In today's interconnected world, businesses based in the UK are no longer confined to local talent pools. As a result, more and more companies are expanding operations abroad and accessing the global talent pool. If you’re on the lookout for specialized skills, exploring new markets, or hoping to optimize cost efficiency, there are a number of reasons hiring remote employees may make sense for your business.
There are also several very different routes UK businesses can take, each with its unique pros and cons. Whether you're a startup or an established enterprise diversifying your workforce, it’s important to know your options. So, let’s get into them.
Can UK Companies Hire Foreign Workers?
UK companies can employ remote workers from overseas, but there are specific requirements and steps involved. First, the foreign worker must be eligible for a work visa, which depends on factors like skills and the type of job.
Second, the company must hold a Sponsor License issued by the Home Office. With this license, they can issue a Certificate of Sponsorship to the prospective employee. This document is essential for the worker's visa application.
Employers also need to conduct right-to-work checks on all employees to ensure compliance. Additionally, staying updated on changing immigration rules and fulfilling employer obligations is crucial when hiring foreign workers in the UK. So, if you’re wondering ‘Can UK companies hire foreign workers?’, you have your answer.
Choose Your Option
There are several different approaches you can take to expand your team beyond the UK. Depending on your needs, preferences, and budget, you can choose the method that aligns best with your goals and resources.
Set Up a Legal Entity Overseas
One of the routes you can take is establishing a local entity in the country you’re hiring from. However, there are several things to keep in mind.
Strategic Move
Creating a legal entity overseas is a long-lasting commitment to a foreign market. Businesses choose this path to establish a strong presence in another country, like opening a branch or subsidiary.
Full Control
One of the compelling advantages of this method is that it grants the U.K. company complete control over its operations in a foreign location. It can make crucial decisions, set policies, and manage its business autonomously, aligning it with its global strategy.
Long-Term Growth
Establishing a legal entity abroad promotes sustainable growth. It enables companies to gradually expand their presence, reach a broader customer base in the foreign market, and build a solid and enduring foundation for ongoing success.
Payroll Challenges
Setting up a legal entity abroad offers numerous benefits but also comes with challenges, particularly in managing employee payroll due to varying tax and labour laws. Many companies use multi-country payroll systems to simplify this complex task, ensuring compliance and timely payments in foreign locations.
Resource-Intensive
It's important to know that setting up a legal entity in another country can be quite demanding. It involves many paperwork, legal requirements, and often significant upfront costs. This method is usually chosen by companies fully committed to substantial global expansion with the required resources to back it up.
Partner with a Legal Employer of Record (EOR)
Using Employer of Record services is an increasingly popular method for U.K. companies looking to employ staff overseas. It offers a streamlined and efficient way to navigate the complexities of international hiring while ensuring compliance with local labour laws and regulations.
An EOR, like Borderless, essentially acts as an intermediary service that handles various aspects of the employment process for international workers. Here's a closer look at the key advantages and considerations when partnering with an EOR:
Streamlined Onboarding
When U.K. companies partner with an EOR, the onboarding process for overseas employees becomes significantly more straightforward. The EOR manages tasks such as contract creation, benefits enrollment, and tax compliance, freeing the hiring company from these administrative burdens.
Global Compliance
Perhaps the most crucial benefit of working with an EOR is its ability to provide global HR services and expertise in ensuring global compliance for remote teams. International labour laws can vary widely, and staying up-to-date with these regulations can be challenging. EORs have a deep understanding of local labour laws and can help companies avoid costly compliance errors.
Cost-Efficiency
While setting up a legal entity in a foreign country can be expensive and time-consuming, partnering with an EOR typically offers a more cost-effective solution. U.K. companies can avoid the expenses associated with establishing and maintaining foreign entities.
Flexibility
EORs provide flexibility when it comes to hiring remote workers. Whether a U.K. business needs full-time employees, part-time staff, or even project-based contractors in another country, EORs can accommodate these diverse needs.
Compliance with Local Employment Laws
Employment-related risks, such as misclassification of workers, tax errors, and employment disputes, can have severe legal and financial consequences. EORs have the expertise to minimize these risks by complying with local employment law and ensuring that all aspects of international employment are handled correctly.
