Employer of Record (EOR) United Kingdom (UK): Hire, Manage, and Pay Talent Seamlessly

Tarmack is your legal employer in the UK, operating as both an EOR UK and a Global PEO with solid expertise in local labour laws. Through our platform, you can hire, onboard, pay, and manage employees or contractors anywhere in the UK, without setting up a local entity.

Employer of Record Services United Kingdom

Hiring in the UK without a local entity? Tarmack becomes your legal employer, so you can build a UK team without touching the country’s admin, compliance, or payroll systems. We take over every employer obligation under UK law, letting you focus purely on the work, not the legalities.

Comprehensive EOR UK Solutions for Seamless Global Hiring

UK Hiring and Onboarding

Hire remote employees anywhere in the UK while Tarmack, as your EOR United Kingdom, handles all employer-related responsibilities.

Hire anywhere in the UK with zero entity setup
Smooth, UK-specific onboarding
Legally compliant contracts and documentation

Payroll Management

Pay your UK employees accurately and on time. Tarmack, as your UK employer of record, manages payroll in line with HMRC and local tax regulations.

PAYE, NI, and statutory deduction management
Payroll processed on UK schedules
Real-time and annual HMRC submissions handled

Compliance Assurance

UK labour laws change often. We stay on top of them so you don’t have to.

Full adherence to UK employment laws
Protection against worker misclassification
Audit-ready compliance documentation

Benefits Administration

Meet UK employee benefit expectations with ease. Tarmack handles compliance and administration as your EOR United Kingdom.

Statutory benefits aligned with UK requirements, such as pension auto-enrolment, holiday pay, sick pay, and parental leave
Access to region-specific perks
Integrated HR and payroll for smooth operations

Enter the UK market without a local entity. Tarmack provides employer of record services UK businesses rely on, handling all employment, payroll, and compliance as your legal employer. Connect with us to get started.

Benefits of Employer of Record UK

Hiring in the UK has never been easier. Tarmack acts as your legal employer, providing exceptional employer of record services United Kingdom. We ensure fast, compliant, and cost-effective workforce expansion in the UK.

Accelerated UK Expansion: Test the UK market or scale quickly without forming a company. Our local expertise covers HMRC registration, UK employment contracts, and right-to-work checks.
Cost-Effective Hiring: Avoid incorporation, legal fees, and admin costs. Pay only for the UK employees or contractors you hire.
Workforce Agility & Flexibility: Scale your UK team up or down with ease. Tarmack manages onboarding, offboarding, and IR35 compliance where applicable.
Hassle-Free UK Compliance: We handle contracts, payroll via PAYE, National Insurance, statutory leave, and pension auto-enrolment, all fully aligned with UK labour laws.
Payroll & Benefits Simplified: UK payroll, pension contributions, holiday pay, sick pay, and statutory benefits are processed seamlessly, keeping your workforce compliant and satisfied.

Enter the UK market without a local entity. Tarmack, as a UK employer of record, handles all employment, payroll, and compliance as your legal employer. Connect with us to get started.

Employer of Record UK Pricing Structure

1. Employee Services

EOR — from $199/employee/month
Hire full-time employees anywhere in the UK without opening an entity. Includes UK-compliant payroll (PAYE, NI, pensions), legal employment contracts, statutory benefits, HR/legal support, and IP protection.
Recruiting — from 10% of annual salary
Global talent search with shortlisting, interviews, optional background checks, and country-specific hiring guidance.
Payroll — from $15/employee per cycle
Payroll in 150+ countries, payslips, reimbursements, attendance, and compliant payment processing.
Enterprise — custom
For teams of 10+, with tailored pricing, global mobility support, and market advice.

2. Contractor Services

Contractor Recruiting — from 10% of annual salary
Find and hire top UK contractors quickly. Includes targeted sourcing, shortlisting, video interviews, expert hiring guidance, and optional background checks.
Contractor Management — from $39/contractor/month
Manage and pay UK contractors with full compliance. Includes UK-compliant contracts, fast payouts, expense tracking, automated invoicing, HR/legal support, and the option to convert contractors to full-time employees, plus full protection of your IP and rights.

3. Corporate & Regulatory Services

Company Formation — contact for pricing
Incorporate a UK company easily and cost-effectively. Fast setup, streamlined paperwork, and expert guidance—plus support for payroll, recruiting, and alternative business solutions.
Immigration — from $999 per visa
Full UK work permit and visa sponsorship services. Quick processing, tailored guidance, and compliance support.
HR Software — from $2/employee/month
Cloud HR platform for payroll, attendance, expense management, and reporting; fully UK-compliant and integration-ready.

Enter the UK market without a local entity. Tarmack offers transparent employer of record pricing UK companies can trust, while handling all employment, payroll, and compliance as your legal employer. Connect with us to get started.

