Using an Employer of Record in the United Kingdom (UK)

Employers must comply with local labor and employment laws to hire and pay employees in the UK. However, this can be complex. 

But working with an Employer of Record in the United Kingdom helps streamline the process. An EOR, like Payoneer Workforce Management, can assist businesses with efficient and compliant global hiring.

Ready to build your team in the UK? Discover how Payoneer Workforce Management can help manage your United Kingdom payroll, taxes and more. Or, keep reading to discover the EOR in the UK.

How to hire employees in the United Kingdom

There are three options for companies looking to hire and pay employees in the United Kingdom.

1. Set up a local entity: You may choose to register your business in the United Kingdom. This is a good choice for building a significant workforce in the UK, but it can be a costly and time-consuming option.

2. Hire independent contractors or freelancers: If you need to hire for a short-term project, you may choose to work with contractors or freelancers. You’ll need to be careful not to missclassify a contractor as an employee, though, or you could risk financial penalties.

3. Hire employees through an EOR: An EOR in the UK makes it possible to hire and pay employees without a legal entity. For the employer, this means shorter set-up times, less admin, and the opportunity to scale up and down as required.

At Payoneer Workforce Management, we assist you with onboarding talent, employment contracts, payroll, benefits, and more.

How to onboard employees in the United Kingdom

When you hire an employee in the UK, the process of onboarding is essential to fulfilling your legal responsibilities as their new employer. 

An EOR in the UK can help you streamline your onboarding process. If you choose to work with one, here are some of the key things to consider:

• Enrollment in payroll and benefits: Enrolling an employee in the payroll management system and administering statutory benefits as per local 
• Device shipment: The procurement and shipment of your employee’s new work devices.
• Induction: Arrange an company induction or an immersion program during the local hire’s first week to explain company procedures, the onboarding process, and their duties.
• Team introduction: Set up some time for the local talent to get to know the business colleagues.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

Pay employees in the United Kingdom

It’s important to comply with evolving local labor laws when you pay employees. In the UK, employees should be paid in British Pound Sterling (GBP) at the end of each working month. 13th-month pay bonuses are not mandatory in the UK.

As of April 2025, the UK minimum wage rate is GBP 12.21 per hour. The recommended London Living Wage is currently GBP 13.85 per hour.

Taxes and contributions

As an employer who is looking to set up a United Kingdom payroll, you should also be aware of relevant taxes in the UK.

Individuals in the UK pay income tax based on their earnings. The rates of income tax are:

Income tax	Rate of income tax
Personal allowance	0%
Basic rate	20%
Higher rate	40%
Additional rate	45%

Public health insurance is also mandatory in the United Kingdom. This is funded by National Insurance contributions made by UK employers.

As your EOR in the UK, our unified, all-in-one platform gives you a single dashboard to manage a global workforce.

Employment laws in the United Kingdom

Anyone employing workers must always comply with local laws and regulations. Here are some of the laws to be aware of when hiring employees in the UK:

• Working hours: A standard working week is 40 hours.
• Overtime hours: Overtime pay isn’t mandatory in the UK, but an employee’s average pay for all worked hours must meet the National Minimum Wage.
• Probation period: It is preferable for probation periods to last between 3 and 6 months.

Stay compliant with local labor laws using Payoneer Workforce Management’s infrastructure.

Minimum wage in the United Kingdom

When you pay employees in the United Kingdom, you need to comply with minimum wage laws. 

As of April 2025, the minimum wage in the United Kingdom is GBP 12.21 per hour. The recommended London Living Wage is GBP 13.85 per hour.

Minimum wage in the UK is usually updated annually, so keeping up to date is crucial to stay compliant.

Employment contracts in the United Kingdom

Both the employer and the new employee need to sign an employment contract, which lays out the rights and obligations that apply to both parties.

Employment contracts in the UK should include:

• The employer’s name
• The employee’s name
• Employment start date (and end date if applicable)
• Job title and responsibilities
• Salary and pay date
• Hours and days of work
• Location of work
• Holiday and any other benefit entitlements

Additional rules must also be included in the contract. 

With Payoneer Workforce Management, you can onboard talent quickly and securely with localized contracts and payroll.

Leave policy in the United Kingdom

In the UK, employers must offer leave, including vacation time, public holidays, sick leave, and more.

Vacation leave and public holidays

Most workers who work a 5-day week must receive at least 28 days’ paid vacation leave per year. The UK also observes 8 public holidays per year. The employer may decide whether public holidays are to be included in the 28 days or added on top.

