Hire employees in the United Kingdom
Everything a foreign company needs to know before employing people in the UK: whether you need an entity, what an employee really costs, how PAYE and National Insurance work, what leave is mandatory, and why the two-year dismissal threshold and IR35 catch people out. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly. Detail follows below.
Do I need a local UK entity to hire?
No. Foreign companies can engage talent in the United Kingdom through three routes:
- Employer of Record. Dryft Global employs the person through its established UK infrastructure. Dryft runs Real Time Information (RTI) payroll with HMRC, withholds income tax under PAYE, pays Class 1 National Insurance, handles pension auto-enrolment and delivers every statutory right. You direct the day to day work. No Companies House incorporation is needed.
- Direct local entity (Ltd company or UK branch). You incorporate at Companies House, register with HMRC as an employer before the first pay day, take out employers' liability insurance, set up a pension scheme and run UK payroll yourself.
- Independent contractor (B2B agreement). Lawful only for genuinely self-employed specialists. The off-payroll working rules (IR35) put the tax risk on you. See the contractor section below.
When should I use an EOR instead of setting up a Ltd company?
An EOR makes commercial sense when you are:
- Onboarding people in days rather than the 4 to 8 weeks that incorporation, a UK bank account and HMRC PAYE registration take.
- Hiring distributed engineering, sales, marketing, finance or customer operations staff without premises.
- Testing demand or building an initial UK customer base before committing to a subsidiary.
A Ltd company becomes the right answer when UK headcount settles at 15 to 25 or more, when you need to contract and bill customers in GBP, when you need regulatory licensing such as FCA authorisation, or when you want your own Home Office Skilled Worker sponsor licence.
What does an employee actually cost beyond salary?
Plan for roughly 15% to 22% or more on top of gross salary. The main line is employer Class 1 National Insurance on earnings above the Secondary Threshold, at around 13.8%. Add the 3% minimum employer pension contribution (tech packages usually pay 5% to 10%), the 0.5% Apprenticeship Levy if your UK pay bill exceeds £3,000,000, and 3% to 7% for the private medical and life cover candidates expect. Full breakdown below.
How difficult is termination in the UK?
Easier than continental Europe, but procedural. In Great Britain, employees with under two years of continuous service (one year in Northern Ireland) have no ordinary unfair dismissal protection, so you can end the contract with notice as long as the reason is not discriminatory or automatically unfair (whistleblowing, pregnancy, health and safety). Past two years you need one of five statutory fair reasons and must follow the ACAS Code of Practice. Negotiated exits use a Settlement Agreement, binding only once the employee has taken independent legal advice.
Can Dryft Global legally employ my team in the United Kingdom?
Yes. Dryft provides Employer of Record services across England, Wales, Scotland and Northern Ireland. We issue the compliant contract and Section 1 written statement, run HMRC RTI payroll, remit PAYE and National Insurance, manage pension auto-enrolment and administer statutory sick and family pay, while you direct the work.
Hiring routes compared
Foreign companies have to weigh corporate presence, PAYE liability, IR35 exposure and speed. Here is how the three routes stack up.
| Factor | Direct entity (Ltd) | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to onboard | 4 to 8+ weeks (incorporation, bank, HMRC PAYE registration) | 2 to 5 business days | 1 to 3 business days |
| Corporate presence required | Yes, Companies House incorporation and filings | No, employed via Dryft's UK infrastructure | No, direct contract with the individual or their PSC |
| PAYE and pension burden | Yours: RTI, PAYE, NICs, pension compliance | Fully managed and assumed by Dryft | None directly, but retroactive tax if misclassified |
| IR35 exposure | High if you engage PSC contractors directly | None, workers are standard PAYE employees | High; you must issue an SDS and carry the tax debt |
| Termination exposure | Direct exposure to ACAS and tribunals | Managed under UK procedure and the ACAS Code | Low severance, but status claims |
| Best fit | 15 to 25+ permanent staff, local contracting, own sponsorship | 1 to 15 remote, technical or commercial hires | Discrete, specialised, non-integrated deliverables |
What an employee costs in the United Kingdom
The UK employer burden is lighter than most of Europe because there is a single social contribution, National Insurance, rather than separate pension, health and unemployment funds. Employer NICs only start above the Secondary Threshold, so the effective rate moves with salary.
| Component | Employer share | Notes |
|---|---|---|
| Employer Class 1 National Insurance | ~13.8% | On earnings above the Secondary Threshold; funds state pension, NHS and benefits |
| Workplace pension (auto-enrolment) | 3.0% minimum | Of qualifying earnings; total minimum 8% with the employee's 5% |
| Apprenticeship Levy | 0.5% | Only if the annual UK pay bill exceeds £3,000,000, less allowance |
| Statutory subtotal | ~15% to 17% | Of gross base pay, before market benefits |
| Enhanced pension contribution | 2% to 7% | Tech and professional market standard is 5% to 10% total employer |
| Market-standard benefits | 3% to 7% | Private medical, life assurance at 3 to 4x salary, income protection, remote stipends |
| Total employer on-cost | ~15% to 22%+ | Above base salary |
For an employee on £70,000 gross, budget roughly £80,500 to £85,500 all-in. Ask us for a cost model with current tax year thresholds applied.
