The United Kingdom has a highly-skilled, highly-educated workforce that many employers look to when expanding into international waters. For companies that are interested in engaging with independent contractors in the United Kingdom, hiring and paying them has never been easier or more secure.
Contractors in the UK are comfortable with working remotely, making the employment and management process seamless. The number of people working remotely in the United Kingdom is significant — in fact, as of 2023, 44% of UK workers currently work remotely. The majority of those who work remotely are contractors; 75% to be exact.
Having a contractor that knows how to work well remotely is a critical factor, but it’s not all employers need to consider. Employers need to figure out the processes in hiring an independent contractor in the UK.
And not only that, but employers also need to determine how to pay their independent contractors securely and compliantly.
When you look into how to hire and pay employees in the UK, you may not think that choosing to hire an independent contractor in the UK may not be that much different. Unfortunately, it is a completely different experience — although, it may be easier and perhaps even more cost-effective.
Thankfully, working with an EOR in the UK, like Borderless, can make hiring an independent contractor in the UK a positive and seamless experience.
Interested to know how to hire and pay your independent contractors from the United Kingdom? Here’s your guide!
Advantages of Hiring Independent Contractors
Many companies look to hire independent contractors for various reasons.
For one, contractors have specific and highly desired skill sets that can help employers with projects and initiatives.
Additionally, hiring contractors is cost-effective and efficient.
Cost-Effective
When figuring out how to hire and pay employees, it’s complex, it’s time consuming, and, quite frankly, can get expensive. Hiring full-time employees in the UK comes with numerous expenses, such as salaries, bonuses, payroll taxes, employee benefits, health insurance coverage, and training.
Contractors, on the other hand, are responsible for their own taxes, employee benefits, work equipment, and training. They also receive payment based on their own rates — which is typically less than an employee’s salary. So, choosing to hire an independent contractor in the UK is more cost-effective than an employee.
Determining how to pay independent contractors in the UK is also a simple process — just work with an invoicing or payment solution based on their invoice and rate.
Helps Businesses Stay Competitive
Working with independent contractors can help companies boost their international presence and stay competitive in an increasingly global market. By engaging with British contractors, organizations are able to find the best talent for the job and onboard them easily with an EOR in the UK.
Boosts Flexibility
Independent contractors provide employers with the chance to meet their needs, such as new initiatives, short-term projects, or long-term projects. Often, employers engage with contractors for projects that require a very specific skill set and offboard them when the project is complete.
In some cases, contractors can easily be re-engaged if needed and if they are available. This onboarding and offboarding flexibility is valuable for employers who wish to have international talent without abiding by complex termination regulations.
Independent Contractors in the United Kingdom
The United Kingdom classifies a worker into two primary groups: workers and independent contractors. Workers cover numerous groups, though. Workers are full-time employees, part-time employees, casual laborers or those who participate in the gig economy.
Every worker is entitled to paid holidays, a minimum wage, protections against unlawful termination, paid leave, pension contributions, and rest days.
Under the worker umbrella term are employees. Employees are subject to a range of payroll regulations, such as minimum wage legislation, tax obligations, and enrollment into a workplace pension plan.
Employers must also provide their employees with a payslip and submit reports to Her Majesty’s Revenue and Customs (HMRC), which must clearly outline the amounts paid and taxes withheld.
Outside of the worker umbrella, though, are contractors. The UK government officially defines independent contractors as self-employed workers for an organization under a contract for services. Contractors typically provide their clients with specialist skills on an as needed basis.
In contrast, employees work under a contract of services and are in a subordinate working relationship.
Independent Contractors and Taxes
Contractors in the United Kingdom are only paid after they submit an invoice. Because of this, contractors are not subject to the same payroll laws as employees. Rather, they are responsible for paying their own taxes and National Insurance contributions (NICs).
This means that contractors in the United Kingdom must keep accurate records of their earnings and must submit a self-assessment tax return to HMRC every year.
