Employer of Record in The United Kingdom

Hiring in The United Kingdom for the first time can be overwhelming, especially when navigating unfamiliar employment laws. Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success. Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in The United Kingdom in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in The United Kingdom.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with The United Kingdom’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in The United Kingdom if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in The United Kingdom below, to avoid any compliance issues.

Employment Contract Requirements

When employing an individual in the UK, the following formalities must be adhered to:

• An employer must give employees a document known as a written statement of employment particulars, stating the main conditions of employment.
• The employment of particulars includes a principal statement and a wider written statement.
• The principal statement must include several inputs including: pay, how long the job will last, work hours, probation period length, benefits, location of work, amongst others.
• On the first day of employment, employers must provide employees info on sick pay, paid leave and notice periods.
• Within the first two months of employment, employers must provide employees with details on pensions, collections agreemment, non-compulsory training, and grievance procedures.

Onboarding Process

We can help you get a new employee started in The United Kingdom quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in The United Kingdom

An employee whose age is 17 or younger has a maximum of 8 hours per day and 40 hours per week. An employee whose age is 18 or older is allowed to work 48 hours per week. A minimum meal interval of 20 minutes must be observed by employees who work more than 6 hours in a day. In typical working hours, Monday through Friday, the hours are 9 am to 17:30 pm.

Overtime in The United Kingdom

Generally, employers do not have to pay overtime for their workers, but if you work more than 40 hours in a week, your average pay for that amount of time must not fall below the National Minimum Wage.

A detailed description of any overtime pay rates and how they are calculated is normally included in an employment contract.

Probation Period in The United Kingdom

Probationary periods in the UK help mitigate risk in hiring. Employees can be subject to a probationary period that enables the employer to assess employees skills. Unless an employees collective bargaining agreement outlines increased protections, the contract can be terminated during the probationary period without cause and at no additional cost to the employer outside of providing the mandatory notice.

This probationary period is not automatic and must be provided in the employment contract. Standard probationary periods can be 3-6 months on average.

Fiscal Year in The United Kingdom

April 6th - April 5th is the 12-month accounting period that businesses in The United Kingdom use for financial and tax reporting purposes.

Payroll Cycle in The United Kingdom

The payroll cycle in The United Kingdom is usually monthly, with employees being paid between the 25th and the 30th of the month.

Minimum Wage in The United Kingdom

The minimum wage for employees in The United Kingdom is typically 11.44 GBP per hour, amounting to ~2,200 GBP per month for a typical 48 hour work week.

Bonus Payments in The United Kingdom

There are no bonus requirements in the UK, but if employers pay a cash or non-cash bonus, they must report it to HMRC.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 17.3% on top of the employee salary in The United Kingdom.

Employee Payroll Tax Contributions

In The United Kingdom , the typical estimation for employee payroll contributions cost is around 17%.

Individual Income Tax Contributions

The individual income tax ranges from 0% to 45%. Income tax is calculated according to progressive rates. Multiple additional factors may impact overall rates such as the household status and the number of children.

Pension in The United Kingdom

Employers must offer a workplace pension scheme to every employee, but it is up to the employee to take it or not. If the employee chooses to enter the pension scheme, their minimum contribution is 4% of their salary. The employers minimum contribution is 3%, and government tax relief is 1%, for a total minimum contribution of 8%.

Mandatory Leave Entitlement in The United Kingdom

The annual leave entitlement in The United Kingdom is 8 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In The United Kingdom

Public holidays, also known as bank holidays, vary by region in the United Kingdom. There are 8 bank holidays in England and Wales, 9 in Scotland, and 10 in Northern Ireland.

Paid Time Off in The United Kingdom

Full-time employees are entitled to 20 day of paid time off (PTO) a year plus an additional eight public holidays. PTO (Including public holidays) accrues at 5.6 weeks (28 days) proportioned to the number of days a week the employee works.

Maternity Leave In The United Kingdom

Eligible employees can take up to 52 weeks of maternity leave: 26 weeks of Ordinary Maternity Leave and 26 weeks of Additional Maternity Leave. Statutory Maternity Pay (SMP) for eligible employees can be paid for up to 39 weeks, usually as follows:

• First 6 weeks: 90% of their average weekly earnings (AWE) before tax.
• Following 33 weeks: 184.03 GBP or 90% of their AWE (whichever is lower).
• Final 13 weeks of maternity leave are unpaid.

Paternity Leave In The United Kingdom

Eligible employees are entitled to two weeks of paid paternity leave. The leave must be taken in one period. The employee will receive 184.03 GBP, or 90% of their average weekly earnings (whichever is lower) during this period.

Sick Leave In The United Kingdom

Employees are entitled to an unlimited number of sick days. The first 3 days of leave are paid at 100% salary by the company. After 3 days of sick leave, employees are entitled to employer-paid Statutory Pay Leave of up to 28 weeks for eligible employees. Statutory Sick Pay is 116.75 GBP per week.

Parental Leave In The United Kingdom

The United Kingdom has a shared parental leave (SPL) policy that allows parents to share leave following the birth or adoption of a child. Parents can share up to 50 weeks of leave and up to 37 weeks of statutory shared parental pay. Shared parental leave is available to employees who have worked with their employer for at least 26 weeks by the 15th week before the child is due (or adoption placement). Parents may be eligible for Statutory Shared Parental Pay (ShPP) if they meet certain criteria, including average earnings and employment status. This pay is set at a standard rate or 90% of the parent's average weekly earnings, whichever is lower.

Termination Process in The United Kingdom

Employees who have been continuously employed by an employer for {period} or more have a right not to be unfairly dismissed. According to the UK employment law, there are 5 statutory reasons for dismissal, which are listed below. Upon dismissal, the employer will have to prove that one applies and that they acted reasonably and legally in treating the reason as sufficient to justify dismissal of the employee.

• Conduct
• Capability
• Redundancy
• Breach of a statutory restriction
• Some other substantial reason

Notice Period in The United Kingdom

Notice periods in the UK depend on the length of the employment relationship, as well as whether the notice is being given by the employee or the employer. For employees who have worked for more than one month, the minimum notice period is 1 week. For employers, the minimum notice periods are as follows:

• 1 month - 2 years of service: 1 week
• 2 - 12 years of service: 1 week per year of employment
• Over 12 years of service: 12 weeks

Severance in The United Kingdom

In the UK, all employees who are terminated due to redundancy are entitled to severance pay. Severance pay is calculated as follows.

• 0.5 weeks pay for each year of service where the employee was below the age of 22
• 1 weeks pay for each year of service where the employee was between 22 to 40 of age
• 1.5 weeks pay for each year of employment where the employee was 41 and over