The United Kingdom currently stands to be one of the top choices for establishing a business. Be it a global expansion of foreign subsidiaries or fanning out branches of the existing national companies, the United Kingdom offers valuable incentives like manageable taxes or a flourishing market. Excellent location and skilled working staff are only a few indispensable factors for a business.
However, hiring employees and establishing your company’s footprint in a foreign land like the United Kingdom can be tedious. Therefore, it is vital to be crystal clear about the relevant employment laws and practices in the United Kingdom. Employee recruitment in the United Kingdom requires you to understand their work culture, compliance obligations, cost of hiring in the country, etc.
So if you want to hire employees in the United Kingdom, this guide will provide you with all the essential information required before you begin a hiring process in the United Kingdom.
Things to Know Before Hiring in the United Kingdom
Hiring in a foreign land comes with its own set of challenges. From unknown tax regulations to cultural barriers, there can be multiple bumpers to your hiring of foreign nationals. Consider a few pointers before you begin the recruitment process in the United Kingdom.
Every employee of the United Kingdom is eligible for National Minimum Wage (or NMW) and the National Living Wage (or NLW). The former varies by the age of the employees, while the latter is applicable for any employee above 25 years of age. Therefore, you must ensure that you are updated with the current wage rates as these rates are updated regularly.
Currently, the United Kingdom doesn’t have any law which states a general probation period for the employees. But, it is customary for any probation period to be six months or less, although you must specify this in the employment contract.
The Working Time Directive (or WTD) governs the working hours of the country’s employees. According to the WTD, employees in the United Kingdom are —
- Entitled to a continuous break of 11 hours after 24 hours.
- Entitled to a rest of 20 minutes, at least, if their shifts go beyond 6 hours.
- Employees have sanctioned a rest of 24 hours, at least, for a 7-day work period.
- In cases where employees fall under the category of a night shift, then the maximum work can be 8 hours every 24 hours.
These regulations are sanctioned keeping in mind the health and wellness of employees. In addition, the WTD further limits the average working hour per week at 48, calculated over a 4-month rolling period.
The UK laws also provide a minimal number of paid annual leaves for its employees, currently at 5.6 weeks. Annual leaves of 5.6 weeks are inclusive of both bank and public holidays. However, an employer holds the discretion of permitting employees to carry forward any unused annual leave in a given year. Therefore, it must be outlined clearly in the employment contract.
Employees in the UK are entitled and eligible to receive a workplace pension from the employer if –
- The employee is within the age bracket of 22 and 66 (UK state pension age)
- Earning a yearly income of 10,000 pounds or more
This pension is contributed by both the employee and the employer, and you have to ensure that your UK employees are registered to the pension scheme. The UK government has taken this initiative for savings encouragement among its citizens.
Every employee in the United Kingdom gets two types of paid off-times that include –
- Vacation time of 20 days per year, exclusive of the public holidays
- Sick leave (alternatively known as Statutory Sick Pay or SSP) if an employee cannot work due to illness beyond four consecutive days. The Statutory Sick Pay (or SSP) currently stands 95.85 pounds every week against a sickness proof.
Other employee benefits
Other commonly sanctioned employee benefits in the UK include –
- Life insurance
- Health cash plans
- Retirement sponsored by the employer
- Health care
- Maternity and paternity leaves
Before you begin hiring employees in the United Kingdom, you must make sure that they have valid work permits in the United Kingdom. If not, then those individuals need to apply for a visa or a work permit in the country before they can be hired, complying with the exclusive five-tier point-based system of the government.
Your hiring of employees in such cases is restricted to the following categories of people:
- The citizens of Britain and their spouses,
- Individuals from the immigration restraint-free Commonwealth countries (right to abode) and,
- Individuals who lack the right to residence but have indefinite leave for staying in the United Kingdom.
The employers need to deduct a chunk of their employee’s income from the PAYE or the Pay As You Earn system. This amount goes to income tax contributions and national insurance payments. The contribution towards national insurance from the employer is currently 13.80%, while at least 3% is contributed towards pension funds.
If any UK employee has worked with you for over a month, but less than two years, he is eligible for one week’s notice. As the employment year increases, one week is added to the employee’s eligible notice period.
The Cost of Hiring an Employee in the United Kingdom
The recruitment fees in the United Kingdom depend on several factors.
- If you are taking aid from any recruitment agency, you would have to incur the recruiting cost. The recruitment fees can range between 10% to 30% of the base annual salary (over 5000 pounds).
