Hire in the UK: A Comprehensive Guide for 2026

Introduction

Employers looking to hire in the UK must comply with the Employment Rights Act 1996, the Working Time Regulations 1998, and the Equality Act 2010, while also tracking the phased rollout of the Employment Rights Act 2025. Foreign companies can engage workers through a registered local entity, an Employer of Record (EOR), or an Agent of Record (AOR) for contractors.

What makes UK compliance harder right now is that the rules are changing mid-cycle. The Employment Rights Act 2025 reduces the unfair dismissal qualifying period from two years to six months for dismissals on or after January 1, 2027, and introduces zero-hours contract rights in phases through 2027. Right to work check failures carry civil penalties of up to £60,000 per illegal worker, and wilfully failing to auto-enrol eligible employees into a pension scheme is a criminal offence carrying up to two years in prison.

This guide covers hiring routes, right to work and contract requirements, key employment laws, payroll and tax rules, leave entitlements, compliance risks, and the cost of hiring in the UK.

How to hire in the UK?

Foreign companies have three main ways to engage workers in the UK: Set up a local entity, partner with an Employer of Record (EOR), or use an Agent of Record (AOR) for independent contractors. Regardless of route, every employer in the UK must complete two obligations before anyone starts work: A right to work check and a written employment statement.

How to hire employees by setting up a local entity?

Setting up a local entity refers to establishing a formal business presence in the UK. It gives you direct control over all employment decisions and is the right structure for companies building a long-term presence. The trade-off is setup time, ongoing administrative overhead, and the full weight of UK employment law compliance sitting with you directly.

How to hire employees via EOR?

An EOR assumes all legal employment responsibilities on your behalf, including payroll, tax compliance, and statutory obligations. You manage the employee's day-to-day work; the EOR handles everything that makes them legally employed in the UK. This is the faster route for companies that want to hire without first registering a legal entity.

How to hire contractors via AOR?

An AOR is the appropriate route for engaging independent contractors rather than employees. The AOR handles worker classification, payments, and compliance with UK contracting rules. This works well for project-based or specialist engagements where full employment is not required.

What type of employment contract do you need?

The UK also recognises other contract types, including agency staff, freelancers and consultants, and zero-hours contracts, but most hires through a local entity or EOR fall under either an indefinite (permanent) or definite (fixed-term) contract.

An indefinite (permanent) contract has no end date and continues until ended by notice, dismissal, or agreement between the parties. It carries the full set of statutory employment rights described throughout this guide, without the fixed-term-specific protections below, since those exist precisely to bring fixed-term treatment in line with the permanent baseline.

Definite employees have the right not to be treated less favourably than a comparable permanent employee doing similar work, unless the employer can objectively justify the difference. This covers pay, benefits, and access to training, not just headline terms.

Any employee kept on fixed-term contracts for four years or more automatically becomes a permanent employee, unless the employer can show a good business reason for keeping the role fixed-term. This applies whether the four years come from one long contract or several renewed ones.

Fixed-term employees with two years or more of continuous service also have the same statutory redundancy rights as permanent employees. Ending a fixed-term contract by non-renewal counts as a dismissal in law, which means fixed-term employees can bring an unfair dismissal claim on the same basis as permanent staff once they have the qualifying service.

What do right-to-work checks require?

Every employer in the UK must carry out a right-to-work check on every worker before employment commences. The check confirms the individual is legally permitted to work in the UK. Failing to conduct a correct check and then employing an illegal worker can result in a civil penalty of up to £60,000 per illegal worker.

The check can be done manually using original documents, via the Home Office online service, or through a certified identity verification provider.

For non-UK nationals, you will also need a sponsor licence to employ workers coming to the UK. This includes European Economic Area (EEA) and Swiss citizens who came to the UK to work from January 2021 onwards.

Getting hiring right in the UK means deciding upfront whether you need full-time employees or contractors, since each route carries separate compliance obligations. Employee hires require a right-to-work check, with civil penalties of up to £60,000 per illegal worker for getting it wrong, plus a written statement of employment particulars on day one. For non-UK nationals, a sponsor licence is also required.

