Employer of Record in United Kingdom

**Employment Contract**: UK employment contracts must be provided within 2 months of employment start. They should outline: job title, duties, salary, benefits, work schedule (typically 37.5-40 hours/week), holiday entitlement, notice periods, and termination conditions. The contract should also reference company policies on grievance, discipline, and flexible working. **PAYE Registration and Income Tax**: Employers must register with HMRC for PAYE (Pay As You Earn) before employment starts. Income tax is withheld from salaries each month and remitted to HMRC. Tax is progressive: 0-20% basic rate (on earnings up to £50,270), 40% higher rate (£50,270-£125,140), and 45% additional rate (over £125,140). National Insurance also applies separately. The EOR handles all PAYE registration and monthly tax calculations. **Employer National Insurance (NICs)**: Employers pay 13.8% NICs on earnings above the secondary threshold (approximately £10,500/year or £873/month in 2025-26). This is separate from income tax. Example: A developer earning £50,000/year has (£50,000 - £10,500) × 13.8% = £5,439/year or £453/month employer NI. NICs must be remitted monthly to HMRC. **Pension Auto-Enroll**: Employers must auto-enroll eligible employees (age 22+, earning above £10,500/year, UK resident) in a workplace pension within 3 months of employment start. The minimum contribution structure is: 8% of salary total (3% employer minimum, 5% employee). The employer contribution is deducted from the employee's salary (post-tax). Many companies offer more generous terms (e.g., 4-5% employer). Pensions are typically managed by providers like Nest or workplace pension schemes. **Annual Leave**: Minimum 28 days per year (including bank holidays). This typically comprises 20 days statutory leave + 8 bank holidays (in England/Wales). Leave accrues from day 1 of employment. Unused leave can be carried over to the next year (up to 5 days in many cases) but must not accumulate indefinitely. Employees must be paid out any accrued leave at separation. **Statutory Sick Pay (SSP)**: Employers must provide SSP after a 3-day waiting period. SSP is approximately £100/week (statutory rate) for up to 28 weeks in any 3-year rolling period. Many employers provide more generous sick pay. The EOR manages SSP calculations. **Maternity and Paternity**: Pregnant employees have strong job protection and statutory maternity pay: 90% of salary for 6 weeks, then statutory rate (approx £165/week) for up to 33 weeks. Total maternity leave is up to 52 weeks (with some unpaid). Partners and same-sex partners have paternity leave rights (up to 2 weeks, typically paid). **IR35 Contractor Rules**: The UK's IR35 rules are critical. If a US company hires a UK contractor, the contractor may be classified as an "employee for tax purposes" even without an employment contract. The test considers: control over work, integration into the business, financial risk, and provision of substitutes. Misclassification triggers back taxes, National Insurance, and penalties. Using an EOR avoids this risk entirely by establishing proper employment classification. **Right to Work**: Employers must verify the right to work in the UK before employment starts. Acceptable documents include: UK passport, visa, settlement status, or share code. Failure to verify can result in fines up to £20,000 per employee. The EOR handles this verification. **Termination and Severance**: Employees with 2+ years service are entitled to statutory redundancy: 0.5 weeks per year of service (ages 18-21), 1 week per year (ages 22-40), and 1.5 weeks per year (ages 41+). Unfair dismissal claims can be made after 2 years of service. Notice periods are typically 1-4 weeks depending on contract terms. The EOR ensures compliant termination procedures. **Working Hours and Overtime**: The standard workweek is 37.5-40 hours. The UK has a 48-hour per week working time limit (averaged over 17 weeks) unless employees opt out in writing. Overtime is typically paid at the same hourly rate or higher depending on contract.