Employment Norms in the United Kingdom

The United Kingdom is the 6th largest economy in the world. It has many economic opportunities and a very high standard of living. Since Brexit, some employers might need help navigating the hiring process. In such circumstances, engaging with an Employer of Record (EOR) services is crucial.

General Information:

The currency used in the United Kingdom is the Pound Sterling.
The capital of the United Kingdom is London.
English is the official language of the United Kingdom.
As of 2022, the GDP of the United Kingdom was 3198.47 billion USD.

Select Section

Employment Contracts
Employee Onboarding
Visa
Work Permits
Minimum Wage
Payroll Cycle
Annual Bonus
Health Benefits
Working hours and overtime
Leaves
Social Security Contributions
Personal Income Tax
Payroll Compliance
Top Skills in Demand
Probation
Termination
Severance Pay
Employees vs Contractors
Global PEO
Start Hiring Today
Frequently Asked Questions

Employment Contracts Employee Onboarding Visa Work Permits Minimum Wage Payroll Cycle Annual Bonus Health Benefits Working hours and overtime Leaves Social Security Contributions Personal Income Tax Payroll Compliance Top Skills in Demand Probation Termination Severance Pay Employees vs Contractors Global PEO Start Hiring Today Frequently Asked Questions

Employment Contracts in UK

A UK employment contract is the legal agreement between the employer and the employee that sets out rights, responsibilities, and terms of work. This includes pay, duties, hours, and conditions. A contract can exist even if it’s not in writing, but for compliance, employers must formalise the terms clearly.

1. Written Statement of Employment Particulars

As an employer in the UK, you must provide every employee with a written statement of employment particulars under the Employment Rights Act 1996.

Provide the principal statement on or before Day 1.
Give the full statement, covering pensions, disciplinary procedures, and collective agreements, within 2 months.
Include key details in the principal statement: employee and employer names, job title, start date, pay, hours, workplace, holiday entitlement, notice periods, and probation terms.
Update promptly within one month whenever terms change.

This written statement is the employer's legal minimum and a core compliance requirement. Failing to provide it can lead to disputes or penalties for employers.

2. Types of Employment Contracts in the UK

The UK recognises a limited number of employment contract types, all of which must comply with statutory employment law.

Permanent contracts have no end date and are standard for long-term roles.
Fixed-term contracts end on a set date or project but still carry core rights such as holiday pay, SSP, and minimum wage.
Part-time contracts offer reduced hours with pro-rata legal protections.
Zero-hours contracts remain lawful but regulated; workers are entitled to minimum wage, paid holiday, and statutory protections.
Agency workers gain equal treatment on basic terms after 12 weeks with the same hirer.

(Independent contractors and freelancers are not employees; their arrangements are governed by commercial contracts, not employment law.)

Note: The new government has proposed reforms under the Employment Rights Bill, but as of 2025, these reforms are not yet fully enacted.

Legal & Compliance Reminders

Every contract type still requires clear written terms.
Zero-hours workers cannot be treated less favourably without justification.
Fixed-term renewals must be monitored to avoid accidental continuous employment rights.
Updated policies must align with minimum statutory rights and Acas (Advisory, Conciliation and Arbitration Service) guidance.

3. UK Compliance Essentials for Employers

Compliance for employers in the UK revolves around 4 pillars:

A) Financial Compliance: Rates & Payroll

The cost of employing staff in the UK rises significantly from 6 April 2025.

1. National Minimum Wage (NMW) Payrolls must meet these new hourly floors:

Category	New Rate (per hour)
National Living Wage (21+)	£12.21
18–20 Year Olds	£10.00
Apprentices / Under 18	£7.55

Upcoming Rate Changes (April 2026)

The government has announced increases to take effect from 1 April 2026:

Category	New Rate (per hour)
National Living Wage (21+)	£12.71
18–20 Year Olds	£10.85
Apprentices / Under 18	£8.00

2. Employer National Insurance (NIC)

Employer NIC rate: 15%
Secondary threshold: £5,000 per year

3. Statutory Payments

Statutory Sick Pay (SSP): £118.75 per week
Family-related statutory pay: £187.18 per week

B) Honouring Statutory Rights
These rights cannot be bypassed by contract:

Paid Holiday: 5.6 weeks per year (28 days for full-time).
- Irregular Hours: For zero-hours/part-year workers, holiday pay can now be calculated at 12.07% of hours worked (rolled-up holiday pay is also permitted if transparent).
Pension Auto-Enrolment: Employers must automatically enroll eligible staff (aged 22+, earning >£10,000/year) into a pension scheme.
- Minimum Contribution: 8% total (Employer pays minimum 3%, Employee pays 5%).
Neonatal Care Leave: From April 6, 2025, eligible parents can take up to 12 weeks of additional leave (and pay, if eligible) if their baby spends 7+ consecutive days in neonatal care. This is a 'Day 1' right to leave.

C) Prevention of Sexual Harassment
Under the Worker Protection Act (October 2024), UK employers have a positive legal duty to take 'reasonable steps' to prevent sexual harassment of their employees.