Efficient Payroll Management
EORs often offer payroll services, ensuring that employees are paid accurately and on time, regardless of their location. This eliminates the need for U.K. companies to set up complex international payroll systems.
Focus on Core Business
By outsourcing the complexities of international employment to a professional employer organization or an EOR, U.K. companies can concentrate on their core business activities and expansion strategies, rather than getting bogged down by administrative tasks.
For example, if a U.K. technology firm aims to hire Indian software engineers for a new project, collaborating with an EOR specialized in Indian employment regulations can facilitate a smooth and legally compliant hiring process. The EOR will handle contract preparation, ensure that the engineers receive the appropriate benefits, and navigate the intricacies of Indian labour laws, allowing the U.K. company to focus on project success.
Overall, partnering with an EOR offers numerous benefits for U.K. companies seeking to employ staff overseas. It simplifies the hiring process, ensures global compliance, reduces costs, and allows businesses to stay agile and focused on their international growth objectives.
Engage Independent Contractors
Engaging contractors is a flexible approach for U.K. companies expanding their operations overseas. This method is particularly appealing when businesses have short-term or project-specific needs, allowing them to quickly onboard highly skilled professionals without the long-term commitment and obligations associated with full-time employees.
Here are the key aspects to consider when hiring overseas staff as contractors:
Flexibility
Contract workers can be engaged on a project-to-project basis, providing your business with the agility to scale your workforce up or down as needed. This flexibility is valuable for industries with fluctuating workloads or specific short-term projects.
Cost-Efficiency
Hiring contractors typically involves fewer overhead costs compared to employing full-time workers. Contractors are responsible for their own taxes, benefits, and other expenses, reducing your financial burden.
Access to Global Talent
This approach allows you to tap into a diverse pool of international talent. You can bring in specialists and experts from around the world to address specific skill gaps or project requirements.
Misclassification Risk
One of the primary risks associated with hiring contractors is worker misclassification. Local labour laws vary; in some regions, authorities may consider contractors as de facto employees if specific criteria are met. Misclassification can lead to costly fines, back pay claims, and damage to your company's reputation.
Legal Compliance
Expanding your workforce by hiring international employees introduces complexities related to compliance with foreign labour laws, tax regulations, and employment standards. Ensuring that your contracting arrangements adhere to local laws is essential to avoid legal repercussions.
Payment Complexity
Paying overseas contractors can be more intricate than managing local payroll. Currency exchange, tax withholding, and compliance with payment regulations in different countries can pose challenges.
To mitigate the risks of hiring overseas contractors, businesses should conduct thorough research into local labour laws and seek legal counsel when necessary. Additionally, using a robust contractor payment platform can streamline payment processes, ensuring that contractors are compensated accurately and compliantly across multiple international markets.
Navigate the Sponsor License Process
It's also important to know one key part of UK employment laws - the sponsor license. This enables you to bring international employees on board legally. This license comes in different forms, depending on the type of workers you're seeking.
Obtaining a sponsor license is about ensuring your overseas recruitment process adheres to regulations. It opens doors for your business to expand internationally and bridge skill gaps within your team, so it’s a necessary process to familiarize yourself with.
1. Decide if You Need a Sponsor Licence
Before venturing into employing staff from outside the UK, the first critical step is to assess whether you need a sponsor license. In many cases, UK employers do need a sponsor license to legally employ individuals from overseas. However, specific categories of individuals, such as Irish citizens or those with settled status under the EU Settlement Scheme, may not need a sponsor license.
2. Choose the Right License Type
Once you've determined that you need a sponsor license, it's essential to select the appropriate type. The type of license you require depends on the nature of the workers you intend to hire. You can apply for a "Worker" licence if you plan to hire individuals for skilled or long-term employment. Alternatively, if you need temporary staff for specific roles, you should opt for a "Temporary Worker" license. It's crucial to align the license type with your specific hiring needs.
3. Make Sure the Job Fits
To successfully sponsor a worker, the job position they are going to fill must meet specific criteria. This includes offering a suitable rate of pay and skill level, as well as satisfying other requirements necessary for their visa category. Carefully review the job's eligibility to ensure it aligns with the prescribed criteria.