Skuad supports both hiring models from a single platform:

EOR for full-time employees

• Acts as the legal employer across 160+ countries, so your company can hire in the UK without registering a local entity
• Supports employment contract generation aligned with local labor laws and statutory requirements across supported markets
• Facilitates statutory contribution workflows covering applicable social insurance and pension obligations
• Supports payroll processing in 70+ currencies with accurate tax withholding and statutory deductions
• Helps administer statutory leave entitlements and benefits in line with local requirements
• Assists with termination and offboarding, including notice periods and severance calculations as required locally

Contractor management (AOR)

• Helps onboard contractors with locally compliant agreements that reduce misclassification exposure
• Supports invoice generation, approval workflows, and payment processing
• Helps flag classification risk before it becomes a compliance issue with built-in worker classification checks
• Facilitates multi-currency payouts across 70+ currencies
• Helps manage contractor records, contracts, and payment history from a single dashboard alongside full-time employees

What are the employment laws in the UK?

The UK's employment framework is primarily governed by the Employment Rights Act 1996, the Working Time Regulations 1998, and the Equality Act 2010. The Employment Rights Act 2025 received Royal Assent on December 18, 2025, and is being brought into force in phases across 2026 and 2027.

Foreign employers hiring in the UK should monitor its implementation, as it introduces significant changes, including a reduced unfair dismissal qualifying period, dropping from two years to six months for dismissals on or after January 1, 2027, and zero-hours contract rights.

Standard working hours

Workers cannot be required to work more than 48 hours a week on average, normally averaged over 17 weeks. Workers can choose to work beyond this limit by signing an individual opt-out agreement in writing. The opt-out can be cancelled by either party.

Notice periods

Statutory minimum notice under the Employment Rights Act 1996 scales with length of service:

Contracts can specify longer notice periods. The statutory minimum applies unless the contract provides more. Employees with more than one month's service must give at least one week's notice when resigning.

Employees are currently entitled to claim unfair dismissal protection after two years of continuous employment. From January 1, 2027, the qualifying period for unfair dismissal reduces from 2 years to 6 months under the Employment Rights Act 2025. Until then, the 2-year qualifying period applies.

What is the statutory redundancy pay entitlement?

Employees with at least two years' continuous service are entitled to statutory redundancy pay. For redundancies on or after April 6, 2026, weekly pay is capped at £751, and the maximum total payment is £22,530. The amount depends on age and service:

Service is capped at 20 years for calculation purposes.

Anti-discrimination protections

The Equality Act 2010 protects employees and job applicants from discrimination across nine protected characteristics: Age, Disability, Gender reassignment, Marriage and civil partnership, Pregnancy and maternity, Race, Religion or belief, Sex and Sexual orientation.

Protection applies across all stages of employment, such as recruitment, terms and conditions, promotion, and dismissal. Both direct and indirect discrimination are prohibited.

For the UK's employment requirements, Skuad's UK hiring guide walks through key areas, including contracts, working hours, notice periods, and the phased rollout of the Employment Rights Act 2025.

Read the Skuad UK hiring guide.

What are the payroll and tax rules in the UK?

UK payroll runs through the Pay As You Earn (PAYE) system, operated by HM Revenue and Customs (HMRC). As an employer, you deduct income tax and National Insurance Contributions (NICs) from each employee's pay and remit them to HMRC. You must report payroll in real time using HMRC-recognised payroll software on or before each payday. On top of this, you have mandatory workplace pension auto-enrolment obligations for eligible workers.

What are the income tax rates in the UK?

These rates apply to England, Wales, and Northern Ireland for the 2026 to 2027 tax year. Scotland has separate rates.

The Personal Allowance reduces by £1 for every £2 of income above £100,000 and reaches zero at £125,140.

Scotland rates:

National Insurance rates

The following Class 1 NIC rates apply for the 2026 to 2027 tax year for most employees (Category A). Employees start paying NIC above the primary threshold, whereas employers start paying above the lower secondary threshold.

