Can a US Company Hire Employees in the UK? 

The UK system places more emphasis on employee rights. You need contracts, structured payroll, and fair processes from the start. 

Do You Need a UK Entity? 

To employ directly, yes. You must: 

• Register a company with Companies House. 

• Register as an employer with HMRC. 

• Run payroll and pensions in line with UK law. 

This makes sense if you’re building a team. For one or two hires, it’s often overkill. 

The alternative is an Employer of Record (EOR). The EOR is the legal employer, running contracts, payroll, pensions, and compliance, while you manage day-to-day work. 

What Does It Really Cost to Hire in the UK? 

Salary is just the start. Employers also cover: 

• National Insurance – usually 13.8% above the threshold (gov.uk). 

• Pensions – at least 3% employer contribution under auto-enrolment (gov.uk). 

• Paid leave – 28 days minimum. 

• Statutory benefits – e.g. sick pay, parental leave, redundancy pay etc. 

Hiring in the UK is approx.16 to 20% more than a worker’s salary. For example, to employ  someone on £50,000 per year may cost closer to £58,000 once contributions and benefits are added in. 

Hiring Contractors & Freelancers in the UK 

Many US companies prefer freelancers for speed and flexibility. In the UK, though, it’s not as simple as signing a contract. 

How UK Law Defines Contractors 

Contractors typically: 

• Run their own business and invoice clients. 

• Set their own hours and may work for multiple clients. 

• Provide their own tools and take on financial risk. 

They don’t get employee rights such as sick pay, holiday pay, redundancy, or parental leave. 

Workers vs Employees vs Contractors 

The UK recognises three categories: 

• Employees have full rights (leave, notice, redundancy, unfair dismissal protection). 

• Workers have some rights such as holiday pay, minimum wage. 

• Contractors and the self-employed have no employment rights. 

Status depends on reality, not labels. If someone works regular hours under your direction, they may be a “worker” or “employee” in practice — even if the contract calls them a freelancer. 

IR35 and Misclassification Risks 

The IR35 rules stop “disguised employment.” If a contractor works like an employee, HMRC can reclassify them. 

• Inside IR35, the company may be responsible for deducting tax and National Insurance. 

• The contractor still doesn’t get full employee rights. 

• Penalties, back taxes, and interest add up. 

Some areas to consider closely: 

Does the freelancer: 

• Work fixed hours. 

• Get direction from your managers. 

• Use your equipment. 

• Only work for your company. 

• Have no right to send a substitute. 

For media and creative businesses, where freelancers often work long shifts or rolling contracts, the risk is higher. And while most high-profile IR35 cases involve UK companies, the rules apply equally to overseas businesses engaging UK freelancers. 

Case Examples: IR35 in Action 

• Gary Lineker vs HMRC – HMRC claimed Lineker owed them £4.9m in tax for work carried out with the BBC and BT Sport between 2013 and 2018. The Tribunal ruled in his favour, deciding IR35 did not apply in this case (The Guardian). 

• Kaye Adams – The broadcaster, known for her work on ITV’s Loose Women and BBC Radio Scotland, successfully appealed against HMRC’s claim that her engagements should fall under IR35. The Upper Tribunal confirmed she was genuinely self-employed (Kingsbridge). 

• Stuart Barnes vs HMRC – Former England rugby player and Sky Sports commentator Stuart Barnes was found by the Tribunal to be inside IR35. His contracts showed elements of employment, meaning PAYE and National Insurance should have been applied (Contractor Calculator). 

These cases highlight how HMRC actively pursues IR35 disputes in the media sector — and that outcomes vary depending on the facts of each arrangement. 

Paying Freelancers in the UK 

Employees are paid through payroll whereas contractors tend to invoice.  

Key points to consider: 

• How you pay – bank transfer, managed service, or platform. Watch fees and exchange rates. 

• Currency – most freelancers prefer GBP. Paying in dollars can cause issues when rates move. 

• Get it in writing – scope, deliverables, terms, and ownership should be clear. 

• Don’t pay late – the Late Payment of Commercial Debts Act protects contractors, and reputation matters. 

Practical Obligations When Using Contractors 

Even without employee status, obligations still apply: 

• Health & safety rules apply if they work on your premises. 

• Freelancers are covered by equality law. 

• GDPR still applies when contractors handle personal data. 

Risks of Getting IR35 Wrong 

These are the main risks of getting IR35 wrong include: 

• Tax penalties – including fines for unpaid National Insurance, IR35 errors etc. 

• Employment disputes – claims over notice, leave, or unfair treatment. 

• Permanent establishment risk – your UK activity could create a taxable branch. 

• Reputation damage – word spreads quickly if you get it wrong 

A Checklist for Hiring in the UK 

1. Choose your hiring route (Entity or EOR). 
2. Issue contracts from day one. 
3. Run payroll properly as PAYE and pensions are mandatory. 
4. Budget correctly for salary plus 16–20% in extra costs. 
5. Check contractor status (use HMRC tools; avoid IR35 issues). 
6. Clarify payment terms and invoices in GBP. 
7. Plan for compliance (health & safety, equality, data protection etc). 

The Smarter Way to Hire in the UK 

The UK has world-class talent and a growing freelance market. Managing workers compliantly is key, whichever route you decide upon. 

The safest path is to partner with a company that understands UK law. A company that manages payroll and contracts compliantly, and keeps both freelancers and employees engaged the right way. 

With Project Global, you get both technology and service. Our Project Engagement Portal (PEP) gives clear oversight of contracts, onboarding, and compliance. We look after the detail, so you can focus on operations. 

With experience supporting US companies and global media clients, we handle complex, real-world compliance challenges, protect reputations, and avoid one-size-fits-all solutions. 

Ready to build your UK team? 
Talk to us today. We’ll help you hire compliantly and confidently.