4. Check Your Business Eligibility
To obtain a sponsor license, your organization must meet certain eligibility criteria. This involves providing documentation to demonstrate the genuineness of your business and its operational or trading presence in the UK. Additionally, you, as the sponsor, will be subject to suitability assessments, which means you cannot have unspent criminal convictions related to immigration offences or certain other crimes.
Furthermore, having unpaid civil penalties for employing illegal workers or other specified offences can affect your eligibility. Ensuring you have the appropriate systems in place to monitor sponsored employees and manage sponsorship within your organization is also essential. Be aware that UK Visas and Immigration may review your application and conduct on-site visits to assess your trustworthiness and capability to fulfill sponsorship duties.
7. Understand Certificates of Sponsorship (CoS)
Certificates of sponsorship (CoS) are central to the sponsorship process. There are two main types: "Defined" and "Undefined." Defined CoS is used for Skilled Workers applying for entry clearance from outside the UK, while Undefined CoS is used for various other routes and applications, including Skilled Workers applying to stay within the UK. Assigning the correct type of CoS is essential to avoid complications or the potential revocation of your license.
8. Keep Up with Reporting
Once you have obtained a sponsor license and started employing overseas workers, you must fulfill certain reporting obligations. These include notifying relevant authorities if a sponsored worker doesn't finish their employment if they are absent from work for an extended period, or if there are significant changes in their employment circumstances. Compliance with reporting requirements is essential to maintain a positive standing as a sponsor and ensure the legality of your overseas workforce.
Familiarize Yourself With the Risks
Expanding a business internationally can be exciting, but it comes with several compliance challenges. Here are some of the main risks when companies hire remote employees:
Misclassification
This happens when a company mistakenly labels its workers. For instance, treating employees as contractors. Consequences can include fines, harm to your reputation, and even losing business. Rules for classifying workers vary from one country to another, so understanding and following local labour laws is crucial.
Permanent Establishment (PE)
If your company establishes a significant presence in another country, you might trigger a Permanent Establishment (PE). PEs often lead to complex tax issues, legal problems, and damage to your reputation. It's crucial to understand the rules around this in each country where you operate.
Unfamiliar Employment Laws
Each country has its own set of employment laws that cover hiring, working hours, wages, employee rights, and terminations. Not understanding or not complying with these laws can lead to fines and legal troubles. Thorough research and legal advice are essential.
Immigration Requirements
When relocating or sending employees abroad, you must ensure they have the necessary visas and permits to work legally. Failing to do so can result in fines and penalties for your company and your employees. Each country has its own immigration rules, so it's important to follow them carefully.
Inaccurate Payroll Contributions
Payroll compliance is vital when employing overseas workers. Different countries have unique payroll tax requirements, including income tax and social security contributions. Making mistakes when you pay taxes or manage payroll l can lead to financial penalties and legal issues.
To minimize these compliance risks, it's essential to conduct thorough research, seek expert advice, invest in suitable payroll and HR systems, and keep communication open with local authorities. Staying informed about changes in local laws is also crucial when employing workers overseas.
Know the Costs
Employing staff from overseas comes with associated costs. These expenses go beyond just the initial fees like the sponsor license application and Certificates of Sponsorship (CoS). You should also consider factors like taxes, social security contributions, and any other mandatory deductions required by the foreign country's regulations.
There might be specific charges like the immigration skills charge if your employee is applying for specific visa categories. Keep in mind that your overseas workers will have their visa application fees to cover, and some may need to pay a healthcare surcharge as part of their immigration application. Understanding these costs will help you budget effectively and ensure compliance every step of the way.
Connect with Borderless
For UK businesses looking to hire remote workers from around the world, teaming up with Borderless is a smart move. They specialize in helping you engage contractors and hire employees in more than 170 countries, making the international hiring process smooth and compliant.
This partnership takes the hassle out of dealing with various labour laws and tax rules, allowing you to focus on your business goals while building an international team. Get in touch today.
Disclaimer
Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.