4. Right to Work Compliance in the UK

Before anyone starts work, UK employers must check that the person has the legal right to work in the UK. This compliance is non-negotiable in the United Kingdom as strict liability applies. Employers must verify permission to work before employment starts to establish a 'Statutory Excuse' against fines (£60,000 per breach).

The 'Digital Only' Era (Jan 2025 Onwards)

Physical Cards are Outdated: As of 31 Dec 2024, physical Biometric Residence Permits (BRPs) are no longer valid for proof of right to work.
The New Process: Employers must use the Home Office online checking service.
- Ask the candidate for their 'Share Code'.
- Verify the code/ details through the official GOV.UK portal
- Download and save the profile page PDF.
- Retain the evidence throughout employment.
British/Irish Citizens: Manual passport checks are still permitted, or you can use a certified Identity Service Provider (IDSP) for digital checks.

No discrimination: All candidates must be treated consistently during checks.

Hire in the UK easily with Tarmack. We take care of all employment contracts through our Employer of Record services UK. Contact us today!

Employee Onboarding in UK

Onboarding Requirements in the United Kingdom

Hiring someone into a UK organisation isn’t just about a warm welcome, it’s about getting the legal steps right from the very beginning. A few missed checks by the employer can turn into steep penalties, so a clear onboarding process saves time, stress, and money.

Phase 1: Pre-Start Essentials (Before Day 1)

These steps must be completed by the employer before the employee starts work as they form the legal foundation of UK onboarding.

Category	What Employers Need To Do	Important Information
Legal Checks	Carry out the Right-to-Work check, issue the employment contract or written particulars, and arrange a DBS check if the role requires it.	Right-to-Work is fully digital. Use the candidate’s Share Code on the GOV.UK system. Physical BRP cards are no longer valid after Dec 2024.
HR & Payroll Setup	Register the new hire with HMRC (Starter Checklist), set up pension auto-enrolment if they’re eligible, and collect documents like the signed contract, P45, and emergency contacts.	RTW must be done before the first working day. Employers are liable if this step is skipped.
Logistics	Arrange IT access, tools, system permissions, and share the welcome pack, first-day plan, and handbook. Assign a buddy or point of contact.	For remote or hybrid hires, make sure equipment is delivered and functioning well before Day 1.

Phase 2: Day 1 & Week 1 (Integration)

The first week shapes how confident and settled the new hire feels.

The manager introduces them to the team and the key people they’ll work with
Complete essential training: Health & Safety, GDPR/Data Protection, IT security.
Walk them through company values and work expectations
Set a simple, realistic schedule for their first few days
Hold a short check-in before the week ends to clear doubts and ensure they’re settling in well

Phase 3: First 30 / 60 / 90 Days (Development)

Onboarding doesn’t end after induction. These first three months build long-term alignment.

Milestone	Focus	What Should Happen
30 Days	Early training and familiarisation	Review progress, note early wins, and adjust expectations if needed.
60 Days	Deeper role understanding	Mid-probation discussion, additional training, and feedback from the manager.
90 Days	Full integration	A more formal review and setting goals for the next 6–12 months.

While an employer may dismiss an employee with less than 2 years of service more easily, following a fair process (including clear feedback during probation) significantly reduces the risk of discrimination or automatically unfair dismissal claims.

Onboarding Process in UK

The onboarding process is a detailed plan for the employee joining the new organization. It can take 1.5 to 12 months.
Documents required during onboarding:
- Social security number
- Passport/ID of the employee
- Educational Qualification
- Personal information like name, address, health statistics
- Tax code
- National insurance number and eligibility

Tarmack simplifies UK hiring as your EOR United Kingdom partner, taking care of onboarding, payroll, and compliance end-to-end. Contact us!

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Visa in UK

The UK work visa is based on a Points Based System (PBS) and has five tiers.

Who can apply

Tier 1
Outside European Union (EU) and European Economic Area (EEA)
- Highly skilled employees
- Investors
- Entrepreneurs
Tier 2
- Skilled employees outside EEA
- Professional sportspeople
Tier 3
Outside EU
- Low-skilled employees
- Temporary workers
Tier 4
Outside EEA
- Students (16 years and above)
Tier 5
(has 6 sub-tiers)
- Temporary employees

The UK work visa requires sponsorship by employers or a licensed incorporated business entity. Additionally, non-EU workers require a certificate of sponsorship from the UK government to attain work permits.

In the UK, third-party sponsorship is not allowed.

Work Permit in the UK: What Employers Need to Know?

Hiring international talent in the UK is tightly regulated and requires strict adherence to Home Office rules. Employers must understand sponsorship, role eligibility, salary thresholds, and compliance duties before onboarding overseas workers.

What Is A UK Work Permit?

CA UK work permit refers to immigration permission that allows a non-UK resident to work legally in the country. In most cases, this permission is granted through a sponsored work visa, with the Skilled Worker visa being the primary route for long-term employment.