Payroll and tax
UK payroll runs monthly and every pay run is reported to HMRC in real time. A Full Payment Submission (FPS) must reach HMRC on or before the pay date, listing gross pay, tax code, PAYE, NICs and statutory pay. A monthly Employer Payment Summary (EPS) reclaims statutory payments such as maternity pay. Withheld tax and NICs must clear HMRC's account by the 22nd of the following month. Every employee receives an itemised payslip on or before pay day.
PAYE and tax codes
The employer is the withholding agent, applying the tax code HMRC issues for each employee. In England, Wales and Northern Ireland the £12,570 personal allowance is taxed at 0% and withdrawn above £100,000. Above it, income is taxed at 20% to £50,270, 40% to £125,140 and 45% beyond. Scottish residents, identified by an S tax code, pay under a separate schedule set by the Scottish Parliament. Employee NICs are deducted alongside, at around 8% up to the Upper Earnings Limit and 2% above it.
National Minimum Wage and National Living Wage
The UK sets hourly wage floors under the National Minimum Wage Act 1998, adjusted every 1 April: a National Living Wage for workers aged 21 and over, lower rates for 18 to 20 year olds and under 18s, and an apprentice rate. HMRC enforces the floor across every contract type. Underpayment means arrears, penalties of up to 200% of arrears (capped at £20,000 per worker) and public naming.
Leave and mandatory benefits
- Paid annual leave. 5.6 weeks, which is 28 days full-time, under the Working Time Regulations 1998. The contract decides whether bank holidays sit inside or on top of the 28. The core 4 weeks must be paid at normal remuneration including regular overtime and commission. Market standard in tech and finance is 25 days plus bank holidays.
- Bank holidays. 8 in England and Wales, 9 to 10 in Scotland, 10 in Northern Ireland. There is no statutory right to a paid day off on them; it comes from the contract.
- Statutory Sick Pay. Paid by the employer from the fourth day of illness for up to 28 weeks at a flat weekly rate. Professional contracts usually add company sick pay.
- Maternity. Up to 52 weeks of leave. Statutory Maternity Pay runs for 39 weeks: the first 6 at 90% of average weekly earnings, the remaining 33 at the statutory weekly rate or 90% of earnings, whichever is lower. Redundancy protection extends through pregnancy and for 18 months after birth.
- Paternity and shared parental leave. Up to 2 weeks of paternity leave at the statutory rate. Parents can share up to 50 weeks of leave and 37 weeks of statutory pay in the first year. Parental bereavement leave is 2 paid weeks; carer's leave is 1 unpaid week a year.
- Workplace pension. You must auto-enrol every eligible jobholder aged 22 to State Pension Age earning above the trigger, around £10,000 a year, contribute at least 3% of qualifying earnings and re-enrol opt-outs every three years.
- Working time. 48 hours a week averaged over 17 weeks, with a signed individual opt-out allowed. 11 hours of daily rest, 24 hours of weekly rest. No statutory overtime premium. Employees can request flexible working from day one.
Termination and notice periods
The UK draws a hard line at two years of continuous service in Great Britain (one year in Northern Ireland). Below it, you can dismiss with contractual notice provided the reason is not discriminatory or automatically unfair. Above it, you need a fair reason: capability, conduct, redundancy, statutory illegality, or some other substantial reason. Statutory notice is a floor; professional contracts set 1 to 3 months, and payment in lieu of notice is allowed if the contract says so.
| Continuous service | Statutory minimum notice (s.86 ERA 1996) |
|---|---|
| Under 1 month | None |
| 1 month to 2 years | 1 week |
| 2 to 12 years | 1 week per completed year (5 years = 5 weeks) |
| 12+ years | 12 weeks (maximum) |
- The ACAS Code is not optional. Conduct and capability dismissals need an investigation, written allegations, a hearing with the right to be accompanied, a written decision and an appeal. Tribunals adjust awards by up to 25% for failing to follow it.
- Day one claims. Discrimination and automatically unfair dismissal claims need no qualifying service, and discrimination awards are uncapped.