Eligible employers can reduce their annual NIC liability by up to £10,500 through the Employment Allowance.

Pension auto-enrolment obligations

Workers aged 22 to State Pension age earning more than £10,000 per year must be automatically enrolled into a qualifying workplace pension scheme. Contributions are calculated on qualifying earnings between £6,240 and £50,270 per year for the 2026 to 2027 tax year.

Workers can opt out after being enrolled. Every three years, employers must re-enrol eligible workers who have left the scheme.

Running payroll in the UK means real-time PAYE reporting to HMRC on or before every pay day, calculating tiered National Insurance Contributions, and auto-enrolling eligible workers into a qualifying pension scheme with minimum contribution thresholds. Each obligation runs on its own deadline and reporting requirement.

Skuad's Global Payroll platform helps process payroll from a single system, supporting statutory contribution workflows, payroll processing in 70+ currencies, and tax withholding across supported markets, so your team isn't managing separate reporting deadlines manually.

For benchmarking salaries across roles before making an offer, the Skuad Salary Insights tool helps in understanding compensation data by role and seniority level across supported markets.

Explore salary benchmarks.

What are the leave benefits in the UK?

The UK has a well-defined set of statutory leave obligations, from annual leave and sick pay to maternity and paternity rights. Most have been updated by the Employment Rights Act 2025, which introduced several changes effective from April 6, 2026.

Annual leave

Almost all workers are legally entitled to 5.6 weeks' paid holiday a year. Most workers who work a 5-day week must receive at least 28 days' paid annual leave a year. Part-time workers receive the same entitlement pro-rated to their hours.

• An employer can include bank holidays as part of statutory annual leave, and there is no separate right to bank holidays on top of the 5.6 weeks.
• Entitlement accrues from the first day of employment. Unused statutory leave cannot be bought out while the employee is still employed.

Sick leave

The weekly rate of Statutory Sick Pay (SSP) for 2026 to 2027 is £123.25 or 80% of the employee's average weekly earnings, whichever is lower. The lower earnings limit and waiting period for SSP were both removed under the Employment Rights Act 2025. SSP is now payable from the first day of illness and applies to all employees regardless of what they earn.

Maternity leave

Eligible employees can take up to 52 weeks' maternity leave. The first 26 weeks is known as Ordinary Maternity Leave, and the last 26 weeks is Additional Maternity Leave. Statutory Maternity Pay (SMP) is paid for up to 39 weeks.

The employee's contractual rights, holiday accrual, and seniority continue uninterrupted throughout maternity leave.

Paternity leave

Statutory Paternity Pay (SPP) is £194.32 a week or 90% of average weekly earnings, whichever is lower. Paternity leave entitles the eligible parent to 2 weeks, which do not need to be taken consecutively, within 52 weeks after the birth.

Both paternity leave and unpaid parental leave became day-one rights under the Employment Rights Act 2025. Employees no longer need to complete a qualifying period before becoming entitled to either.

How many public holidays are there in the UK?

In the UK, bank holidays are the statutory public holidays, and the festive holidays are all included within the bank holiday list. There are no additional paid public holidays beyond these dates. Your employer does not have to give you paid leave on bank or public holidays, as they can count toward the statutory 5.6 weeks' annual leave entitlement.

The number of bank holidays and specific dates differ across the four nations.

What are the compliance risks of hiring in the UK?

The UK has active enforcement across employment law, pay obligations, and pension compliance. The risks below carry specific financial penalties and, in some cases, criminal liability. All these apply to foreign employers hiring in the UK.

The UK enforces compliance across right-to-work checks, minimum wage, pension auto-enrolment, and the new day-one rights under the Employment Rights Act 2025. Right-to-work failures alone carry civil penalties, and wilfully failing to enrol eligible workers into a pension scheme is a criminal offence carrying up to two years in prison.

Skuad's Shield helps distributed teams stay aligned with statutory obligations across supported markets, supporting compliance monitoring and documentation tracking from a single platform, so teams can track right-to-work, wage, and pension obligations without building independent monitoring capacity for each requirement.

How much does it cost to hire in the UK?