To access this route, the hiring organisation must be authorised by UK Visas and Immigration (UKVI) and meet ongoing compliance obligations.

1. Sponsor Licence: Mandatory Requirement

A Sponsor Licence is mandatory to employ workers who do not already hold unrestricted UK work rights. The licence:

Authorises sponsorship under specific visa routes
Requires an approved Sponsor Management System (SMS)
Imposes ongoing reporting, record-keeping, and monitoring duties

A licence must be granted before any Certificate of Sponsorship is issued.

2. Skilled Worker Visa: Core Work Permit Route

A. Skill Level

For new applications from 22 July 2025, roles must generally meet RQF Level 6 (degree-level).
Medium-skill roles (RQF 3–5) are no longer eligible unless listed under a Temporary Shortage List.

B. Salary Thresholds

General minimum salary: £41,700 per year
New entrant minimum: £33,400 (where applicable)
Salary must meet the higher of the general threshold or the occupation’s going rate.

C. Role Validity

The job must be genuine, match the correct occupation code, and meet Home Office skill and pay criteria.
Care worker and senior care worker roles are closed to new overseas recruitment, with limited transitional protection for existing visa holders.

Although the Skilled Worker route is legally points-based (70 points). These points are automatically satisfied when role, salary, and English language requirements are met.

3. Temporary Shortage List (TSL)

The Temporary Shortage List allows limited sponsorship of selected lower-skill roles on a time-restricted basis. Key limitations include:

Restricted duration
Dependants are generally not permitted
Higher compliance scrutiny

This list is subject to regular review and is not a long-term hiring solution.

4. Certificate of Sponsorship (CoS)

A Certificate of Sponsorship is a digital record issued by the licensed employer. It confirms the job offer, salary, and role details and is required before the worker can apply for a visa. Each CoS must be accurate and role-specific. Incorrect or premature assignment can trigger compliance action.

5. Right-to-Work Checks

Employers must verify everyone’s right to work in the UK before they start employment.
Checks must cover:
- Valid visa status (including eVisa share codes),
- Supporting documents for settled/pre-settled status, or
- Proof of immigration permission, where relevant.
Accurate documentation helps secure a statutory excuse against penalties.

6. Cost & Compliance Rules

A. Cost Responsibility

Employers cannot charge or recoup core sponsorship costs (sponsor licence fees, CoS fees) from the sponsored worker.
Attempting to recover these costs can lead to licence revocation.

B. Sponsor Duties

Maintain accurate HR and immigration records.
Monitor sponsored workers’ compliance with visa conditions.
Report specified events (e.g., job changes, absences) to UKVI.
At least one senior user managing the licence must be a UK-settled worker.

C. Penalties for Non-Compliance

Hiring someone without the right-to-work status or failing proper checks can trigger civil fines and enforcement action.
Non-compliance with sponsorship duties may lead to licence suspension or revocation.

What’s coming in 2026?

Not yet in force, but employers should prepare:

English language requirement tightening from 8 Jan 2026: Skilled Worker and some other visas will require B2 English (higher than current levels).

Other major changes like radical shifts in settlement (ILR) timelines are under consultation but not final rules yet.

Tarmack, your UK Employer of Record, manages work permits and local compliance, so you can hire in the UK without the hassle. Reach out today!

Minimum Wage in UK

In the United Kingdom, the minimum wage is hourly and based on the age of the employee. It is revised annually by the government.

	Apprentice	Under 18 years	18-20 years	21-22 years	23 and above
Current Rate (Since 1 April 2022)	£4.81	£4.81	£6.83	£9.1	£9.50
2023 (to be in effect from 1 April 2023)	£5.28	£5.28	£7.49	£10.18	£10.42

Payroll Cycle in UK

The United Kingdom follows a monthly payroll cycle.

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Annual Bonus in UK

There is no statutory requirement for bonuses in the UK. It depends on the discretion of the corporate policy.

Health Benefits in UK

In the United Kingdom, the employee's health coverage is contributed from National Insurance Contribution (NIC) fund.
It is the employer's responsibility to file NIC through the PAYE system.

Working hours and overtime in UK

The working hours in the UK are 40 hours, spread over 5 days (Monday to Friday).
There is an accepted cultural norm that these 40 hours are flexible, but they differ from industry to industry.
Employees can choose to work for longer hours.

Overtime is allowed only if it is permitted in the written contract. It is usually unpaid.

Leaves in UK

Statutory Sick Leaves (SSL)

SSL leaves are granted to employees earning a minimum of £120 per week.
The validity of SSL leaves is up to 28 weeks.
SSL is usually worth £96.35. It is paid by the employer and not the government.

Maternity and Paternity leaves

Mothers are entitled to 52 weeks of maternity weeks. The first 26 weeks are called ordinary maternity leave, and the next 26 weeks are called additional maternity leave.
Mothers are mandated by law to take at least 2 weeks off after the birth of their child.
Even fathers can attain paternity leaves for up to 2 weeks.

