Employing Staff in the UK? A Guide for Overseas Companies

An increasingly globalised workforce, coupled with a move to remote working during the Covid-19 pandemic, has meant that overseas employers are hiring workers in the UK or sending existing employees to take on job opportunities in the UK.

While this might seem straightforward, it’s not simply a case of locating a qualified candidate. Employers must ensure that their employees are legally entitled to work in the UK in the first and fulfil their UK tax obligations. This has become even more important in the aftermath of Brexit. So, what do overseas companies need to know about employing staff in the UK?

What is the impact of Covid-19?

The Covid-19 pandemic has caused major shifts in the global labour market. Workers in many industries were furloughed or their jobs phased out as lockdowns caused businesses to close. Low-skilled, young and migrant workers were affected the most as they were more likely to lose their jobs or face pay cuts.

The combination of Brexit and the pandemic has made the UK employment market less appealing for foreign workers, with far fewer international candidates applying for jobs in the UK, according to the national statistics office. Many workers who previously had jobs in the hospitality and retail industries found alternative employment after their jobs were affected by multiple lockdowns. The manufacturing, construction, travel and transport sectors were also disrupted. With government restrictions lifted and businesses returning to pre-pandemic levels of activity, finding suitable candidates, wherever they may be, has become a priority for many employers.

What is the impact of Brexit?

For overseas companies, including United States employers hiring foreigners, you need to ensure that your potential employees have the right to live and work in the UK. The automatic right for EU citizens to live and work in the UK ended with Brexit. Nationals of the EU, European Economic Area (EEA) and Switzerland who lived in the UK before 31 December 2020 could apply for settled or pre-settled status, giving them the right to continue living and working in the UK without restrictions.

But since 1 January 2021, EU citizens do not have the automatic right to work in the United Kingdom without a valid work permit and sponsorship from their employer. To be eligible, they must meet requirements for foreign employees set out by the UK government based on their skills and salary. It is the responsibility of employers to confirm that the candidates they recruit meet the eligibility rules, as it is illegal to employ someone who does not have the appropriate documentation to work in the UK.

You should note that UK employment legislation based on EU law – such as pay, health and safety and anti-discrimination – was retained in the European Union (Withdrawal) Act 2018. However, the UK government is now entitled to make changes in the future. This could potentially include amending the Working Time Regulations 1998 to clarify inconsistencies in the way holiday pay is calculated; introducing a cap on compensation for discrimination cases, and changing the way employers handle proposed employee transfers.

What should I have ready before employing someone in the UK?

There are tax implications for you and anyone you employ in the UK. Based on the circumstances of your business, and the work the employee does, you might decide to employ them as a contractor or establish a branch office in the UK. Here’s what you need to have before you bring on UK employees.

Legal business entity

If you decide to set up a subsidiary or branch, or even just have a business address in the UK, you need to register the UK business with Companies House and HM Revenue and Customs (HMRC). Companies must file financial statements and pay UK corporation tax. You should consult a legal expert and tax specialist to ensure you meet all the company’s legal obligations.

Sponsorship licence

If you want to send an employee to the UK or hire foreign workers, you should apply for an Employer Sponsorship Licence. There are different licences depending on the work employees will do, including long-term, temporary or intra-company transfer. Employees need to provide the details of the sponsorship licence to apply for a work visa, which will only be valid for them to reside in the UK while they work for your company.

You also need a way to check that each candidate you intend to recruit has the right to work in the UK, either by checking their physical documents or their Biometric Residence Permit online if they have one.

Payroll

If you set up a permanent establishment in the UK, you must register with HMRC before paying employees. You need an employer Pay As You Earn (PAYE) reference number to pay tax and National Insurance contributions. UK employers are required to make real-time information submissions to HMRC and meet requirements for auto-enrolment in a workplace pension scheme. You might opt to use a third-party service to help with operating UK PAYE.

However, suppose a company does not establish a presence in the UK. In that case, an employee working in the UK for a foreign employer is responsible for setting up payroll and ensuring they make the correct income tax and National Insurance payments.

A currency specialist

When you recruit workers in the UK as an overseas employer, you should have a process to ensure they are paid their wages or salary on time and in the agreed currency. The easiest way to do this is to use a currency specialist to avoid expensive commission and transaction fees, which can hit your bottom line. If you’re relocating employees to the UK, you may need to transfer currency as part of their relocation package.

What employment rights do I need to know about?

There are some essential differences between employment rights in the UK and other countries such as the US. These include:

• Family leave - A minimum of two weeks and up to 52 weeks of maternity leave, paid paternity leave, shared paternity/maternity leave and adoption leave.
• Annual holiday - Full-time employees (who usually work five days a week) must receive at least 28 days of paid annual holiday, including public holidays.
• Sick pay - Employees are guaranteed statutory sick leave for up to 28 weeks.
• Pension - Employees have to be automatically enrolled in a workplace pension scheme with a minimum employer contribution of 3% and an overall contribution of at least 8%.
• Protection from discrimination and unfair dismissal - Employees are protected from discrimination based on “protected characteristics” such as age, disability, gender, pregnancy, race, religion or sexual orientation. According to the ACAS code of practice, employers must follow disciplinary and dismissal procedures.

Choose Clear Currency when paying your UK workers

As an overseas employer hiring workers in the UK, you need to ensure that your company complies with employment law by recruiting candidates with the right to work in the country and meets its tax obligations.

Using a dedicated foreign currency platform like Clear Currency can help simplify the process by handling all your international payments. Our specialist team will ensure you get the most competitive exchange rates, and save on conversion costs. Contact us today to find out how.