- If you are not taking any agency’s help, you can use the help of job portals or social media, which is around 200 to 400 pounds.
Other probable costs that you might have to bear while hiring employees in the United Kingdom include:
For some employees, you might have to conduct an additional background check, which will increase your hiring costs. You need to check for their immigrant status and if they are legally sanctioned to work in the UK or not.
After hiring an employee, in most cases, there is an additional training session, which comes with an additional cost.
This is the heftiest part of your hire, and the average estimated annual salary of UK employees is 27,600 pounds. However, this amount certainly varies with the expertise and type of job.
Apart from the salary, most companies provide additional bonuses to their employees. These bonuses are an additional cost, which is a token of good work and helps boost the employee’s morale.
Insurance and Pension schemes
As per UK law, every employee in the UK must be enrolled in these schemes to boost their saving attitude.
These costs include –
- Office equipment costs
- Holiday covers
- Maternity or paternity leaves
- Fuel costs for company cars
- Licenses for software
These are additional costs of hire.
What Does a Company Need to Hire Employees in the United Kingdom?
The recruitment process in the United Kingdom companies can be a time-consuming task, which includes a lot to be done even before you begin the hiring session. The preceding steps to the hiring process in the United Kingdom include:
- Establishing a branch of your company (or subsidiaries): Hiring employees for business growth is a moot point if you do not have a branch or any subsidiaries. First, complete all the formalities for the subsidiary or branch establishment, including its registration, locating an office, etc., and then start the hiring session.
- Employer Registration: As an employer, you have to register yourself with Her Majesty’s Revenue and Customs (or HMRC). It doesn’t matter if you are a sole employee of the company because if you are not registered, you can not begin the hiring process in the United Kingdom.
- Employer’s liability insurance: Adhering to the UK laws, you must possess an employer’s liability insurance cover, which protects your employees in case of sickness or injuries.
- Payroll setup: You need to set up the payroll and add it to your company’s accounting software. If required, you can also outsource the required help.
Various Options for Hiring Employees in the United Kingdom
For setting up your business in the United Kingdom, you can hire the following employee types:
- Hiring employees in the United Kingdom as contractors or freelancers: These are independent employees you can call in on a contractual basis. If your business requires specific skillsets for a specified time, this is a great option.
- Hiring staff in the United Kingdom as full-time employees: Full-time employees will work with you in your office and come with obligations like sick pay, pension, etc. The greatest advantage of these employee types is their regularity in the office.
- Hiring employees in the United Kingdom via a PEO: Hiring employees in a foreign land via PEO or Professional Employer Organization is often fruitful. They take on the tedious task of employee hiring on your behalf while you focus on expanding your business. A PEO also makes sure that the hiring process adheres to domestic laws.
The Steps to Hiring in the United Kingdom
One of the key milestones for a company is recruiting its first staff. The hiring process in the United Kingdom for your new business can be a bumpy ride if you don’t get things done right from the earliest stages. For hiring staff in the United Kingdom, you can follow these simple steps:
The primary step is to build a job listing, where you mention the requirements for the job. This ad also shows the skill sets required, eligibility, and the educational qualifications you are looking for. This listing should also incorporate if the job position is office-bound or remote and other important pointers about the position.
Now is the time to opt for candidate screening with applications pouring in. You can either take the help of hiring agencies or conduct the screening internally to determine which candidates are more suitable for the open job position. Most employees will send you a CV, including more in-depth information about the candidate rather than a resume.
After screening for ideal candidates, the next step is to conduct interviews. You can also opt for online video call interviews or a physical one, and more than one round.
Cross-checking the employee’s legal status
For hiring staff in the United Kingdom, you need to cross-check if they are legally permitted to work in the country. If not, first, they need to apply for a visa, get it sanctioned, and then re-apply if the position is open.
Drafting the contract
After finalizing any candidate, a formal letter of appointment is provided, which has every employment detail, like responsibilities of the candidate, their rights, employment conditions, and likewise.
After completing all these steps, you can onboard your new employee and begin their training session.
Let Multiplier be Your EOR Platform in the United Kingdom
If the hiring process in the United Kingdom looks tedious and confusing, why not take the help of an excellent PEO platform such as Multiplier?
Multiplier is a third-party service provider, which has you covered on hiring your employees while adhering to the domestic norms of the country. Trusted by many industrial leaders, Multiplier ensures global talent acquisition at minimal risk. We also manage your employee’s payroll in more than 120 countries and their expenses, taxes, and benefits while you focus on your business.