Holidays

Full-time employees are granted paid holidays for either 5.6 weeks or 28 days.
Part-time employees can also have paid holidays, but they might be less than 28 days.
In case the employee has not utilized all the paid holidays, they can carry forward 8 holidays to next year.

Public holidays for the year 2024 are the following:

January 1 - New Year's Day
March 29 - Good Friday
April 1 - Easter Monday
May 6 - Early May Bank Holiday / Labour Day
May 8 - Bank Holiday for the Coronation of King Charles III
May 27 - Spring Bank Holiday
August 26 - Summer Bank Holiday
December 25 - Christmas Day
December 26 - Boxing Day

Employers are not obliged to give bank holidays off, but they must mention this in their written contract.

Public holidays for the year 2025 are the following:

January 1 - New Year's Day
April 19 - Good Friday
April 22 - Easter Monday
May 5 - Early May Bank Holiday / Labour Day
May 26 - Spring Bank Holiday
August 25 - Summer Bank Holiday
December 25 - Christmas Day
December 26 - Boxing Day

Employers are not obliged to give bank holidays off, but they must mention this in their written contract.

Social Security Contributions in the UK (National Insurance)

In the UK, social security is funded through National Insurance Contributions (NICs). Employers are legally responsible for calculating, deducting, and paying the correct NICs through payroll when employing staff in the UK.

NIC obligations apply regardless of whether the employee is a UK national or a foreign national working lawfully in the UK.

What Employers Must Pay Attention To?

UK National Insurance operates through contribution classes, each serving a different purpose. Employers are mainly concerned with Class 1, Class 1A, and Class 1B contributions.

1. Employer NIC Responsibilities

A. Class 1 NICs

Employee NICs (Class 1 Primary): Deducted from employee pay via PAYE.
- 0% up to £242/week (£12,570/year)
- 8% between £242.01–£967/week (£12,570–£50,270/year)
- 2% above £967/week (>£50,270/year)
Employer NICs (Class 1 Secondary): Paid on top of salary.
- 15% on earnings above £96/week (£5,000/year)

B. Class 1A/1B NICs

15% on qualifying benefits and expenses (e.g., company cars, bonuses).

2. Employment Allowance

Annual relief amount: Employers can reduce their Class 1 National Insurance liability by up to £10,500 per year.
Expanded eligibility: From April 2025, the previous cap (which excluded employers with NIC bills over £100,000) was removed. This means many more businesses can now claim the allowance.
Application: The allowance is claimed through the employer’s PAYE system. HMRC guidance confirms that once eligibility is declared, the relief is automatically applied against the employer’s NIC liability until the £10,500 limit is reached.
Scope: Applies only to employer NICs (Class 1 Secondary), not to employee deductions.

3. NIC Category Letters

Every employee has a category letter (e.g., A, B, C, H, M, Z).
The letter determines which NIC rates and thresholds apply.
Employers must ensure payroll systems apply the correct category to avoid under-or over-deductions.

4. Self-Employed NICs

Self-employed individuals pay different NIC classes based on profits:

Class 4 NICs: 6% on profits £12,570–£50,270; 2% above £50,270. These are calculated through the Self-Assessment tax return.
Class 2 NICs: From April 2025, no longer mandatory above £6,845 profits, treated as paid automatically. Voluntary rate £3.50/week.
Class 3 NICs: Voluntary contributions at £17.45/week to fill gaps in the NI record.

Accurate NIC calculation and reporting are critical. Incorrect deductions or misclassification of category letters can result in HMRC penalties. An employer must ensure all NIC obligations are met, protecting both the business and its workforce.

Tarmack, as your Employer of Record United kingdom manages PAYE and National Insurance contributions, keeping your payroll fully compliant. Connect with us today!

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Personal Income Tax in UK

Personal Income Tax in the UK is levied on an individual’s taxable income including employment earnings, pensions, and other income. Employers should understand this because income tax affects employee take-home pay and is deducted through PAYE from salaries.

1. Personal Allowance — Tax-Free Income

Every individual is entitled to a Personal Allowance of £12,570 in 2025/26. Income up to this level is not taxed.
When income exceeds £100,000, the allowance is reduced by £1 for every £2 over £100,000, and is fully withdrawn at £125,140.

This allowance applies to most UK residents and is the first deduction before tax rates are applied.

2. UK Income Tax Bands and Rates (England, Wales & NI)

Once personal allowances are applied, taxable income is taxed in bands:

Tax Band	Taxable Income Range	Tax Rate
Basic rate	£12,571 to £50,270	20%
Higher rate	£50,271 to £125,140	40%
Additional rate	Above £125,140	45%

These bands and rates apply to non-savings, non-dividend income such as salaries and bonuses.

