For companies looking to tap into international markets, the United Kingdom should be on the top of their list. The United Kingdom has a strong economy full of innovation, students with top-tier education, and young professionals with entrepreneurial mindsets with specialized skill sets.
Additionally, remote jobs in the UK are on the rise. According to the Office of National Statistics, 44% of UK employees currently work remotely in 2023 — 16% of which are fully remote. Companies looking to hire in the UK don’t need to worry about their potential employees struggling to adapt to remote work; many have already adjusted.
Hiring in the United Kingdom may seem daunting. When you hire employees in the United Kingdom, there are so many elements to consider, ranging from labor laws, employee protections, and compensation. Not to mention, when you hire in the UK, you need to manage international payroll.
But what if we told you that hiring employees in the United Kingdom doesn’t have to be a lengthy and intimidating process? When you work with an Employer of Record (EOR), like Borderless, the hiring process is streamlined and compliant. With local, legal expertise, you can hire employees in the United Kingdom, maintain compliance, and manage international payroll with ease.
For employers looking to onboard employees from the United Kingdom, here’s your guide.
Benefits of Hiring in the United Kingdom
The United Kingdom has become one of the easiest markets to do business in. This is due to many different factors, such as increased flexibility among employers, a strong economy, and a highly-educated workforce.
The UK is home to a strong, diversified economy. London, being the main economic hub throughout the British Isles, is full of innovation. The City of London itself — a historic financial district that lies within London — generates, on average, GBP 85 billion in economic output each year and employs over 580,000 people. London is also home to 80 tech companies worth more than one billion dollars.
Other cities in the UK, such as Cardiff, Manchester, and Glasgow are also full of innovation. Manchester, in particular, has seen rapid economic growth. From 2010 to 2020, Manchester’s economy grew 39% and is the largest city region economy outside of London. Manchester is home to many different companies, but its strength is in manufacturing, media, life sciences, and finance.
The United Kingdom has a long history of innovation and commerce, which is explicitly reflected in the business culture. Generally speaking, companies in the UK are hierarchical with clear lines of responsibility and authority.
However, with the rise of flexibility and remote jobs in the UK among employers, these lines are becoming slightly more opaque. More and more companies are jumping on the trend of egalitarian business structures, especially when it comes to small businesses. In this type of structure, discipline, organization and time management are highly valued.
In the UK’s business culture, though, a core value remains: employees are expected to communicate politely and respectfully with coworkers and clients. All in all, the UK’s business culture is disciplined, professional, and focuses highly on quality and customer service.
Labor laws and legislation
The United Kingdom has an intricate set of local laws that regulate absolutely everything related to employment, from the minimum wage, working hours, redundancy rights, to holiday entitlement.
Working Time Regulation 1998
The Working Time Regulation 1998 legislation sets the standard for the amount of hours employees should work and the rest breaks they are entitled to. Under this regulation, employees are not to work more than 48 hours each week.
It also limits the amount of hours employees can work throughout the night. In terms of rest, employees are entitled to 11 hours of rest between working days, and 20 minutes of rest during the day if the employee works more than six hours. Every seven days, employees must receive a minimum of a 24 hour break.
This regulation also states that all employees are entitled to a minimum of 5.6 weeks of paid holiday each year, and when you hire employees in the United Kingdom, you must adhere to this.
Equality Act 2010
The Equality Act 2010 is a critical piece of legislation surrounding labor rights and employee protections in the United Kingdom. This act prohibits discrimination based on the following:
- Gender reassignment
- Marriage and civil partnership
- Pregnancy and maternity
- Sexual orientation
- Religion or belief
Employers are not to discriminate against their employees based on any of the grounds stated above when it comes to pay, promotion, or conditions of employment.
Employment contracts are required by all employers hiring in the United Kingdom. However, an employment contract in the UK is commonly referred to as a Written Statement of Employment Particulars. This is essentially a two-part document, which comprises a Principal Statement and a second, more general statement of employment.
Principal Statements must include the following information to be compliant:
- Employer's name
- Employee’s name
- Job title
- Job description
- Start date
- Payroll cycle
- Work hours
- Holiday allowance and if this includes public holidays
- Restrictions when working abroad
In the general written statement, this must include information surrounding non-mandatory terms of employment. This is to include training, probationary periods, severance pay, collective agreements, disciplinary procedures, and supplemental benefits.
