Hiring Employees in the UK: A Comprehensive Guide (2026)

The United Kingdom remains one of the world's most attractive hiring markets. It gives you access to one of Europe's deepest pools of tech, finance, and creative talent, a workforce that operates in English, and a time zone that works for both US East Coast and EMEA teams. Remote-work adoption is mature, and the infrastructure that supports distributed employment is well established.

But the UK also comes with real complexity. Setting up a local entity, registering for PAYE, calculating National Insurance contributions, auto-enrolling employees into pension schemes, and staying current with a raft of new legislation introduced by the Employment Rights Act 2025 — all of it takes time, money, and specialist knowledge. Get it wrong, and HMRC penalties arrive quickly.

This guide is for any organisation hiring employees within the UK, including:

• UK-based employers who are hiring locally for the first time or scaling their workforce and need a clear picture of their legal obligations
• Global employers who want to hire UK talent without setting up a local entity — and for whom an Employer of Record (EOR) is the fastest, lowest-risk route

By the end, you'll understand UK employment law, payroll and tax obligations, statutory benefits, the EOR model, visas and right to work, termination rules, and how Deel handles all of it in one platform.

UK employment law: what every employer must know

Employment status: three categories, not two

Most countries distinguish between employees and independent contractors. The UK adds a third category — the worker — that sits between the two, and getting classification wrong is expensive.

Courts and tribunals look at the substance of the relationship, not just the label on the contract. If someone works exclusively for you, follows your processes, and uses your equipment, they are likely an employee regardless of what the agreement says.

Written statement of employment particulars — day one

Under the Employment Rights Act 1996, you must give every employee and worker a written statement of employment particulars on or before their first day of work. This isn't optional, and it isn't something you can send over in week two.

The statement must include, at a minimum:

• Names of the employer and employee
• Start date and job title
• Pay rate and payment frequency
• Working hours and location
• Holiday entitlement
• Notice periods
• Sick leave and sick pay provisions
• Pension arrangements
• Probation terms

Failure to provide this on day one is an automatic breach, and Employment Tribunals can award compensation of two to four weeks' pay.

National Minimum Wage and National Living Wage (April 2026)

As of April 2026, the minimum wage rates are:

These rates are enforced by HMRC and updated each April. Employers who underpay face fines of up to 200% of arrears, public naming, and potential criminal prosecution.

Working time

The Working Time Regulations 1998 cap the average working week at 48 hours, measured over a 17-week reference period. Employees can voluntarily opt out in writing, but you cannot require them to do so as a condition of employment.

Additional entitlements:

• At least 11 consecutive hours of rest in every 24-hour period
• An uninterrupted rest break of at least 20 minutes when the working day exceeds six hours
• At least one day off in every seven

Under-18s face stricter limits: no more than eight hours per day and 40 hours per week, with no opt-out available.

Statutory holiday entitlement

Full-time employees are entitled to 28 days of paid annual leave, inclusive of the eight UK bank holidays. Part-time employees receive a pro-rated equivalent.

From April 2024, holiday pay for workers with irregular hours is calculated at 12.07% of hours worked in the relevant pay period, removing the previous system of averaging over a reference period.

Right-to-work checks and UK GDPR

Every employer must verify that each employee has the legal right to work in the UK before their start date. Since Brexit, this applies to EU and EEA nationals as well as non-UK citizens — only Irish citizens retain an automatic right to work.

Verification methods:

• UK and Irish nationals: check original documents (passport, birth certificate)
• Settled and pre-settled status holders: use the Home Office online checking service with the employee's share code
• Visa holders: verify the visa and any conditions attached

Failing to conduct proper right-to-work checks exposes employers to civil penalties of up to £60,000 per illegal worker and potential criminal prosecution.

On data protection: all employee information you collect — including right-to-work documents, payroll data, and HR records — is subject to UK GDPR. You must have a lawful basis for processing, maintain records for the required retention period (three years for payroll), and apply appropriate security measures.

Employment Rights Act 2025 and 2026 reforms — what's changed

The Employment Rights Act 2025 introduced the most significant overhaul of UK employment law in a generation. Many provisions phased in from April 2026. Employers hiring in the UK now need to be aware of three major changes in particular:

Day-one unfair dismissal rights. Previously, employees needed two years of continuous employment before they could bring an unfair dismissal claim. From April 2026, that qualifying period is removed for most claims. Employees have the right not to be unfairly dismissed from their first day of work. This makes a compliant, documented performance and conduct management process critical from the moment someone joins.

Fire-and-rehire restrictions. The practice of dismissing employees and re-engaging them on worse terms — once used by some employers to force through contract changes — is now substantially restricted. Employers who engage in fire-and-rehire without following a prescribed statutory process face automatic findings of unfair dismissal.

