How to Pay Remote Workers in the UK

Paying a remote worker in the UK can raise more questions than expected. You may find yourself navigating worker classification, PAYE rules, National Insurance (NI), and statutory rights all at once.

Global teams may find setting up payroll especially complex. If you’re unfamiliar with UK laws, you may be worried about missteps that could lead to penalties or back payments.

While these challenges are real, UK payroll is far from unmanageable with the right structure in place. Many Deel customers follow straightforward processes or use our specialist support to stay compliant from abroad.

Let us break down the essential steps for paying remote workers in the UK, so you know exactly how to maintain compliance.

Step 1. Verify the employment status of remote workers

Correctly identifying whether someone is an employee or a contractor is the first step in paying UK remote workers. This decides how you run payroll and the tax obligations you take on as an employer.

UK employment status is based on the working arrangement, not just the phrasing in your agreement. HMRC and employment tribunals look at factors such as who controls the work, whether the individual must perform the tasks personally, and how independently they operate. It’s a holistic assessment rather than a strict checklist.

Here’s a quick, side-by-side comparison of UK employees and freelancers:

Misclassification in the UK can lead to backdated taxes, penalties, and potential employment claims. It’s important to get this right from the outset to avoid compliance issues.

If you’re unsure how UK rules apply to your arrangement, consult with local experts. Deel Contractor can classify workers within a few minutes via our platform. All we need is a few details about the worker and the role you want them to perform at your company.

Step 2. Draft a contract that complies with UK employment rights

UK employment rights apply to all employees, no matter where they carry out work. Build these protections into your contract to ensure you uphold the same standards for remote workers as you would for office-based staff.

Contracts must reflect the following statutory rights:

• National Minimum Wage: All employees must receive at least the statutory minimum wage for their age group, currently £12.21 per hour and increasing to £12.71 as of April 2026
• Working Time Protections: Employees cannot work more than 48 hours per week on average unless they opt out, and they must receive minimum rest breaks and paid annual leave
• Flexible Working Rights: After 26 weeks of employment, workers can request flexible arrangements. Employers must provide a reasonable, justified response, as refusals may raise discrimination concerns
• Statutory Leave: Employees are entitled to 5.6 weeks of paid annual leave, alongside sick pay, parental leave, and other time-off protections
• Pension Auto-Enrolment: Eligible employees must be enrolled in a workplace pension scheme, with employers contributing at least 3% of qualifying earnings.

Remote workers must also have equal access to promotions, training, and company benefits. Discrimination based on working arrangement can trigger employment tribunal claims, particularly where remote work requests relate to protected characteristics like disability, pregnancy, or family care.

Use the employment contract to clarify your expectations for the role. For example, confirm whether remote work is permanent or may change over time. If there are limits on where the employee can work within the UK, include those too.

Step 3. Understand UK payroll requirements and registration

Once you’ve hired an employee, you must register them with HMRC and the UK’s Pay As You Earn (PAYE) scheme to start setting up payroll. Your obligations as an employer include:

• Deducting income tax based on each employee's tax code
• Withholding NI contributions for both employee and employer portions
• Submitting payroll information to HMRC on or before each payday
• Providing employees with payslips showing gross pay, deductions, and net pay
• Filing year-end returns and providing P60 forms to employees by May 31st

If you’re hiring contractors, PAYE registration isn’t generally required. These workers should invoice you for their services and handle their own tax obligations through Self Assessment instead. Just be cautious of IR35 rules, which can reclassify some contractors working through personal service companies as employees for tax purposes.

Step 4. Consider whether you need an Employer of Record (EOR) service

PAYE registration presents a significant hurdle for companies without a UK entity. You need to register as an employer with HMRC, which typically requires a UK address and business process.

Additionally, the registration process involves obtaining an employer PAYE reference number and setting up payroll software that can communicate with its Real Time Information system. You may need to delay hiring until you can complete all these steps.

Partnering with an Employer of Record (EOR) with a UK entity means you can skip this process. EORs like Deel can hire employees on your behalf and take over all your HR, payroll, and compliance responsibilities. As the provider is already registered with HMRC and PAYE, they enable you to move straight to hiring and onboarding.

