Hiring UK Based Employees
The UK has a rich pool of talent, and for companies based internationally, accessing this talent is often at the forefront of their mind when expanding abroad. When speaking to prospective clients looking to attract UK talent, they often ask how can I quickly & effectively begin to establish a UK workforce? There are several options available, including using consultants, employer of record (EOR), or opening a company PAYE scheme. We explore these options in more detail during this article.
USING CONSULTANTS IN THE UK
Depending on the nature of the work being undertaken, it may be the case that rather than bringing the individuals on as employees, they may start providing services initially as a consultant for you. This is very common for overseas companies who are looking to initially test the UK market, before committing fully through an established presence. In this scenario, the consultant will invoice you directly for their services, typically their time, and the consultant will handle all the associated taxes.
It’s important to remember the UK legislation, IR35, when using consultants in the UK. This legislation is designed to prevent actual employees being ‘disguised’ as consultants, and therefore avoiding paying employers National Insurance (NI). You can check the status of your consultants using this questionnaire here.
EMPLOYER OF RECORD (EOR) – HOW DOES THE SERVICE WORK?
Employer of record is a solution for companies hiring employees around the globe, where a third-party organisation hires the employees on your behalf but assigns the employees to work full-time on behalf of your own company. A provider of this convenient service is Globalization Partners, or Foothold America should you be looking at the USA.
This solution provides your company with a streamlined way to hire employees in the UK, or any other territory, without having to establish a subsidiary or branch office. The individual you wish to hire will be legally contracted through the employer of record company, who will usually also handle all the compliance, local labour laws, benefits & payroll. In most cases, the employee will still be managed and report internally within your organisation.
Three Benefits of Employer of Record (EOR) Service
- Helps you hire the candidate of choice quickly
- Handles all benefits, payroll & compliance in one place, often with less administration
- Lifts human resources and compliance from your company`s shoulders
There can be many reasons for a company to use this employer of record service, but the main reason is to overcome the cost and regulatory barriers when employing in a remote country. This can be advantageous where you are not interested in selling or expanding your presence within the region, with the focus being on recruiting a sole individual than scaling a team in that region.
Besides the employer of record service, you may consider Professional Employer Organization, also known as PEO. The main difference between a PEO and EOR is that a PEO does not hold the employment relationship and risk like the EOR would do.
PROFESSIONAL EMPLOYER ORGANISATION (PEO)
The professional employer organisation service allows you to enter into a joint-employment relationship with an employer. This is done by leasing employees to the employer, allowing the PEO to manage/share employee-related responsibilities and liabilities. PEOs will manage payroll, benefits and HR responsibilities for the employees of a client company.
Five Benefits of Professional Employer Organisation (PEO) Service
- Compliance with local regulation
- More accurate finance forecasting
- Data Security
- Benefits offering
- Cost efficiency
OPENING A PAYE SCHEME IN THE UK
If you have employees who are based in the UK, regardless if their employer is UK based (such as a subsidiary company) or based in the EEA, you will be required to open a PAYE (pay-as-you-earn) scheme. Once the scheme is open, you will need to make returns periodically, even if nil (in the event of having no employees) to HMRC. These returns will declare the amount of income tax & national insurance (employers & employees) that needs to be paid to the authorities – HM Revenue & Customs.
If you decide to employ directly in the UK the individuals will be employed under UK employment law, and liable to pay taxes in the UK. As an employer, you will also be responsible for paying employers NI and making the minimum contributions to their mandatory workplace pension scheme.
To find out more about how Goodwille can help you onboard employees into your UK operation, either through an Employer of Record (EOR) or through establishing a PAYE scheme, please do not hesitate to get in touch.