3. Savings and Dividend Income Rates in UK

Separate rates apply to savings (interest) and dividends:

Income Type	Basic Rate	Higher Rate	Additional Rate
Dividends	8.75%	33.75%	39.35%

Dividend income is taxed after the personal allowance and other income, and the first £500 of dividends is tax-free for most taxpayers.

4. Scottish Taxpayer Differences

Scotland sets its own income tax rates and bands for earnings. The Scottish system includes additional bands and slightly different rates , for example, a starter rate and intermediate rate below the UK basic rate, but personal allowance rules are similar.

5. Employer Compliance Responsibilities

A. PAYE Withholding: Employers must deduct income tax through the PAYE system based on employee tax codes supplied by HMRC.

B. Personal Allowance and Reduction: HMRC tax codes reflect the personal allowance. When an employee’s adjusted net income exceeds £100,000, their allowance is tapered, affecting the tax deducted.

C. Band Threshold Awareness: Tax thresholds are frozen until at least 2028, meaning wages rising with inflation can push employees into higher tax bands (“fiscal drag”).

D. Dividend & Savings Rules: If the employer handles dividends (e.g., in small companies with shareholder-employees), the different dividend tax rates apply after allowances.

With Tarmack as your Employer of Record UK, personal income tax is managed fully through PAYE. Contact us today!

United Kingdom Payroll Compliance

Employers in the UK must follow strict payroll rules set by HMRC and other regulators. These include registering for PAYE, reporting employee pay and deductions on time, meeting pension auto‑enrolment duties, and observing statutory leave and minimum wage laws. The sections below outline the key requirements to help businesses stay compliant and avoid penalties.

1. Government Requirements

A. Registration Requirements
Any employer operating payroll in the UK must run a PAYE (Pay As You Earn) scheme. PAYE is HMRC’s system for collecting Income Tax and National Insurance from employment income.

Employers must register with HMRC when they:

Start employing staff in the UK
Engage subcontractors in the construction sector
Are a sole director of a UK limited company

Most employers registering for PAYE are UK-registered businesses, but other legal entities (e.g., sole traders) can also register as employers with HMRC if they meet payroll requirements.

PAYE Registration Timeline: Two rules apply when registering for PAYE:

Registration must be completed before the first payday
Registration cannot be done more than two months in advance

This creates a limited registration window.

Registration Process: Registration can be completed online if directors hold UK National Insurance numbers. Otherwise, registration must be done directly with HMRC by phone.

HMRC Reference Numbers: HMRC issues PAYE and Accounts Office reference numbers within 10 working days. Payroll can be prepared earlier, but payments and filings cannot be submitted until references are received.

Real Time Information (RTI) Reporting:

Once registered, employers must submit payroll data to HMRC on or before each payday using RTI.
RTI submissions include details of employee pay, tax, and NIC deductions.
Failure to file RTI on time can result in HMRC penalties.

B. Ongoing UK Payroll Compliance Requirements
Once a PAYE scheme is registered, UK employers must meet ongoing reporting and payment obligations under HMRC’s Real Time Information (RTI) system.

Full Payment Submission (FPS): An FPS must be submitted on or before every payday, regardless of pay frequency. It reports pay date, gross pay, tax and NI due, tax code, statutory deductions, and employee details. Late or missed FPS filings can trigger HMRC penalties.
Employer Payment Summary (EPS): An EPS is submitted monthly by the 19th of the following month, even when no payroll is run. It is used to report recoverable statutory payments, Employment Allowance, Apprenticeship Levy, CIS deductions suffered, nil-pay periods, or PAYE scheme closure.
HMRC Payments: Income Tax, National Insurance, and other deductions must be paid by the 22nd of the following month (19th if paying by cheque). Quarterly payments are permitted where liabilities are usually under £1,500 per month. Late payments attract penalties and interest.
Key Dates: The UK tax year runs from 6 April to 5 April. Payments must include the correct Accounts Office reference.

2. Workplace Pension & Auto-Enrolment Obligations (UK)

Under the Pensions Act 2008, every UK employer with at least one worker has legal duties under workplace pension auto-enrolment.

A. Who must be automatically enrolled?
A worker must be enrolled if they:

Are aged 22 to State Pension age
Ordinarily, work in the UK
Earn £10,000 or more per year

Workers under 22, over State Pension age, or earning below the threshold do not need to be auto-enrolled but may have opt-in rights.

B. Employer Responsibilities

Employers must assess their workforce, enrol eligible workers into a qualifying pension scheme, start contributions, and provide statutory communications explaining enrolment and opt-out rights. Pension contributions must be deducted and paid each pay period. A Declaration of Compliance must be submitted to The Pensions Regulator, even if no employees are enrolled.

C. Re-enrolment Requirements

Every three years, employers must re-enrol eligible workers who previously opted out and submit a new declaration.