Enhanced day-one rights. Paternity leave and unpaid parental leave are now day-one rights, no longer subject to a length-of-service qualifying period. Flexible working requests must also be handled within two months, down from three.

What this means for employers: the risk profile of a bad hire has increased. Invest in robust employment contracts, clear probation policies, and documented performance management from the start. If you're using an EOR, these obligations transfer to the EOR as the legal employer, which is one of the strongest arguments for the model in 2026.

Payroll, tax, and employer costs explained

The PAYE system

All UK employment income is taxed through Pay As You Earn (PAYE). As an employer, you're responsible for deducting the correct amount of income tax and National Insurance Contributions (NICs) from each employee's pay, filing that information with HMRC in real time, and remitting the total by the 22nd of each month.

Key PAYE obligations:

• Register as an employer with HMRC before your first payday
• Submit Real Time Information (RTI) reports on or before every payday — not monthly, on payday
• Issue P60 annual summaries to all employees by 31 May each year
• Issue a P45 when an employee leaves
• Keep payroll records for a minimum of three years

Income tax bands (2025/26)

Note: Scotland operates slightly different income tax bands. Employees registered at a Scottish address receive an S-prefixed tax code, and the correct rates apply automatically through HMRC's system.

Employer National Insurance Contributions

As of April 2025, employers pay 15% National Insurance on the portion of each employee's salary above £417 per month (the Secondary Threshold). This is one of the most significant costs of employment in the UK and must be factored into every hiring decision.

A worked example for an employee earning £50,000:

Apprenticeship Levy

Employers with an annual wage bill above £3 million pay the Apprenticeship Levy at 0.5% of their NICable payroll above that threshold. The levy funds apprenticeship training through a digital account. If you don't use the funds within 24 months, they expire back to the government.

For most SMEs hiring in the UK, the levy doesn't apply. Larger employers should factor it into cost modelling.

Pension auto-enrolment

Employers must automatically enrol eligible employees into a qualifying workplace pension scheme. Eligible employees are those:

• Aged 22 to state pension age
• Earning more than £10,000 per year
• Working in the UK

The minimum employer contribution is 3% of qualifying earnings. The minimum total contribution (employer plus employee) is 8%. Employees can opt out, but you must re-enrol them every three years.

Non-compliance with auto-enrolment is monitored by the Pensions Regulator and can result in escalating fixed penalties and daily fines.

Statutory benefits and leave entitlements

Annual leave

All employees are entitled to 28 days of paid annual leave per year (pro-rated for part-time workers). This is a floor, not a ceiling — many UK employers offer 25 or more days in addition to bank holidays as part of a competitive benefits package.

Sick leave and Statutory Sick Pay

Employees who are off sick for four or more consecutive days are entitled to Statutory Sick Pay (SSP) of £123.20 per week (from April 2026) for up to 28 weeks. The first three qualifying days (waiting days) are not paid under SSP, though many employers choose to pay from day one as a contractual benefit.

Maternity, paternity, and parental leave

Adoption leave mirrors maternity leave entitlements.

Workplace pension

As described in Section 2, auto-enrolment is mandatory. The minimum employer contribution is 3% of qualifying earnings. Many employers contribute more as part of a competitive total reward package — the market norm for professional roles is 5–6% employer contribution.

Health and safety

Every employer must provide a safe working environment under the Health and Safety at Work Act 1974. Practically, this means:

• Conducting and documenting risk assessments
• Ensuring all employees complete health and safety induction training
• For remote workers, providing DSE (display screen equipment) assessments

With Deel, build H&S training as standard into your onboarding workflow.

Hiring without a UK entity — how an Employer of Record works

What a UK Employer of Record is

An Employer of Record (EOR) is an organisation that becomes the legal employer of your UK staff on your behalf. The EOR has its own established UK entity — registered with Companies House, enrolled with HMRC for PAYE — and hires your chosen candidates through that entity.

You retain full operational control: you direct the day-to-day work, set performance expectations, and manage the relationship. The EOR handles every statutory obligation:

• Issuing a compliant employment contract (day one)
• Running PAYE and filing RTI submissions
• Paying employer NICs and managing pension auto-enrolment
• Processing statutory leave payments
• Handling GDPR-compliant data processing
• Assuming liability for employment tribunal claims and HMRC audits

Because the EOR is the legal employer, any compliance issue goes to the EOR first, not your organisation.

Who keeps control vs. who takes legal responsibility

This distinction matters:

IR35 and contractor misclassification — what every UK employer must understand

IR35 is a UK tax rule designed to prevent workers from avoiding income tax and National Insurance by operating through a personal service company (PSC) when they would otherwise be classified as employees.

Since April 2021, medium and large businesses are responsible for determining a contractor's employment status for tax purposes — a process called an off-payroll working determination. If you engage a contractor through their limited company but they work in a way that resembles employment, HMRC can deem them inside IR35 and hold you (the fee payer) liable for the unpaid tax and NICs.