Steps to Take Before Hiring Contractors in the UK
Before onboarding your team of contractors from the United Kingdom, there are some steps to take to ensure a smooth and compliant experience.
Classify Correctly
When opting to hire an independent contractor in the United Kingdom, one of the most important things to be aware of is classification. Correctly classifying your independent contractors is critical in avoiding lawsuits, fines, and possible reputational damage.
The United Kingdom has legislation in place to avoid misclassification: IR35. Introduced in 2000, and last updated in April 2023, IR35 was implemented to tackle tax avoidance from the following:
- Businesses that are designating their workers as employees
- Contractors that are designating themselves as employees
- Businesses that list workers as self-employed to disguise their actual employment status
When employers are figuring out how to hire and pay an independent contractor in the UK, they must ask themselves the following to figure out if they fall in or out of IR35:
- Does your contractor control when and how they work?
- Is your contractor engaged with an umbrella company?
- Are you a small business in the private sector?
Overall, IR35 aims to prevent tax avoidance by contractors who act as employees. UK officials regularly update IR35 legislation, so it’s imperative that employers follow these changes closely to maintain compliance and avoid misclassification penalties.
To streamline this process, many employers choose to work with an Employer of Record (EOR) in the UK. Using an EOR will make it easy — and compliant — to pay your contractors in the United Kingdom.
Draw Up a Comprehensive and Compliant Contract
Every country has different requirements for what must be included in an independent contractor agreement — in fact, some countries, like Brazil, don’t even make contracts mandatory when bringing in a new freelancer.
However, the United Kingdom does in fact require contractors to have written contracts.
Independent contractor agreements in the United Kingdom are called a contract for services, whereas employees work under a contract of services. When hiring an independent contractor based out of the UK, keep this vital information in mind — it’s the first step of creating a secure and compliant contract.
These contracts play two primary roles: they create clear boundaries and expectations between the employer and contractor, and they help guarantee compliance and correct classification when HMRC audits your business.
What to Include in an Independent Contractor Agreement in the UK
There is no specific information that is required in an independent contractor agreement in the United Kingdom.
However, to clearly outline the role and expectations, it's wise to include the following:
- Project scope and tasks
- Start and end dates
- Compensation amount, structure, and pay period
- Termination guidelines
- The classification of the contractor
- Where the contractor resides
Hiring Independent Contractors in the UK
When you think about how to hire and pay your employees, and what it involves, hiring an independent contractor in the UK is a relatively easy process in comparison. Working with an Employer of Record (EOR) in the UK takes care of all administrative tasks associated with hiring, onboarding, and managing contractors based in the United Kingdom
An EOR in the UK, like Borderless will make sure everything is compliant, from hiring, to managing, to paying. We’ll help you draft secure independent contractor agreements in the UK that cover all the bases.
With our centralized independent contractor management platform, contractors in the UK will be able to access all the necessary information, such as past invoices, their contract, and payment status.
EORs in the UK can also help convert your contractors to employees — when or if you’re ready to do so. An EOR can provide you with insight into the United Kingdom’s labor laws and regulations so you can convert your contractor to a full-time employee compliantly and easily.
Paying Independent Contractors in the UK
While hiring an independent contractor is one thing, figuring out how to pay contractors is another.
There are four ways to pay your independent contractor:
- An international money order
- An international bank transfer
- Using online money transfer companies
- Working with a contractor payment platform.
International Money Order
An international money order is a secure way to pay contractors based out of the United Kingdom. It’s challenging for anyone but the payee to cash a money order, and, in the instance that the payee loses it, the purchasing place can quickly do a refund.
An international money order can be done by simply purchasing the amount you need and sending it in the mail to your contractor.
However, sometimes, payments may be delayed due to delivery issues. You and your contractor must have secure locations nearby to process the payment, as well — if no place is nearby, then this may not be the right payment method.
International Bank Transfer
International bank transfers — also referred to as wire transfers — are a secure and traditional way to pay your independent contractor. This payment method transfers money via the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.