Terminating an employee
While many countries protect their employees from termination until the end of probation, the UK does not. Employees in the UK are not provided with protection from termination until their second year of employment with the company.
This means that employers have the ability to terminate their employees for any reason — aside from grounds relating to the Equality Act of 2010.
After two years, however, employees can only be terminated with just cause.
Employees are entitled to a notice period, and in the UK they vary by length of employment. They start at one week, but are not to exceed three months. In some instances, employers can send the terminated employee home for the notice period in lieu of working. In this case, employees are still paid their regular wages.
Statutory redundancy pay
Severance pay in the UK is not legally required from employers. That being said, the UK does protect employees when it comes to redundancy. Statutory redundancy pay is for employees who have been working for their employer continuously for two years or more.
Statutory redundancy pay varies by age, earnings, and length of employment. To make it easy to understand, the UK has provided a useful tool to calculate your statutory redundancy pay.In essence, your statutory redundancy pay would be the average pay you earned per week over the past 12 weeks before you were made redundant.
Employees, Workers, and Contractors
Each and every country has different rules and laws regarding what defines an employee and an independent contractor. However, the UK has introduced the term “worker” into the mix of classification.
What is a worker?
In the United Kingdom, a “worker” refers to numerous groups. Workers are full-time employees, part-time employees, short-term workers, casual laborers, agency workers, or those who participate in the gig economy, like Uber drivers.
Those who are employed under a zero-hour contract are also workers. However, recently, zero-hour contracts in the UK have caused many labor disputes and instigated a push for change among the UK workforce.
Workers are entitled to paid holidays, a minimum wage, protections against unlawful termination, paid leave, pension contributions, and rest days.
What is a contractor?
Independent contractors in the UK are the same as independent contractors everywhere else. They work for themselves, on a client-to-client or project-to-project basis. Contractors in the UK set their own hours and rates, and are not involved in a subordinate employee-employer relationship. They are free to accept and refuse projects, and to work from wherever they want.
Determining Compensation Packages
Determining compensation when you hire someone is tricky, regardless of the location. The cost of hiring in the United Kingdom may not be as cost-effective compared to other parts of the world, but with the strong economy, highly-educated workforce, and constant innovation, it’s to be expected.
And, not only is it hard to determine the salary, payroll is a whole other factor to consider. Thankfully, you don’t have to manage international payroll on your own — a global payroll solution like Borderless can help.
When you hire employees in the United Kingdom, there are numerous costs to consider.
National Living Wage in the UK
The National Living Wage — which is how the UK defines their minimum wage — increases each year by April 1st. As of 2023, the National Living Wage is set at GBP 10.90.
For those under 22 years of age, the amount varies. For example:
- 21-22 years old: GBP 10.18
- 18-20 years old: GBP 7.49
- 16-17 years old: GBP 5.28
When you hire in the United Kingdom, it’s essential to pay your employees at least the National Living Wage. However, it’s highly likely that you’ll be paying your employees more than the National Living Wage depending on their role and experience.
It’s also important to consider social security contributions when determining the cost of hiring. Employees need to contribute 13.8% towards social security, which covers pension, national insurance, and additional social security provisions.
Average salaries across industries
The United Kingdom’s economy has many successful industries, so the pay will vary across sectors and roles. If you’re looking to hire someone in finance or insurance, the average salary is GBP 45,000 annually.
The average salary in the information and communication sector is similar — as of 2023, it stands at GBP 42,000. In administrative roles, the average pay is GBP 29,000.
Overall, the median salary across the entire UK is GBP 27,700. This increased from GBP 25,900 in 2021. If you’d like to attract top talent, consider offering a competitive salary.
It’s important to note that there is no standard salary increase in the United Kingdom, though if employers choose to offer salary increases, the average is 2% per year. If someone decides to change jobs, the average salary increase they experience is 10%.
Supplemental benefits, also known as non-mandatory benefits or fringe benefits, are an extra cost to consider, and another element to outline in the employment contract.