The financial exposure is significant. Uber's 2016 tribunal case and Deliveroo's 2023 Supreme Court case both demonstrated how costly misclassification can be — back taxes, NI arrears, holiday pay, and pension contributions can run into millions.

How EOR removes the risk: when you hire through Deel EOR, the worker is a genuine employee of Deel's UK entity. There's no IR35 question, no PSC, and no status determination to make. The employment status is unambiguous, the obligations are Deel's, and your organisation is protected from the personal liability that comes with contractor misclassification.

If you currently engage UK contractors and want to move them to a compliant employment model, Deel can handle the conversion — from contractor to employee — without disruption to the working relationship.

EOR vs. setting up your own UK entity

Setting up a UK entity is the right long-term choice for large, established operations. For most companies entering the UK market or hiring a small number of UK employees, an EOR is faster, cheaper, and lower risk.

Use our EOR vs. entity cost calculator to model the numbers for your specific situation.

When to consider your own entity instead

An EOR is not always the right answer. Consider setting up your own UK entity when:

• You're committing 20+ employees to the UK market long term
• You need a UK-registered company for regulatory, procurement, or investor reasons
• You want full payroll ownership and direct HMRC registration
• You plan to hire UK apprentices (the Apprenticeship Levy funds flow through your own entity)

Deel Entity Setup can manage the full incorporation process if and when you reach that point — and for companies transitioning from EOR to owned entity, Deel ensures a smooth handover with no compliance gaps.

Deel EOR: what makes it different

Deel owns its UK entity directly — we're not an aggregator routing through third-party providers. That matters because it means:

• Every employment contract is issued by Deel's UK entity, not a subcontractor
• HMRC audits and compliance queries are resolved within our team, not handed off
• You can ask to see our Companies House registration number before signing

Deel EOR operates in 150+ countries, carries a 4.8/5 rating on G2, and provides real-time compliance monitoring that flags legislative changes — including the April 2026 Employment Rights Act reforms — before they affect your workforce.

Step-by-step guide to hiring an employee in the UK

Whether you're hiring through an EOR or your own entity, the process follows the same logical sequence.

Step 1: Choose your hiring model

Before anything else, decide how you'll employ your UK hire:

• Own entity: you're the legal employer. Requires HMRC registration, PAYE setup, and an existing UK entity
• EOR: Deel becomes the legal employer. No entity required, hire in days
• Contractor: only appropriate where genuine self-employment criteria are met and IR35 doesn't apply

Step 2: Verify right to work

Before making a formal offer, confirm the candidate's right to work in the UK. Use the Home Office online checking service for those with digital status (settled or pre-settled). For UK and Irish passport holders, retain a copy of the original document.

Do this before the offer is accepted — not on day one. If a visa needs to be sponsored, engage Deel Mobility at this stage to begin the sponsorship process.

Step 3: Draft and issue a compliant employment contract

Your employment contract must include everything required by the written statement of particulars, plus:

• Intellectual property assignment clause
• Confidentiality obligations
• Garden leave provision (for senior roles)
• Data protection acknowledgement

If you're using Deel EOR, the contract generator builds a compliant contract automatically based on role, seniority, and location — including probation period, notice, and pension details.

Step 4: Register for PAYE with HMRC

If you have your own entity, register as a UK employer with HMRC before your first payday. You'll receive a PAYE reference number and need to set up payroll software that can submit RTI reports.

If you're using Deel EOR, this step is handled entirely by us.

Step 5: Set up pension auto-enrolment

Identify a qualifying pension provider and set up your auto-enrolment scheme before the employee's start date. You must enrol eligible employees from day one of employment.

Deel uses Penfold as its UK pension provider and handles all enrolment, assessment, and opt-out administration on your behalf.

Step 6: Run the onboarding workflow

On or before the employee's first day, ensure they have:

• Their written statement of employment particulars (day-one legal requirement)
• Their P45 from a previous employer (if applicable) — or a starter checklist for HMRC
• Bank details collected for payroll
• Pension enrolment confirmation
• Benefits information
• Health and safety induction completed

Deel automates this entire sequence — employees complete onboarding self-service, and the platform flags any missing information before their start date.

Step 7: Maintain ongoing compliance

UK employment law isn't static. From April 2026 alone: NMW increased, SSP increased, ERA 2025 reforms took effect. Each year brings further changes to NI thresholds, holiday pay calculations, and statutory payment rates.

Deel's Compliance Hub monitors regulatory changes and notifies you of anything affecting your UK employees — with plain-English explanations and recommended actions, not just legal citations.

Hiring internationally into the UK — visas and right to work

Post-Brexit, any non-UK, non-Irish national requires a visa to work in the UK. For employers wanting to hire or relocate international talent into the UK, the sponsorship process has specific requirements.

