Hiring, Payroll & Employment
in the United Kingdom

Salary and compensation in the UK are regulated by various laws and regulations:

• Minimum Wage: The National Minimum Wage and National Living Wage rates vary by age and are reviewed annually. 
• Overtime Pay: There is no statutory requirement for overtime pay, but employers must ensure that the average pay for total hours worked does not fall below the National Minimum Wage. Overtime pay rates are typically specified in employment contracts.

The UK observes several public holidays, also known as bank holidays. These include:

• New Year’s Day
• Good Friday
• Easter Monday
• Early May Bank Holiday
• Spring Bank Holiday
• Summer Bank Holiday
• Christmas Day
• Boxing Day

In addition to these, each nation within the UK (England, Scotland, Wales, and Northern Ireland) may have additional public holidays specific to their region.

Employees in the UK are entitled to various types of leave, including:

• Annual Leave: The Working Time Regulations 1998 entitle workers to 5.6 weeks of paid leave per year, which can include public holidays.
• Sick Leave: Employees are entitled to Statutory Sick Pay (SSP) for up to 28 weeks if they are too ill to work.
• Maternity Leave: Up to 52 weeks, with up to 39 weeks paid.
• Paternity Leave: Two weeks paid leave.
• Shared Parental Leave: Up to 50 weeks, with up to 37 weeks paid.
• Parental Leave: Up to 18 weeks unpaid leave for each child.
• Parental Bereavement Leave: Two weeks paid leave.
• Dependants Leave: Reasonable unpaid time off to deal with emergencies involving dependants.
• Jury Service: Unpaid leave for the duration of the jury service.

Termination of employment in the UK can occur under several circumstances:

• Capability: Relating to the employee’s ability to perform their job.
• Conduct: Relating to the employee’s behavior.
• Redundancy: When the job is no longer needed.
• Statutory Illegality or Breach: If continuing employment would contravene a law.
• Some Other Substantial Reason: Which justifies the termination.

Employers must provide appropriate notice periods based on the length of service, ranging from one week to 12 weeks. Immediate dismissal without notice can occur in cases of gross misconduct.

Employers in the UK are required to provide certain types of insurance:

• Employer’s Liability Insurance: This covers claims by employees for injuries or illnesses sustained as a result of their work.
• Pension Contributions: Although not a form of insurance, employers must automatically enroll eligible employees into a qualifying workplace pension scheme and make contributions.

You can employ someone in the UK without establishing your own local company by using an Employer of Record, or EOR. The EOR becomes the worker’s legal employer while your organisation manages their day-to-day role.

A UK EOR arrangement can support employment contracts, payroll, tax deductions, statutory benefits and ongoing employment administration. Before the arrangement begins, the proposed role, working practices, right-to-work position and employment status should be reviewed.

Need to employ someone in the UK? Discuss your EOR requirement with us.

The total cost of employing someone in the UK includes more than salary. Depending on the employee and arrangement, it may include employer taxes and National Insurance, workplace pension contributions, paid holiday, statutory payments, benefits and employment administration.

The cost should be calculated using the employee’s salary, working hours, benefits, pension position, employment terms and any immigration requirements. Current tax rates, statutory thresholds and employee entitlements should be applied when the estimate is prepared.

Get a UK employment cost estimate.

A standard EOR cannot sponsor a worker who is supplied to and managed by a client. Home Office guidance does not permit an employment agency, employment business or intermediary to sponsor a worker and then supply that person as labour to another organisation.

The client may be able to hold the sponsor licence and sponsor the worker where it has genuine responsibility for the person’s duties, functions and outputs. Project Global can potentially provide legal employment or payroll administration alongside the client’s sponsorship, but the structure must be reviewed carefully and must comply with National Minimum Wage and Working Time requirements.

Discuss a UK employment and sponsorship structure

Employers must be satisfied that each person they employ has the right to perform the proposed work in the UK. The prescribed check should be completed before employment starts, with a follow-up check where the person has time-limited permission to work.

Depending on the person’s status and documents, the check may be completed using an appropriate manual document check, a digital verification service or the Home Office online checking service. The Employer Checking Service can be used in certain circumstances where the person’s status requires confirmation from the Home Office.

Checks should be applied consistently. Employers should not make assumptions about someone’s right to work based on nationality, name, accent, ethnicity or appearance.

Check the onboarding requirements for your proposed UK worker.

You can engage a genuinely self-employed contractor in the UK, but the arrangement must reflect how the person will work in practice. Using a contractor agreement or requiring the person to work through a limited company does not, by itself, establish self-employed status.

Relevant considerations include whether personal service is required, who controls what work is done and how it is performed, whether there is an obligation to offer and accept work, and whether the individual is genuinely operating an independent business. HMRC’s Check Employment Status for Tax tool can support the tax-status assessment.

IR35 is the common name for the UK’s off-payroll working rules. The rules are intended to ensure that a contractor who provides services through an intermediary, but would have been an employee if engaged directly, pays broadly the same Income Tax and National Insurance as an employee.

IR35 can still be relevant when the contractor provides services through their own limited company. The appropriate assessment depends on the contractual terms and the actual working arrangements, including personal service, control and the parties’ ongoing obligations.

Check whether the proposed engagement may fall within IR35.

The relevant question is not simply where the client is incorporated. The off-payroll position depends on the parties involved, the contractor’s intermediary, the working arrangement and the statutory rules that apply to that engagement.

A cross-border client should not assume that using an overseas company, foreign contract or UK limited-company contractor automatically removes UK tax and classification considerations. The engagement should be reviewed before work begins to establish which party has responsibility for determining status and operating any required deductions.

Request a review of your cross-border contractor arrangement.

A contractor who is treated as self-employed may have to be treated differently for tax or employment-rights purposes if the actual relationship points towards worker or employee status. Potential consequences can include unpaid tax and National Insurance, statutory employment rights, holiday-pay exposure and disputes over responsibility between the parties.

The employment-status label used in the contract is not always decisive. The courts and authorities may consider how the arrangement operates in practice and may disregard written terms that do not reflect the true relationship.
A classification assessment should therefore address both tax status and employment rights rather than treating IR35 as the only relevant risk.

Request a UK worker-classification assessment