Even though these challenges exist, hiring employees in the United Kingdom is not impossible. With the right technique and strategy, you can ensure a smooth employment process while staying compliant. Let’s find out what these methods are.
Best Ways to Hire
There are three main ways to hire employees in the UK. You can either set up a local entity, partner with an EOR or seek the services of an AOR. Depending on your business needs and goals, you can select any one of these methods.
For example, partnering with an EOR can be a good idea for small enterprises with budget constraints. Similarly, setting up a local entity, too, has its own set of pros and cons.
Nonetheless, let’s take a look at what these three methods entail.
How to hire employees by setting up a local entity
One significant advantage of this approach is that it lets you control every aspect of the business's overseas branch.
However, there are quite a few other disadvantages as well. These include being extremely time-consuming, potential legal risks, and significantly reduced organizational flexibility.
How to hire employees via EOR
An Employer-of-Record assumes all legal employment responsibilities on your behalf.
This includes payroll duties, legal compliance, and administrative hurdles.
It reduces the chances of compliance risks and enables you to better focus on your employees’ day-to-day activities.
With an EOR like Skuad, companies can hire, pay, and manage their global team without setting up a local entity.
How to hire contractors via AOR
Leveraging the services of an Agent of Record is usually one of the best ways to hire international contractors in the United Kingdom.
An AOR takes up all responsibilities, from managing workers’ classification to managing payments and administration.
Additionally, they help you ensure compliance with hiring and employment agreements, reducing the risk of legal pitfalls.
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Now that you know the best ways to hire employees in the UK, let’s examine the various costs associated with it, like employee salary, benefits management and more.
Parameters
Setting up a local entity
Partnering with Skuad (AOR/EOR)
Setup costs
Typically high as it involves setup fees, business registration expenses, and more.
Minimal, as Skuad already has an established presence in the UK.
Administrative costs
High, since you will need to build an in-house team to help you with all tasks related to administration and HR
Low, since Skuad provides global team management expertise, which also includes payroll and taxes
Legal and Compliance
High, since you will have to handle the fees for legal services, background checks, and compliance with employment laws
Skuad has an in-house legal team that will guide you through the complexities of local labor regulations.
Parameters
Partnering with Skuad (AOR/EOR)
Setting up a local entity
Setup costs
Minimal, as Skuad already has an established presence in the UK.
Typically high as it involves setup fees, business registration expenses, and more.
Administrative costs
Low, since Skuad provides global team management expertise, which also includes payroll and taxes
High, since you will need to build an in-house team to help you with all tasks related to administration and HR
Legal and Compliance
Skuad has an in-house legal team that will guide you through the complexities of local labor regulations.
High, since you will have to handle the fees for legal services, background checks, and compliance with employment laws
Navigating these costs can be challenging if you do not have proper mechanisms in place. Skuad gives you access to the country cost calculator, which will help you manage employment expenses in over 160+ countries.
A Brief About Employment Laws in the UK
Two main acts govern the labor relations in the United Kingdom. They include,
The Employment Rights Act 1996 - Contains comprehensive guidelines related to working hours, leave policies, dismissal procedures, and more.
The Equality Act 2010 - Prohibits any form of age discrimination against adults in providing services and public functions.
These regulations provide a legal framework that protects workers' rights and offers remedies or compensation if those rights are violated. Therefore, as an employer, it is paramount that you carefully analyze all the regulations and adhere to them to avoid potential legal challenges.
Challenges of Hiring in the UK
Recruiting full-time employees in the UK, although hugely advantageous, does come alongside its own set of challenges and hurdles. Here are a few examples:
Navigating complex labor laws
The UK has some stringent labor laws in place to ensure fair treatment in the workplace. They include provisions such as the following,
Employees are entitled to 28 days of paid vacation leave per year.
In the event of termination, a notice period of one to 12 weeks must be provided, depending on the employee's tenure of service.
The probationary period in the United Kingdom should not exceed three months.
Compliance with these regulations can often be a hurdle for most companies.
This is especially true for small to medium enterprises, which lack the resources to seek legal expertise in compliance matters.
Payroll and Tax
Moving on, the payroll system in the United Kingdom can also be difficult to navigate since it involves a lot of complexities. From social security contributions to income tax rates, there are a lot of factors that can often get difficult to juggle together.
For example,
Both employers and employees in the UK must make social security payments, commonly referred to as the National Insurance Contributions (NICs).
Previously, the rate was set at 12% for employees earning between £12,571 and £50,270, with an additional 2% for any income above this threshold.
Employers were required to pay 13.8% of their employee’s earnings above £9,100.
The primary rate of employee NICs has been reduced by 2% to 10%.
With all these changes in place, navigating the UK payroll system can become confusing and tedious for employers.
You will need to leverage the services of a powerful payroll solution, which usually comes alongside vast amounts of upfront investment in money and resources.
Talent Landscape
The sudden increase in the demand for tech talent in the United Kingdom has resulted in fierce competition between companies to attract and retain top-tier professionals.
Additionally, the complexity has increased further with the increase in startups in the country. Established companies struggle with these emerging organizations, offering attractive packages and work environments.
Last but not least, this competitive talent landscape in the UK, especially involving tech professionals, has also resulted in salary inflation. It has become much costlier for several companies to secure top talent in this country.
One potential solution to this problem is to build a solid global talent acquisition team. It will allow you to optimize resources, minimize turnover, and increase retention rates.
Hire in the UK with Skuad
Skuad is an all-in-one global employment platform that enables you to hire, pay, and manage full-time employees based on country-specific laws.
Additionally, it provides a robust payroll system that allows you to consolidate all your payment needs under a single roof.
Skuad also offers automated HR compliance so that you do not have to spend your time and resources.
Yes, US companies can hire employees in the United Kingdom. They can either set up their subsidiaries, engage with an AOR to hire international contractors or partner with an employer of record.
How much does recruiting an employee in the UK cost?
The cost of hiring employees in the UK usually differs based on your method. For example, if you are considering setting up a local entity in this country, it will cost you much more than leveraging an EOR's services.
How does payroll work in the UK?
Employers in the UK are mandated to pay their employees in the country’s official currency, the Pound Sterling (GBP, £). They must also comply with the national minimum wage, which is currently set at £11.44 per hour.
What are the leading UK employment laws?
The Employment Rights Act 1996 and the Equality Act 2010 are the primary labor laws in the UK. They govern various aspects of employment, including statutory working hours, overtime limitations, and leave policies.
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