The Skilled Worker visa

The Skilled Worker visa is the primary route for most professional and technical roles. To hire through this route, your organisation must hold a Sponsorship Licence from the Home Office. Obtaining the licence requires:

• Being a genuine UK trading business
• Demonstrating robust HR systems capable of monitoring sponsored employees
• Having no history of immigration non-compliance

Once licenced, you issue a Certificate of Sponsorship (CoS) for each hire. The role must meet the eligible occupation and minimum salary thresholds — generally £38,700 per year for most roles, or the going rate for the occupation code, whichever is higher.

Processing time: typically three weeks for overseas applicants, or inside the UK depending on visa type.

Other key visa routes

• Global Talent visa: for leaders and emerging talent in science, digital technology, arts, and research. No employer sponsorship required — candidates apply via an endorsing body
• Graduate visa: for UK university graduates, valid for two years (three for PhD graduates). No sponsorship required; graduates can work freely
• Intra-company Transfer: for senior employees already working in your organisation overseas who are being relocated to the UK

Hiring without a UK entity — how EOR handles sponsorship

To sponsor a Skilled Worker visa, the sponsoring organisation must be a registered UK entity. If your company has no UK presence, you can't sponsor directly.

Deel Mobility solves this. As an established UK entity with a Sponsorship Licence, Deel can act as the legal employer and sponsor for your international hires — without you needing to incorporate in the UK. Deel manages the CoS application, compliance monitoring, and all reporting obligations to UK Visas and Immigration.

This makes it possible to relocate or hire non-UK nationals into the UK in a matter of weeks, not months.

EU Settlement Scheme

EU, EEA, and Swiss nationals who were living in the UK before 31 December 2020 should have applied for Settled or Pre-Settled Status under the EU Settlement Scheme. As an employer, you must verify their digital immigration status using the Home Office online service — you cannot rely on an EU passport alone.

Termination, redundancy, and offboarding

UK employment law is employee-protective. Getting termination wrong — in terms of process, even when the substantive reason is fair — exposes employers to successful tribunal claims. With the removal of the two-year qualifying period under the Employment Rights Act 2025, this risk starts on day one.

Fair dismissal grounds

An employee can only be fairly dismissed on one of five statutory grounds:

1. Capability — performance or ill-health
2. Conduct — misconduct or gross misconduct
3. Redundancy — the role is no longer needed
4. Statutory restriction — the employee can no longer legally do the job (e.g. lost driving licence for a driving role)
5. Some other substantial reason (SOSR) — a catch-all for genuinely fair reasons that don't fit the other four

Whatever the reason, the employer must also follow a fair procedure, which typically means investigation, a formal hearing, and the right of appeal. Procedural failures can convert an otherwise fair dismissal into an unfair one.

Notice periods

Most employment contracts for professional roles specify longer notice periods — typically one to three months — which take precedence over the statutory minimums.

Redundancy

When a role is no longer needed, redundancy is a potentially fair dismissal reason. However, the process matters enormously:

• Selection criteria must be objective and consistently applied
• Consultation is required before the decision is made — not announced as a fait accompli
• Collective consultation (with trade unions or elected employee representatives) is mandatory where 20 or more redundancies are proposed within 90 days at one establishment — and must start at least 30 days (or 45 days for 100+) before the first dismissal
• Alternatives to redundancy must be explored and documented

Statutory redundancy pay

Employees with two or more years' continuous employment are entitled to statutory redundancy pay, calculated as:

• Half a week's pay for each complete year under age 22
• One week's pay for each complete year aged 22–40
• One and a half weeks' pay for each complete year aged 41 or over

Weekly pay is capped at £719 (from April 2025), giving a maximum statutory redundancy payment of £21,570.

Employees can claim redundancy pay in addition to notice and any accrued but untaken holiday.

How Deel handles offboarding

When you need to terminate or make an employee redundant, Deel manages the full offboarding workflow:

• Drafting legally compliant termination letters or redundancy notices
• Calculating final pay, including accrued holiday
• Managing the pension wind-down
• Ensuring the correct P45 is issued
• Archiving employment records for the required retention period

Because Deel is the legal employer, we manage the procedural obligations — and our UK employment law team guides you through every step.

Hire in the UK with Deel

The UK is one of the world's best hiring markets. It doesn't have to be one of the most complicated to navigate.

Deel's Employer of Record service gives you a wholly-owned UK entity, compliant employment contracts, PAYE and pension management, built-in Compliance Hub monitoring, and dedicated UK legal expertise — all in one platform. You can hire your first UK employee in days, not months, without a legal entity, without a payroll vendor, and without an employment lawyer on retainer.

Ready to start? Book a 30-minute demo with our team, or use our EOR vs. entity cost calculator to model the numbers before you decide.