Expanding your overseas company’s operations into the UK presents exciting opportunities for growth and access to new markets. However, before you can successfully employ people in the UK, it is crucial to understand and navigate the legal and regulatory requirements.
We will explore the key steps and considerations for employing individuals in the UK as an overseas company.
Establishing a Legal Presence
To employ people in the UK, your overseas company can establish a legal presence in the country. This can be achieved through various means, such as setting up a subsidiary or branch office, forming a partnership, or registering as a foreign entity. Each option carries different legal implications, tax considerations, and reporting requirements. Consulting with a legal professional or business adviser like Paul Beare can help you determine the most suitable structure for your company.
No UK legal entity? No problem
There are situations setting up a UK entity may not be preferred, such as testing the market. This is possible, albeit HMRC aren’t favourable to register UK payroll schemes in the name of an overseas entity. It should also be noted that certain other functions, such as benefits might not be able to be obtained without a UK legal entity in place, as the providing benefits firms do not work with overseas controlled entities.
Understanding Employment Laws and Regulations
Employment laws and regulations in the UK are designed to protect the rights and interests of employees. As an overseas company, it is crucial to familiarise yourself with these laws to ensure compliance. Key areas to consider include minimum wage requirements, working hour limits, health and safety regulations, holiday entitlements, and employee rights. Engaging the services of an employment lawyer can provide valuable guidance in navigating these complex legal frameworks. At Paul Beare, we can help with this.
Registering as an Employer and Obtaining a PAYE Scheme
Once your overseas company is legally established in the UK, you must register as an employer with HM Revenue and Customs (HMRC). This process involves obtaining an employer reference number and setting up a Pay As You Earn (PAYE) scheme. The PAYE scheme enables you to deduct income tax and National Insurance contributions from your employees’ salaries and remit them to HMRC on their behalf.
Conducting Right to Work Checks
Before employing individuals in the UK, you must ensure that they have the legal right to work in the country. Conducting right to work checks is a legal requirement and helps prevent employing individuals without proper documentation or authorisation. You can verify an individual’s right to work by checking their identity documents and ensuring they have the necessary visas, sponsorship licence, work permits, or immigration status to work in the UK.
Auto-enrolment / Pension Compliance
The Pensions Act 2008 requires all employers to set up and contribute to a workplace pension scheme for anyone they directly employ. This legislation applies to any employer who has one or more members of staff. This is called “Automatic Enrolment”.
Employees who are eligible to join a pension scheme are those:
- not already in a workplace pension
- aged 22 or over
- under State Pension age
- earn more than £10,000 a year
- work in the UK
Employee pension contributions will attract tax relief up to a certain level of contribution.
Employees will automatically become members of the pension scheme but they can choose to opt out of the scheme. The employee needs to write to the employer stating that they do not want to join the scheme. However, the employer must automatically re-enrol the employee after three years after the automatic staging date and at regular intervals thereafter. The employee can repeatedly opt out of the pension scheme.
Pension compliance can only be collected from a UK based bank account and collected by direct-debit.
Complying with Tax and Payroll Obligations
As an employer in the UK, you are responsible for fulfilling various tax and payroll obligations. These include deducting income tax and National Insurance contributions from employees’ salaries, maintaining accurate payroll records, and submitting payroll reports to HMRC on time. Consider using payroll software or outsourcing payroll services to ensure accurate and timely compliance with these obligations.
Providing Employee Benefits and Contracts
Employing individuals in the UK often involves offering employee benefits, such as pensions, healthcare, and vacation allowances. It is essential to research and understand the UK’s requirements for these benefits and ensure compliance with relevant regulations. Additionally, provide written employment contracts that outline terms and conditions of employment, including job responsibilities, compensation, and termination procedures. Seek legal advice to ensure contracts align with UK employment laws.
Expanding your overseas company’s operations to the UK and employing people can be a rewarding venture. However, it requires careful consideration of legal, regulatory, and compliance obligations. By establishing a legal presence, understanding employment laws, registering as an employer, conducting right to work checks, complying with tax and payroll obligations, and providing employee benefits and contracts, you can navigate the process successfully.
Consulting with professionals, like us, experienced in UK employment matters will ensure that you comply with regulations, protect your employees’ rights, and set a solid foundation for your company’s growth in the UK.