- Statutory redundancy pay. After two years: half a week's pay per year under age 22, one week per year aged 22 to 40, one and a half weeks from 41. Service is capped at 20 years and a week's pay at a rate reset each April.
- Collective redundancies. 20 to 99 at one establishment within 90 days means 30 days of consultation and an HR1 notification; 100 or more means 45 days. Skip it and the protective award is up to 90 days' pay per employee.
- Settlement Agreements. Valid only when the employee has independent legal advice, which you typically fund at £500 to £1,500. The first £30,000 of genuine ex gratia compensation is usually free of tax and NICs; PILON stays taxable.
Can I use independent contractors?
Yes, but the UK polices this through both employment law and tax law. Employment status has three tiers: employee, worker and self-employed. Tribunals look at the reality rather than the label (Autoclenz v Belcher, Uber v Aslam), testing mutuality of obligation, the right of substitution, control over how, when and where the work is done, and integration. A contractor who is really a worker can claim holiday pay, minimum wage and pension enrolment; one who is really an employee can claim everything. On the tax side, the off-payroll working rules (IR35) make medium and large end clients (two of: over £10.2m turnover, over £5.1m balance sheet, over 50 employees) responsible for assessing each contractor working through a personal service company and issuing a written Status Determination Statement. If HMRC decides an engagement was inside IR35, you owe the unpaid PAYE, both sides of NICs and Apprenticeship Levy retroactively, plus interest and penalties of up to 100% of the tax. An EOR is the compliant alternative for anyone who works like an employee.
The legal framework in brief
UK employment law is a hybrid of Acts of Parliament, regulations, statutory codes of practice and case law. Employment law is fully devolved in Northern Ireland and Scotland sets its own income tax. The statutes you will hear referenced most:
- Employment Rights Act 1996. Written particulars, statutory notice, unfair dismissal, redundancy pay, protection from unlawful deductions and family leave in Great Britain.
- Equality Act 2010. Discrimination, harassment and victimisation across nine protected characteristics, plus the duty of reasonable adjustments. Northern Ireland has separate statutes.
- Working Time Regulations 1998. The 48-hour week, rest breaks and the 5.6 weeks of statutory leave.
- National Minimum Wage Act 1998. The wage floors, enforced by HMRC.
- Pensions Act 2008. Workplace pension auto-enrolment and minimum employer contributions, supervised by The Pensions Regulator.
- Data Protection Act 2018 and UK GDPR. Employee data, monitoring and international transfers, enforced by the ICO. Consent is not a valid basis in employment; monitoring needs a policy and an impact assessment.
- Health and Safety at Work etc. Act 1974. A duty of care that reaches home workers, including workstation assessments.
- TULRCA 1992 and TUPE 2006. Union rights, collective redundancy consultation, and automatic transfer of staff when a business changes hands.
- Immigration, Asylum and Nationality Act 2006. Right to work checks before day one; civil penalties up to £45,000 per illegal worker, £60,000 for repeats.
Where the talent is
The UK is Europe's leading destination for international expansion, with a workforce of over 34 million, deep capital markets, world-class universities and English as the working and legal language. Its time zone bridges North American mornings and the full European day.
| Region | Talent and industry concentration |
|---|---|
| Greater London | Fintech, banking, private equity, SaaS, legal, AI research, media, creative industries, corporate HQs |
| Cambridge and Oxford | Deep tech, biotech, life sciences, advanced AI, quantum computing, hardware engineering |
| Manchester and Leeds | E-commerce, digital agencies, B2B SaaS, healthtech, financial shared services, logistics |
| Edinburgh and Glasgow | Asset management, data science, cyber security, renewables, gaming, cloud infrastructure |
| Birmingham and the Midlands | Advanced manufacturing, automotive tech, edtech, medtech |
| Belfast | Cyber security, legal operations, fintech, software R&D |
United Kingdom Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step.
- Step-by-step implementation checklist, from hiring route selection to first RTI submission
- Home nation confirmation: Scottish tax codes, Northern Ireland law, local bank holidays
- Section 1 written statement template with every day-one particular
- Right to work verification via the Home Office share code service
- PAYE, tax code and National Insurance number setup for RTI payroll
- Pension auto-enrolment assessment, notices and re-enrolment tracking
- Working time opt-out, DSE assessment and UK GDPR privacy notice
- IP assignment, moral rights waiver and restrictive covenants under UK law
This guide is general information, not legal, tax or immigration advice. UK employment, tax, National Insurance and pension rules change every April and through legislative reform, and Scotland and Northern Ireland differ from England and Wales. Confirm current figures with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
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