring and paying in the UK, businesses must consider a wide range of hiring requirements. The employment status of a person provides guidance for both the employee’s rights and the employer’s responsibilities. There are four major types of employment status in the United Kingdom:
- Worker
- Employee
- Self-employed/contractor
- Director
Employers must ensure that the people they hire have the legal right to work in the UK, conduct a criminal background check if necessary, and determine whether they are eligible for a workplace pension. Following this, the employer and employee must agree on the employment contract and salary.
When everything is in order, the company must notify HMRC about the new employee to ensure proper records are kept. Misclassifying an employee can have serious ramifications for the employer.
We can Help you
The One World have a wealth of experience when it comes to assisting overseas companies set up and employ staff here in the UK.
Their business consultancy services are second to none and their team of experts can assist you with everything from ensuring you have the correct visas in place to registering your company with Companies House, registering with HMRC, and even finding you a commercial space from which to run your business.