However, they may take about five days and cost both the employee and employer hefty fees.
Online Money Transfer Companies
Online money transfer services, like Paypal, Wise, or Revolut, make it easy to transfer money between user accounts, regardless of location. These service options come with low currency conversion rates and smaller fees.
However, it’s important to note that some companies may charge a commission for holding some currencies above a certain limit. And, these service solutions are usually not available in all countries.
Before you choose this payment method, make sure the company of your choice is available in the United Kingdom.
Contractor Payment Platform
A contractor payment platform, like Borderless, simplifies the entire process of paying independent contractors in the United Kingdom. It’s a cloud-based, centralized and secure platform that pays your independent contractors in their currency — Pound Sterling — in just a few clicks.
Borderless’ global payroll platform makes it easy to track invoices, the contractor agreement, and check on the payment status. When you’re insure on how to pay independent contractors in the United Kingdom, see what Borderless can do for you.
Considerations When Hiring Contractors in the United Kingdom
When it comes to working with independent contractors in the UK, it is necessary to remain compliant with labor laws and legislation. That being said, there are additional considerations to be aware of to guarantee a smooth experience.
Keep Time Zones in Mind
When working with contractors in the United Kingdom, you need to be aware of time differences. Meeting times and deadlines should be respectful of everyone’s time involved.
For instance, a meeting scheduled for 3pm in Toronto isn’t fair for a contractor in the UK — it’d be 9pm there! As an employer, you will also need to also consider time differences when sending messages. Messages and emails that are sent during your regular working hours may not be within your contractor’s regular working hours.
Ultimately, respecting your contractor’s time zone will lead to better relationships and communication.
Be Considerate of Cultural Differences
The beauty of working with international freelancers is that they often offer fresh new perspectives, often stemming from their own country’s culture and experiences. When bringing on international independent contractors, you, as an employer, must be aware of cultural differences.
For example, if you are a company based out of Argentina that’s hiring a contractor in the UK, you need to be aware of the language barrier. The United Kingdom is an English-speaking country, so unless you onboard a Spanish-speaking contractor from the UK, the communication style may be different than what you’re used to.
Refrain from using slang — this can easily be misinterpreted and could lead to confusion — and keep it simple with communication. If a lot of communication is required, consider incorporating translation software.
The United Kingdom also has many bank holidays. While contractors are not entitled to holidays or paid time off, it may be in their culture or beliefs not to work on a specific day.
Encourage Open Communication
Open and clear communication lines are crucial to building strong relationships with your British independent contractor. There are countless remote communication and project management tools you can leverage to achieve this.
Platforms like Zoom, Slack, Dropbox, or Trello will help keep lines of communication open and projects on track, regardless of geographic location.
Open communication also makes it important for an employer to carefully assess the nature of the work and the level of control they need to have. This is key, especially for when an employer may be considering converting their contractor to a full-time employee.
Integrate Them into Company Culture
One of the downsides of hiring freelancers is that they are not fully integrated into the company culture. And, based on research from the Harvard Business Review, freelancers prefer to work with an employer that treats them like a crucial part of the team.
So, when hiring independent contractors from the UK, try to avoid any small indicators that make contractors feel excluded from the company.
While some may worry that this may be making them look too much like employees, in reality, inviting contractors to a virtual happy hour or meeting that relates to their skill set won’t hurt.
Make Timely Payments
Payment is another key element to consider when working with an international freelancer. To remain compliant, the contract must include the rate, the currency, and legal jurisdiction.
Once you and your freelancer mutually agree on the payment terms, you must pay them in a compliant and timely manner. Don’t keep your contractor waiting — not only will they get frustrated, some may charge a late fee.
Manage, Pay and Hire Employees with Borderless
Borderless is your EOR in the UK when you want to engage with independent contractors. We’ll help you hire, manage, and pay your independent contractors securely and easily.
Speak with us today to learn more. Together, we will take a proactive and elevated approach to hiring employees, paying employees and everything in between.
Disclaimer
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.