Common fringe benefits employers offer for UK employees include transportation passes, gym memberships, private health insurance, retirement savings plans, or employee stock options.
With remote jobs in the UK, these benefits may differ. Some companies may go as far to offer rent subsidies, home office allowances to cover increased utility bills, or co-working passes.
Does the UK have mandatory bonuses?
The United Kingdom does not have any mandatory bonuses, so employers don’t need to worry about that regarding compliance. Just because they aren’t mandatory, though, doesn’t mean they’re not uncommon. Many employers opt to offer bonuses to employees who exceed expectations and boost company revenue.
When offering a bonus, the employer must report it, whether it be cash or non-cash, to Her Majesty’s Revenue and Customs (HMRC).
The cost of living varies significantly across the United Kingdom, so your employee’s residence is important to consider when determining their compensation. This is especially important when your employee lives in London.
The London Living Wage is GBP 11.95 per hour — just over a pound more than the National Living Wage. The London Living Wage is not federally mandated, but a campaign by non-profits in London to reflect the higher cost of living when compared to other parts of the country.
Due to the various costs of living, it may be beneficial for you to adopt a location-based pay model. Location-based pay sets compensation for each region to give employees equitable standards of living. If you’re hiring numerous employees from the UK, it may get expensive to offer them all London wages — especially if the cost of living is lower in other areas, such as Cardiff, Birmingham, or Glasgow.
How to Hire in the UK
There are two primary ways employers can hire employees from the United Kingdom: establishing a local legal entity on their own, or partnering with an Employer of Record (EOR) service.
Establish a foreign subsidiary
More often than not, independently establishing local entities can get costly and time-consuming. It also requires comprehensive knowledge of the United Kingdom’s ever-changing labor laws, tax obligations, and regulations. Put simply, setting up a local legal entity on your own in the UK can get messy and expensive. And depending how many workers you plan to hire in the UK, it may not be worth it.
Work with an Employer of Record
Hiring laws in the UK may be intricate, but thankfully, an EOR takes care of absolutely everything to guarantee compliance — including how you manage international payroll. Other tasks an EOR takes care of include:
- Right to work entitlements
- Contracts for international employees
- Onboarding processes
- Tax laws and filing
- Payroll processing
- Employee benefits
- Intellectual property protection
- Employee data management for foreign workers
Additional Elements to Consider
While it’s vital for employers to keep labor laws and compensation in mind when hiring in the United Kingdom, there’s also other elements to be aware of.
Remote Work in the UK
With the popularity of remote jobs in the UK showing no signs of slowing down, the government has decided to bring legislation in for employees to enjoy increased flexibility in regards to their work environment.
In July 2023, the UK passed the Employment Relations Bill, which is commonly known as the Flexible Working Bill. This would allow employees to request flexible working arrangements from when they start employment. Employees would be able to make two flexible working requests per year. Keep this in mind when hiring both in-office and remote workers in the UK.
Keep Time Differences in Mind
The United Kingdom is in an advantageous time zone. The UK only has a couple of hours time difference with the rest of Europe — the most being a two hour time difference in eastern Europe, such as Greece or Finland.
While there is a time difference between the eastern seaboard of North America — five hours — it still allows for some overlap or core working hours. All in all, the United Kingdom is the perfect middle ground for employers looking to build a global team and embrace asynchronous communication.
Maintaining Connection with a Remote Workforce
Each employer has a different approach on how to connect with remote employees, but there are some core values to keep in mind. Communication is key, especially if there is a time difference among employees. Creating open lines of communication creates an inclusive work environment that’s open to collaboration, questions, insights, and positive relationships.
Employers can also consider investing in the professional development of their employees. Doing this will show that you appreciate your employees and want them to go further and grow within the company.
Work With Borderless
If you’re looking to hire foreign employees in the United Kingdom, just remember that it doesn’t have to be a complex process. In fact, it’s easy with Borderless. Borderless will help you navigate the United Kingdom’s labor laws and regulations, act as a payroll provider, and support you throughout the hiring process.
Hire confidently and seamlessly in the United Kingdom. Speak with us today.
Borderless does not provide legal services or legal advice to anyone. This includes customers, contractors, employees, partners, and the general public. We are not lawyers or paralegals. Please read our full disclaimer here.