The United Kingdom is home to some of the oldest and most prestigious universities in the world. With over two million students — 600,000 of which were international students — the University of Oxford, the University of Cambridge, and the London School of Economics have produced highly successful and intelligent young professionals.
These new graduates also stay in the UK for a good reason: to join the innovative and competitive job market. With tech and finance hubs like Manchester and London thriving, the UK is filled with highly skilled young professionals looking to excel in their careers.
These young and ambitious job-seekers make the United Kingdom the perfect place for Italian employers looking to hire top talent.
Italy is also quite close to the United Kingdom. The time difference is only an hour, making it easy to communicate across all channels, and to travel to the UK, it only takes a mere three-hour flight on one of the many airlines around Europe.
For Italian employers looking to hire in the UK, it doesn’t have to be hard. Hiring employees in the UK is easy with an Employer of Record (EOR). From navigating time off, UK employment benefits, and payroll, an EOR in the UK is here to help.
How exactly can an Italian company hire in the UK, though? Fortunately, Borderless is here to guide you through the process.
Where Italian employers need to remain compliant in the UK
When Italian employers start to hire in the UK, there are many intricate local labor laws they must adhere to. This includes employee classification, employee contracts, annual leave, payroll cycles, and more.
Correct classification
First and foremost, Italian employers need to classify their employees when they hire in the UK correctly. In the United Kingdom, a “worker” is a term that includes different groups. Workers can be full-time employees, part-time employees, short-term workers, casual laborers and agency workers. Those who are employed under a zero-hour contract are also workers.
All workers are entitled to paid holidays, a minimum wage, protections against unlawful termination, paid leave, pension contributions, and rest days.
The definition of worker has evolved over time in the United Kingdom, especially regarding the distinction between independent contractors and workers.
While employees have more rights than workers, both groups have certain legal entitlements, such as the right to receive the National Minimum Wage or National Living Wage, protection against discrimination, and rights related to working hours and breaks.
The risk of misclassification
Many times, employers misclassify their employees as a way to avoid taxes and the added expenses associated with hiring an employee.
Employment status can significantly affect various areas, including taxation, pension entitlements, employment rights, and more. It's vital for Italian employers to classify correctly when they hire in the UK. If not, they may risk hefty fines and legal penalties.
The United Kingdom has legislation in place to avoid misclassification: IR35. IR35 aims to prevent tax avoidance by contractors who act as employees.
UK officials regularly update IR35 legislation, so employers must follow these changes closely to maintain compliance and avoid misclassification penalties.
Work week
The Working Time Regulation 1998 sets the standard hours employees are to work within a week. Based on this regulation, employees are not allowed to work more than 48 hours weekly.
It also guides employee rest breaks. Employees are entitled to a minimum of 11 hours of rest between working days and at least 20 minutes of rest throughout the work day if they work more than six hours.
The Working Time Regulation 1998 also states that all employees, and workers, for that matter, are entitled to at least 5.6 weeks of paid holiday each year. When you hire in the UK, you must provide them with this.
Payroll
The UK operates on a monthly payroll cycle. However, they do allow employees to be paid on a bi-weekly schedule if need be.
Employees are entitled to the National Living Wage. The National Living Wage is regulated by the National Minimum Wage Act 1998 and the National Minimum Wage Regulations 1999. The National Minimum Wage Act 1998 states that workers must be at least 16 years old to receive the minimum wage, and workers over the age of 23 must be compensated at least the National Living Wage. The minimum wage in the UK is as follows:
- 21 to 22 years old: GBP 10.18
- 18 to 20 years old: GBP 7.49
- 16 to 17 years old: GBP 5.28
- Apprentice rate: GBP 5.28
Employment contracts
The United Kingdom has different types of employment contracts. The most common type of employment agreement is a permanent, full-time contract. However, there are other types of employment agreements available to employers, such as fixed-term contracts and zero-hour contracts.
Permanent, full-time contracts
Employment contracts are required by all employers looking to hire in the UK. An employment contract in the UK is officially called a Written Statement of Employment Particulars.