The total cost of hiring in the UK is the employee's salary plus employer National Insurance Contributions and pension auto-enrolment, both covered in the payroll section above. Use the minimum wage rates below as your floor when building a hiring budget.

What is the minimum wage in the UK?

Rates increased on 1 April 2026, following the Low Pay Commission's recommendations:

The National Living Wage rose by 4.1%, and the 18-20 rate rose by 8.5%, narrowing the gap between the two bands as part of the government's stated goal of phasing out separate youth rates. Apprentices qualify for the apprentice rate if they are under 19, or aged 19 or over and still in the first year of their apprenticeship. Once an apprentice turns 19 and completes their first year, they move to the rate for their age band.

Your actual UK hire cost depends on the role, compensation level, and applicable National Insurance and pension contribution thresholds at that salary. Skuad's hiring cost calculator helps you model the employer cost before you make an offer.

Calculate your hire cost.

Customer story: How PureRED scaled its team across six countries with Skuad?

PureRED, a marketing and advertising agency, needed to onboard employees across six countries, including the UK, without setting up local entities in each market. The company used Skuad's EOR platform to support localized employment contracts, payroll processing in 70+ currencies, and ongoing compliance across supported markets, growing its team to 65 employees.

Skuad made our team expansion possible, helping with complex onboarding and payroll processes across six different countries with ease. Their local expertise assisted our compliance, letting us focus on serving best to our clients.

- Brian Butcher, EVP Corporate Development, PureRED

Read the full case study.

Ready to make your first UK hire?

The UK's employment framework isn't static right now. The Employment Rights Act 2025 is rolling out in phases through 2027, which means obligations that apply today, like the two-year qualifying period for unfair dismissal, will shift before many hires complete their first year. Building internal processes around rules that are still changing adds risk on top of the existing right to work and auto-enrolment requirements, both of which carry real penalties for getting it wrong.

A local entity means you track every regulatory change yourself. An EOR keeps that updated, so your team isn't chasing each new requirement separately.

Skuad supports the operational complexity of hiring in the UK, covering employment contracts, payroll processing in 70+ currencies, statutory contribution workflows, and termination handling, so your team can focus on the hire itself.

Book a demo to see how Skuad supports your first UK hire without entity setup.

FAQs

1. Can a foreign company hire in the UK without setting up a local entity?

A foreign company can hire in the UK without a local entity by using an Employer of Record (EOR). The EOR acts as the legal employer, processes Pay As You Earn (PAYE) payroll, deducts income tax and National Insurance, helps in pension auto-enrolment, and manages compliance, while you direct the employee's work.

2. What must a UK employer do before an employee starts?

Before anyone starts work, every UK employer must complete a right-to-work check confirming the person can legally work in the UK and provide a written statement of employment particulars on day one. To employ most non-UK nationals, the employer also needs a sponsor licence.

3. How much do employer costs add to a UK salary?

On top of gross salary, the employer pays National Insurance at 15% on earnings above £5,000 a year, and contributes a minimum of 3% to a workplace pension for eligible workers, within an 8% total minimum. Eligible employers can offset up to £10,500 of National Insurance through the Employment Allowance.

4. What happens if a worker is misclassified in the UK?

Misclassifying an employee or worker as self-employed exposes the employer to backdated income tax and National Insurance owed to HM Revenue and Customs (HMRC), plus the worker's employment rights claims at an employment tribunal. UK status tests assess the working relationship in practice, looking past the contract label.

5. What are the main compliance risks when hiring in the UK?

The UK enforces several obligations with real penalties. A failed right to work check carries a civil penalty of up to £60,000 per illegal worker. Paying below the minimum wage triggers fines. Wilfully failing to auto-enrol eligible workers into a pension scheme is a criminal offence carrying imprisonment.

6. How long does it take to onboard a hire in the UK?

Onboarding depends on the route and the worker. Setting up a local entity adds months before the first hire, plus PAYE registration with HMRC. Through an Employer of Record that already holds the registrations, a UK national can start in days, while a sponsored non-UK national waits on visa processing.