By Globalization PartnersSeptember 2020
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If you’re looking to expand your company and create a presence in the United Kingdom, you need to understand hiring practices in the UK and the requirements you need to abide by under UK law. Our guide to hiring employees in the UK can help walk you through the process. You can also simplify this process greatly by working with Globalization Partners.
What to Know Before Hiring in the UK
First, it’s helpful to consider some of the aspects of work in the UK that may differ from the country where your company operates. Let’s look at some of the key things you should know before you begin the hiring process with a British worker.
1. Cultural Differences
One of our tips for hiring in the UK is to pay attention to possible cultural differences that can impact the hiring process and work practices. Whenever you hire an employee in a different country, you should learn about the cultural norms there that might differ from your own country. The differences that stick out to you will depend on where your company is based.
American companies, for example, may notice that British employees place a higher priority on taking breaks and may not appear as dedicated to their employers. They may also notice that British workers handle business matters in a more direct way. On the other hand, they may be more reticent to promote themselves than American workers would be.
2. Minimum Wage Rates
It’s also important to note that the UK has a national minimum wage (NMW) and a national living wage (NLW), which may influence what you pay your British employees. The NMW differs by age group and is lowest for workers who are considered apprentices. The NLW is a higher rate than all the NMW rates and applies to any worker aged 25 and above.
Since these wage rates are regularly updated, make sure you are aware of the current rates and which one applies to a prospective employee so you do not risk any legal repercussions.
3. Minimum Annual Leave
The UK also has laws regarding the minimum amount of paid leave employees are entitled to. Currently, employers are required to offer British workers at least 5.6 weeks of paid leave. This may include public and bank holidays, of which there are eight in the UK. For someone who works full-time, this will equate to 28 days of paid holiday.
Employees don’t have to use all of their paid leave within a year, but it’s up to the employer whether employees can carry over their unused leave from year to year or whether the unused leave expires at the end of the year.
4. Statutory Sick Pay
Employees who earn over a minimum limit are entitled to Statutory Sick Pay (SSP) under UK law. Rather than having to use their annual paid leave, workers who are too sick to work can use SSP after being ill for four days. They must provide a doctor’s note or some other evidence of their sickness.
For most workers, SSP is £95.85 a week, and they can collect it for up to 28 weeks. You pay SSP in the same way as you would an employee’s normal wages, withholding tax and insurance costs.
5. Pay As You Earn
Pay As You Earn (PAYE) is the system the HM Revenue and Customs (HMRC) was set up for employers to divert part of an employee’s paycheck to paying national insurance and income tax. It can also include other deductions, such as for pension contributions.
Essentially, it is up to employers to deduct the correct amount from employees’ paychecks, so make sure you are aware of the appropriate insurance and tax contributions, both of which are linked to a person’s earnings.
6. Workplace Pensions
British workers between the ages of 22 and state pension age who earn £10,000 or more per year and usually work in the UK are legally entitled to a pension scheme provided by you, the employer. Employees may choose to opt out, but you must give them the option.
The employee contributes a portion to the pension, and the employer contributes the rest. Make sure you give British employees the opportunity to enroll in a pension scheme that meets the legal requirements.
7. Maximum Working Time
It’s also helpful to know that Britain puts a limit on the amount of time employers can expect their employees to work, though this cap does have exceptions. In general, employees can work an average of 48 hours per week at the most, typically averaged over 17 weeks.
Employees may choose to forgo this protection, however, if they want to work more hours. The requirement is more stringent for employees under the age of 18. They are only allowed to work 40 hours in a week and are not allowed to opt out of this limit.
The Cost of Hiring an Employee in the UK
New employees cost a company more than their salary and benefits. The process of hiring new employees always involves some expenses, but these costs can multiply if you’re expanding into a new country for the first time. Here are some possible costs you can incur when you hire a new employee in the UK:
- Conducting research: Researching all the relevant laws and regulations to make sure you’re compliant and ready to hire takes time. That means, if you complete this research internally, you’ll be paying your employees to do this time-consuming work.
- Forming a branch or subsidiary: If you have to form a new branch or foreign subsidiary, this also comes at a cost. Note that setting up a subsidiary is considerably more costly than creating a branch.
- Partnering with an agency: A recruitment agency can simplify the process of finding the right employees for the job, but this service comes at a cost. It can, however, be the most cost-effective choice in some instances.
- Posting the job ad: Posting your job ad on job boards also costs money, but it’s smart to post your job ad on several popular boards so you can attract a good pool of candidates. Make sure you choose job boards that are popular in the UK.
- Legal checks: If you have to conduct background checks, that will add to your hiring cost. Checking an applicant’s documents to ensure they have a legal right to work in the United Kingdom involves an indirect cost since it takes time.