This is a two-part document comprising 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
- Compensation
- Payroll cycle
- Work hours
- Holiday allowance and if this includes public holidays
- Restrictions when working abroad
- Sick pay
- Leave allowances
The general written statement must include specific information related to the non-mandatory terms of employment. Non-mandatory terms of employment can include anything from probationary periods, severance pay, fringe benefits, and more.
Fixed-term contracts
Fixed-term contracts are a type of employment contract that has a clear start and end date. These contracts are usually used when organizations are testing new roles or covering for an employee who is on leave, like maternity leave.
Employers must treat employees on a fixed-term contract the same as a full-time employee.
The United Kingdom does have limitations regarding fixed-term contracts, though. Any employee on a fixed-term contract for more than four years will automatically become permanent — unless the employer can provide a substantial reason not to do so.
Zero-hour contracts
Zero-hour contracts are popular in the United Kingdom. Anyone under a zero-hour contract is classified as a worker. In a zero-hour contract, the employer is not required to give the worker a minimum number of hours. Equally, workers can refuse hours if they’re offered. Zero-hour contract workers are on-call and only work when the demand is needed.
Under employment laws in the UK, zero-hours workers are eligible for mandatory annual leave and the national minimum wage. Zero-hours workers can get other jobs while being employed by other companies.
Zero-hour contracts do come with misclassification risks. A 2021 study from the University of Aberdeen discovered that 7% of employers in the United Kingdom didn’t know how to classify their zero-hour contract workers correctly. If you hire an employee on a zero-hour contract, be sure to classify them correctly as a worker — not a contractor, not an employee, but a worker.
Termination
Many countries around the world provide protections for employees from unlawful termination. However, the United Kingdom does not — not until the second year of employment. So, employers can terminate their employees for any reason except any grounds related to the Equality Act of 2010.
Equality Act 2010
What is the Equality Act 2010, exactly? And how does it protect workers from termination? Basically, the Equality Act 2010 is a piece of legislation that protects employees from discrimination, especially related to pay, promotion, and termination.
The Equality Act 2010 applies to the following:
- Age
- Disability
- Sex
- Gender reassignment
- Marriage
- Pregnancy
- Religion, belief or spirituality
- Race
Notice periods
Employees are entitled to a notice period, however, the time periods surrounding notice periods in the UK are broad. They start from one week and are not to exceed three months.
There are two types of notice periods in the United Kingdom: mandatory notice, which is required by the government, and the notice period stated in the employment contract.
The notice period outlined in the employment contract is completely up to the discretion of the employee and employer. However, it must be longer than the mandatory notice period.
Determining compensation for UK employees
When you hire in the UK, you have to know that there are many costs associated with it. Not only do employers have to meet minimum wage requirements, but they should also consider average salaries across industries, the location of their employees, the cost of social security contributions, and UK employment benefits.
Another key thing that Italian employers need to be aware of is the exchange rate. While the Euro and Pound are relatively similar, it’s still an additional cost to keep in mind.
National Living Wage
The majority of employees that you hire will receive the National Living Wage. The National Living Wage increases annually by April 1st to adjust for inflation and the cost of living. As of April 2023, the National Living Wage is GBP 10.90 per hour.
Salaries across the United Kingdom
By the end of 2022, the average salary in the United Kingdom was GBP 27,700. However, in the first quarter of 2023, the average regular pay in the United Kingdom increased by 6.6%. If regular wages continue this trend, the average salary is expected to be GBP 29,500 by the end of 2023.
Average salaries vary by industry and location. The highest-paying industries in the UK are within the financial and insurance services sector, where the average salary stands at GBP 43,800. Those working in information, communication, and marketing have an average salary of GBP 42,200.
It’s important to remember that these salaries reflect the whole of the United Kingdom. Salaries in London will be higher to account for the cost of living and the London Living Wage.
For example, the average yearly salary in London currently stands at just over GBP 57,000. In Manchester, the average salary is GBP 39,000, and in Glasgow, the average salary is GBP 34,000.