3. Statutory Leave & Employment Obligations

UK employers are required to meet statutory obligations covering employee leave and related pay, including:

Statutory leave types: Maternity, paternity, adoption, shared parental, neonatal care (effective April 2025), and sick leave. (eligibility depends on earnings, service length, and notice requirements)
Employment terms during leave: Most contractual rights continue while an employee is on statutory leave, except for pay, which follows statutory rules. Protection also applies in redundancy situations.
Keeping in Touch arrangements: Employees may work up to 10 KIT days, or SPLIT days for shared parental leave, by mutual agreement, without ending their leave entitlement.
Contractual obligation: All statutory rights operate alongside a legally binding employment contract, which remains in force unless formally amended or terminated.

4. Payroll & Year-End Reporting Obligations

A. Employee Payslips (Legal Requirement for All Workers)

Employers must issue payslips on or before payday. Payslips must show gross pay, all deductions, and hours worked where pay varies by time worked.

B. Leavers & Annual Statements

P45: Must be issued when an employee leaves during the tax year.
P60: Must be provided by 31 May to employees employed on 5 April. Employees who left earlier receive only a P45.

C. Benefits, Expenses & HMRC Reporting

P11D: Required for taxable benefits or expenses (deadline: 6 July).
P11D(b): Reports and pays Class 1A NICs on benefits (due by 22 July, or 19 July by cheque).

D. Payrolling Benefits in Kind (PBIK)

Most taxable benefits can be payrolled, removing the need for a P11D. Employers must register before 6 April. Living accommodation, beneficial loans, and vouchers cannot be payrolled. A P11D(b) is still required.

E. National Minimum & National Living Wage
The UK sets statutory minimum pay rates that all employers must observe. These vary by age and apprenticeship status.
From 1 April 2025, the rates are:

£12.21 per hour for workers aged 21 and over (National Living Wage)
£10.00 per hour for workers aged 18–20
£7.55 per hour for workers aged 16–17 and apprentices under 19 or in the first year of their apprenticeship.

These rates apply regardless of contract type (full-time, part-time, temporary). Employers must not pay below these rates and should use payroll records as evidence of compliance. If HMRC identifies underpayment, employers must repay arrears, may face penalties, and could be publicly named.

Employers should retain all records of wage calculations and hours for six years as proof of compliance.

Future increases are planned for 1 April 2026, raising the NLW and related rates.

F. Reducing Employer National Insurance: Employment Allowance
Eligible employers can reduce their Class1 employer National Insurance contributions by up to £10,500 per year (2025/26).

Who can claim: Most private-sector businesses and charities.
Who cannot claim: Most public authorities (except charities) and single-director companies with no other employees.
Claim process: Applied monthly through payroll software.

Key update: The previous £100,000 NIC liability limit has been removed, so more employers are eligible.

G. Apprenticeship Levy: Supporting Workforce Training
The Apprenticeship Levy is a tax on large employers to fund apprenticeship programs.

Rate: 0.5% of the annual pay bill if the total exceeds £3million.
Allowance: Employers receive a £15,000 annual allowance to reduce liability.
Reporting: Pay and report monthly through the Employment Payment Summary (EPS).

5. Payroll Payments & HMRC Compliance

As an employer, you must ensure all PAYE and HMRC liabilities are paid in full, whether from a UK or overseas bank account. Cover any bank charges or exchange-rate differences so HMRC receives the exact amount due. Always use the correct employer reference to ensure payments are properly allocated and to avoid penalties or interest.

Tarmack, as your UK Employer of Record, manages payroll compliance seamlessly, ensuring every pay cycle aligns with HMRC and UK regulations. Get in touch!

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Top Skills in Demand in UK

UK employers are increasingly prioritising technical expertise, digital capabilities, and hybrid skills to navigate rapid change.

1. Technology & IT Skills

Cloud Computing: Designing, deploying, and optimising scalable cloud infrastructure (AWS, Azure, Google Cloud).
Cybersecurity: Protecting systems, managing threats, and ensuring compliance in an increasingly digital workplace.
AI & Machine Learning: Building, implementing, and scaling intelligent systems, including generative AI applications.
Data Engineering & Analytics: Transforming data into actionable business insights for decision-making.

These skills are essential for organisations pursuing digital transformation, automation, and secure technology operations.

2. Finance & Analytics with Digital Edge
Finance roles now demand digital fluency: data analytics, AI-augmented forecasting, and reporting with modern tools. Employers value candidates who combine core finance expertise with tech skills to optimise operations.

3. Marketing & Creative Digital Skills
Digital marketing, content creation, social media strategy, and data-led campaigns are increasingly driven by AI and analytics, ensuring engagement and measurable impact.

4. Legal, HR & Support Skills
Legal and compliance, HR administration, and customer support roles now require digital literacy and tech integration, with tasks supported by AI, HRIS systems, and workflow automation.

5. Soft Skills
Critical thinking, adaptability, leadership, and communication remain vital across all functions, complementing technical and domain expertise.
Candidates who combine technology knowledge with business context and soft skills are the most likely to be hired and retained.