- Hiring committee’s time: The other activities your hiring committee does to recruit and hire employees in the United Kingdom, such as writing the job ad, evaluating applications, and interviewing candidates, all cost your organization in working hours.
- Training: Once you’ve hired a new employee, you will likely have some training costs to consider before the employee can start doing valuable work for your company. If your new hire is filling a new position, you should plan for higher training costs.
The exact amount it will cost your company to hire a new employee in the UK depends on a variety of factors, but this total is likely to include many of the costs above, so it’s wise to get a full picture of how much you may expect to spend to expand your staff.
What Does a Company Need to Hire Employees in the UK?
If you’re not working with a professional employer organization (PEO) in the UK, such as Globalization Partners, then you have to go through a bit of legwork before you can begin the hiring process. You’ll need to have the following in place:
- A branch or subsidiary: You must have a branch or a subsidiary located in Britain to expand your company there. A subsidiary is a legal entity that is independent of the parent company while a branch is an office, either virtual or physical, of the parent company.
- Employers’ liability insurance: You must also have an employers’ liability insurance policy in place to cover employees’ work-related injuries or illnesses. This is required even if you are hiring just one employee, and you will pay a fine for every day you do not meet this legal requirement.
- Employer registration: You need to register with HMRC as an employer before your first payday, even if your only employee is you. Be aware that you could wait up to five days to receive the employer PAYE reference number you need to ensure you pay your taxes correctly.
5 Steps to Hiring Employees in the United Kingdom
Hiring someone in the UK involves a series of steps, many of which likely coincide with the steps of hiring employees in your home country. However, these steps may involve some different considerations when you’re hiring for the first time in Britain. There are five basic steps to hiring in the United Kingdom.
1. Create a Job Listing
First, create a job listing that details the requirements and duties of the job and the qualities, skills, and qualifications you are looking for in an employee. You should also include important details, such as the location or whether the position is for remote work. If you need an employee who is multilingual to make international communication easier, include that, as well. Post the job listing on popular job boards where British candidates will see it.
2. Screen Candidates
You can employ a hiring agency to handle this step or you can handle it internally, either with the help of software or manually. As applications come in, you will need to evaluate them to determine which candidates are the most qualified for the job position.
As you evaluate applications, keep in mind that British employees use a curriculum vitae (CV) to apply for jobs rather than a resume, as most American employers are used to seeing. The difference is that a CV is a more in-depth document that includes a detailed education and work history and may include sections on an applicant’s interests and skills. Also keep in mind that you can expect to see British spellings on a British CV, which often differ from American English spellings.
3. Conduct Interviews
Once you have a short list of the most qualified applicants, you can conduct interviews with these candidates. You may choose to do more than one round of interviews to zone in on the ideal new hires. If you’re establishing a physical presence in Britain, you can conduct interviews at your local office. If you’re hiring remote employees in the UK, you can conduct interviews over the phone or through an online video call.
For phone or video interviews, you’ll want to take the time difference into consideration. The time zone in the UK is British Summer Time (BST) during daylight savings time and Greenwich Mean Time (GMT) the rest of the year. For example, the UK is five hours ahead of New York in the U.S. So, in this case, you may need to schedule interviews in the morning so they will still take place during working hours for British interviewees.
4. Follow Up and Create a Contract
After you conduct interviews and choose the perfect candidates to fill your new positions in the UK, it’s time to follow up with these candidates. At this point, you can discuss more job details, such as salary, and formally offer these candidates a position with your company.
You should also create an employment contract that includes terms regarding:
- Employment conditions
Having this contract in writing provides a helpful record for both you and your new employee and will become especially pertinent if you ever need to terminate employment since, in the UK, you must have a valid reason, which your employment contract can help reveal.
5. Onboard Your New Hire
Finally, it’s time to onboard your new hire. This can involve a good deal of paperwork and training before the employee begins performing their new job duties. When you’re hiring a British staff member, onboarding should include confirming that the new hire has a legal right to work in the UK, if you haven’t done so already. This involves an online or physical check of a citizen’s documentation.
Simplify and Expedite the Process With Help From Globalization Partners
Understanding how to hire in the UK can be complex, but working with Globalization Partners can greatly simplify the process. We make it easy for companies to expand rapidly into 187 different countries, including the United Kingdom. We act as the employer of record, leveraging our legal and human resources expertise and existing structure to handle your new employees’ payroll, benefits, taxes, and other logistics.
You still choose your own employees, but then you let Globalization Partners manage your new hire in a way that is fully compliant with UK law, so you can focus on running your business.
If you’re ready for international expansion into the United Kingdom or want to learn more, contact us today.