What is the London Living Wage?
If your employee lives in London, you may want to consider adopting a location-based pay model. And, you’ll need to keep in mind the London Living Wage. The London Living Wage is GBP 11.95 per hour.
While the London Living Wage is not federally mandated, it is a widespread campaign run by nonprofits to reflect the city’s high cost of living. This is to ensure that everyone has access to equitable standards of living.
Statutory benefits
Mandatory UK employment benefits are issued through social security contributions. As of 2023, employers are required to contribute 13.9% towards social security. With these contributions, employees are entitled to receive numerous mandatory benefits. If you’re unsure how to navigate these benefits, fortunately, an EOR in the UK will help track and issue UK employment benefits.
Employers do not legally require statutory redundancy pay Severance in the United Kingdom. In place of this, employees can receive statutory redundancy pay. Statutory redundancy pay is designed for employees who lost their jobs because they were no longer needed in their roles.
National healthcare
Citizens in the United Kingdom, regardless of worker classification, are entitled to healthcare from the National Health Service (NHS).
Sick pay
Should an employee go on sick leave, they are to receive long-term statutory sick pay. This provides employees with GBP 95.85 per week, which the employer pays. Employers are required to continue to pay statutory sick pay for their employees up to 28 weeks.
Shared parental leave
Employees can receive 37 weeks of paid shared parental leave. Parents do not have to take this type of leave at the same time or even consecutively. However, it must be used within the first year of the child’s birth.
Pension
Employers of workers in the United Kingdom are legally required to contribute a minimum of 3% of every worker’s salary towards a pension plan.
Common supplemental benefits in the UK
Offering supplemental UK employment benefits is another key part of the compensation package when hiring a UK employee. As the title suggests, though, these benefits are non-mandatory and an employer can choose what they offer to an employee.
Popular supplemental benefits for remote workers in the United Kingdom include the following:
- Bonuses
- Private healthcare
- Home office allowances
- Gym memberships
- Transportation stipends
- Coworking passes
- Employee stock options
- Unlimited paid time off (PTO)
The implications of Brexit
Prior to Brexit, companies based in Italy could easily hire in the UK, and vice versa. However, now that the UK and EU are separate entities, there is not as much freedom between the UK and EU member states. This begs the question: can EU citizens work in the UK?
Short answer: yes, EU citizens can still work in the UK; however, they need to have the correct right-to-work entitlements.
As an Italian employer looking to hire in the UK, you need to make sure that your employee has the right to work in the UK. If they are an EU citizen, they must have settled status. Or, if they’ve recently relocated to the United Kingdom from another country, be sure they have the correct visa. Thankfully, an Employer of Record (EOR) in the UK can help with that.
How to hire employees in the UK
There are two primary ways Italian employers can hire in the UK: by setting up their own foreign subsidiary or by working with an Employer of Record (EOR). An employer of record service acts as the legal employer in the UK, making global employment an efficient, compliant, and overall positive experience.
Set up a foreign subsidiary
A foreign subsidiary is a legally independent business entity that’s set up in a foreign country. Setting up a local entity alone may be a long, exhausting process. Doing so takes time, effort, money, and endless resources. Unless you have boots on the ground and numerous legal experts in the UK, you may be at risk of noncompliance. Doing this may be only worthwhile if you plan on having a large team based out of the United Kingdom shortly.
Work with an Employer of Record
Local employment laws in the UK may be intricate, but thankfully, an EOR in the UK takes care of absolutely everything regarding the direct employment relationship to guarantee compliance with local laws.
Other tasks an EOR in the UK can take care of include:
- Right to work entitlements
- Employment contracts
- Onboarding processes
- Income tax laws and filing
- Payroll processing
- Employee benefits
- Intellectual property protection
- Termination
- Employee data management for foreign workers
Hire in the UK with Borderless
Want to hire in the UK but worried about your legal responsibilities as an employer? To enjoy everything the United Kingdom has to offer and to hire compliantly, work with Borderless. Book a demo today.