Sick leave

Employees in the UK are entitled to GBP 118.75 per week of Statutory Sick Pay (SSP). This is paid by the employer, up to a maximum of 28 weeks.

An employee may self-certify their sick leave for up to 5 consecutive working days, but after this, they will need a doctor’s note to be eligible to receive SSP.

Parental leave

New mothers in the UK are entitled to paid maternity leave. The minimum maternity leave is 26 weeks, and the maximum is 52.

New fathers can choose to take either 1 or 2 weeks of statutory paternity leave. If they take 2 weeks, this can either be used in 1 continuous block or as 2 separate weeks.

UK parents are also entitled to 18 weeks of childcare leave, as well as statutory parental bereavement leave (with 2 weeks’ pay) if an employee’s child dies, or if they experience a stillbirth after 24 weeks of pregnancy.

Other leave

You must legally give an employee time off work if they are called to jury service or if they need to fulfil their duties as a magistrate.

Work permit in the United Kingdom

Non-British citizens usually need a work permit to live and work in the UK. You can use the government’s check-if-you-need-a-UK-visa tool to determine whether your employee needs a work permit.

There are also different work permit rules for Commonwealth citizens and EU, EEA, and Swiss citizens. You can find full details of how to work in the UK for an overseas employer on the government website, too.

Background checks in the United Kingdom

You may want to conduct background checks before hiring someone in the UK. This can include employment, education, criminal history, or social media checks.

While background checks are legal in the UK, you will likely need the employee’s consent before performing one. You should also outline exactly what personal data you are looking into.

Employment termination in the United Kingdom

While an employer can terminate employment in the UK, this must be based on valid grounds. 

Terminations are possible in the following scenarios:

• Employee resignation
• Mutual agreement between the employee and the employer
• Termination during the probationary period
• Termination by the employer due to misconduct, performance issues, absence without leave, etc

Notice of termination

You may be required to legally give notice before terminating an employment contract, but this depends on the length of time the employee has worked for you. 

Employment stage	Length of service	Notice period
During Probation	Less than 1 month	1 week
	More than 1 month	2 weeks
After Probation	Between 1 month and 2 years	At least 1 week
	Between 2 and 12 years	1 week per year of service
	12 years or more	12 weeks

Severance pay

You may also be required to pay the employee a severance package, which increases based on the employee’s age. 

Age group	Severance pay entitlement
Under 22	0.5 week’s pay per year of service
22 to 40	1 week’s pay per year of service
41+	1.5 weeks’ pay per year of service

Note: The severance pay is capped at GBP 719 per week. 

Company registration in the United Kingdom

If you are planning to build a significant workforce in the UK, you might be considering registering as a local entity. You can find details on how to do this on the UK government website.

However, EORs in the UK offer a simpler and affordable approach to hiring in the UK. 

For instance, Payoneer Workforce Management enables compliant onboarding and engagement of talent in 160+ countries without having to set up a legal entity.

PEO in the United Kingdom

A Professional Employer Organization (PEO) in the United Kingdom can support HR and payroll functions, but requires you to have a legal entity in-country. 

On the other hand, an Employer of Record in the United Kingdom does not require a legal entity and instead serves as the legal employer for your local team. This often makes it the better choice for companies new to the UK market.

Explore Payoneer Workforce Management’s services in the United Kingdom

Payoneer Workforce Management helps growing companies onboard, pay, and manage employees in the UK without setting up a local entity. 

As your EOR in the UK, we offer assistance with employment contracts, benefits administration, taxes, and payroll, while you retain control over daily operations.

Book a demo to learn more about Payoneer Workforce Management.

FAQs

1) What is an Employer of Record in the UK?

A UK Employer of Record is a third-party organization that legally employs your workers on your behalf and manages payroll, taxes, and employment contracts. This allows you to hire without establishing a local entity. Businesses may also refer to this model as an EOR in the UK.

2) How much does it cost to hire British talent?

The cost to hire someone in the United Kingdom depends on their annual salary. The employer cost to hire someone on an annual salary of USD 60,000 is around 20.5%. Head to the cost calculator tool for a detailed breakdown.

3) Why hire British talent through an EOR?

Payoneer Workforce Management allows you to onboard local employees without setting up a local entity and pay independent contractors in 70 currencies from a unified dashboard. Get in touch today for more details.