Looking to hire in the UK? Tarmack, your Employer of Record United Kingdom, helps you source, onboard, and manage talent seamlessly. Talk to us!

Probation in UK

There is no statutory requirement for a probation period in the UK. The market practice of probation in the UK is from 3 months to 6 months, depending upon the business and the employment agreement.

Termination in UK

In the United Kingdom, the termination process can be quite complex. No employer can terminate an employee who has completed their probation at will.

The termination has to be based on one of the following four causes:

Fair dismissal
When the employee has not followed the company's rules or has failed to perform their duties.
Unfair dismissal
When the employer does not have good reason to dismiss an employee or/and when the company has failed to follow the disciplinary procedure.
Constructive dismissal
When the employee has to leave their job, against their will, due to their unreasonable conduct.
Wrongful dismissal
When the company has not followed the dismissal procedure and/or has given the wrong reasons for the dismissal.

Notice Period

In the United Kingdom, the notice period for the termination is determined by the number of years of service of the employee.

Length of employment	Notice period
1-2 years	1 week
2-12 years	1 week per year of service
12+ years	12+ weeks

Severance Pay in UK

In the United Kingdom, employees are eligible for severance pay if they are terminated due to redundancy. It is determined by the employee's age and the number of weeks they have worked for the organization.

Age	Number of week's pay for each year of service
22	0.5 week's pay
22-40	1 week's pay
41 and above	1.5 week's pay

Employees vs Independent Contractors in UK

In the UK, worker status is based on how the working relationship operates in reality, not on job titles or contract wording. Even if someone is labelled as a contractor, HMRC and employment tribunals may still treat them as an employee if their day-to-day work reflects employment. Incorrect classification can lead to tax liabilities, penalties, and employment claims.

UK authorities assess several factors together to determine status. Control is a key consideration. If the company decides what work is done, how it is done, and when or where the individual must work, this points toward employment. Contractors are expected to have autonomy over how they deliver their services.

Substitution is another important test. A genuine contractor should be able to send a suitable replacement to carry out the work. Employees are required to perform the work personally. If substitution exists only in the contract but would not be accepted in practice, it will be disregarded.

Ongoing work expectations also matter. Employees usually have continuous work and are expected to accept tasks as they arise. Contractors are typically engaged for specific projects or periods, with no obligation for future work on either side.

Financial risk helps distinguish between employment and self-employment. Contractors bear business risk, invoice for their work, and may incur losses. Employees receive a regular wage and do not take on commercial risk.

For tax purposes, the UK applies IR35 rules to prevent individuals from working like employees through personal service companies. In the private sector, the hiring company must assess IR35 status and operate PAYE where required. Errors can result in backdated tax and National Insurance charges.

The employer determines whether they need a full-time employee or a consultant/ contractor. It is dependent on the short-term and long-term goals of the business.

A full-time employee is eligible for various benefits, such as:
- Statutory sick pay
- Statutory maternity and paternity leaves
- Statutory redundancy pay
- Minimum notice period
- Flexible work hours
- Legal protection from unfair dismissal
- Time off in lieu of work
- Health insurance
All these benefits are available only when an employee is 'continuously' employed with the organization.
A consultant or a contractor is a person who is either self-employed, such as a lawyer, characterized accountant, or a doctor with a private clinic.
Consultants work from project to project. They either work for their entity or multiple clients. They are not part of a payroll system. Their benefits may be different from those of full-time employees.

If an employer has been found to employ a worker who did not have permission to work in the U.K. or is employed in a job for which she was not permitted. Then the employee can be sent to jail for 5 years and have to pay an unlimited fine.

Using an Employer of Record (EOR) in the UK removes these risks by employing workers legally, managing payroll and statutory benefits, and ensuring full compliance with UK employment and tax laws. Schedule A Consultation.

Global PEO in UK

A Global PEO in the UK allows global companies to employ employees and contractors in the UK without establishing a local company. Under Tarmack Global PEO/EOR services, you can source and onboard talent in the UK within a few days. We will manage the end-to-end employment lifecycle, such as compliant contracts, payroll, taxes, benefits, and continued HR support.

Start Hiring Today

Our competitive pricing ensures you get the best value without hidden fees. With our cost-effective plans, you can manage your workforce in India efficiently while staying well within budget. Contact us today.

Frequently Asked Questions

What is an Employer of Record (EOR) in the UK?

An Employer of Record is a legal third-party employer of your workforce in the UK. It helps foreign or multinational business organisations to hire in India without establishing a local legal structure. They handle all statutory, legal, and compliance liabilities, like employment contracts, onboarding, payroll, taxes, social-security contributions, and labour-law compliance.

What is the cost of an employer of record in the UK?

EOR prices are transparent with Tarmack. For employees in the UK, the service fee begins at US $199 per employee per month. In the case of contractors, it begins at US $39 per contractor per month. If you are employing multiple employees and contractors, please contact us for a proper cost estimate.