Step 5. Consider tax and NI contributions for overseas UK citizens

Once a remote employee works outside the UK, their tax and NI position may change. Confirm their residency, understand when the rules still apply, and learn where there’s a risk of double taxation or contributions.

The challenge is that employees may remain subject to PAYE and NI if they travel abroad. HMRC only issues a ‘No Tax’ Code if you meet specific conditions, so overseas work doesn’t automatically exempt you from UK payroll obligations.

Here’s an overview of the general rules:

To manage these obligations:

1. Determine each worker’s tax residency status using HMRC's Statutory Residence Test
2. Obtain the correct tax code from HMRC for each employee
3. Calculate gross-to-net pay, including all applicable deductions
4. Submit Real Time Information (RTI) to HMRC on or before each payday
5. Pay employer and employee NIC to HMRC monthly or quarterly
6. Consider A1 certificates for employees working temporarily in EU countries
7. Monitor changes in working location that could affect tax obligations

If you’re using an EOR with global payroll capabilities, the platform can apply the correct tax codes, submit RTI to the UK, and manage NIC on your behalf. Deel can also flag when an employee’s working location changes, helping you spot when overseas rules may come into play.

Step 6. Choose the best payment method for remote workers

The right payment method depends on various factors, including worker status, currency, and payroll setup. As you decide between options, consider what UK employees and contractors need and expect, as well as what makes sense for your business.

Here’s a quick overview of common payment methods for UK payroll:

If you have distributed teams, Deel offers a fast and reliable way to manage payments. Our service ensures employees and contractors get paid in their local currency, on time, and gives them a range of payout options.

Step 7. Set up a way to handle expenses and reimbursements efficiently

Remote work expenses can create administrative burdens and tax complications if not managed properly. Establish a standardized process for covering these payments for your UK employees and contractors to avoid issues.

HMRC provides a simplified approach: a flat rate of £6 weekly or £26 monthly can be paid to remote employees for homeworking expenses without requiring receipts. This flat-rate allowance covers additional household costs like heating, lighting, and internet usage attributable to working from home.

Beyond the flat-rate allowance, UK employers can reimburse actual expenses if they're “wholly, exclusively, and necessarily” for business expenses. Some examples include equipment and furniture, software subscriptions, and business travel costs. Ensure expenses fit these three criteria, or HRMC may treat them as taxable income.

To handle reimbursements compliantly:

1. Establish a clear expenses policy
2. Share it with all the relevant teams
3. Require everyone to upload documentation through the system
4. Process through a payroll with expense management tools like Deel
5. Review regularly to refine

For equipment purchases, consider whether it might be easier to provide company-owned assets. Services like Deel IT can now manage the entire device lifecycle from procurement and delivery through to recovery.

Step 8. Stay updated on UK remote work and payroll regulations

UK employment and tax regulations constantly change, particularly as remote and hybrid work arrangements become more popular. Staying updated with these changes protects your business from compliance risks, financial penalties, and employment disputes while ensuring your remote team receives the right compensation.

Here are some ways to get ahead of updates:

• Subscribe to the HMRC bulletin
• Review UK government announcements
• Check the relevant gov.uk pages
• Schedule annual checks when tax and NIC rates change
• Track Employment Bill Rights reforms
• Get automatic updates through an expert service like Deel’s Compliance Hub

Pay remote workers confidently with Deel

UK remote workforce management becomes far more straightforward once you classify roles correctly and understand your payroll and tax obligations. With this foundation in place, you can decide whether to manage payroll yourself or use support that handles compliance for you.

Deel EOR can take care of HR, payroll, and compliance if you don’t have a local entity. Our in-country experts manage PAYE, NIC, and statutory benefits on your behalf, letting you focus on running your team.

When you partner with Deel, you get access to:

• UK employment contracts
• Payroll, PAYE, and NIC handled end-to-end
• Statutory benefits, holiday pay, and pension auto-enrolment
• Right-to-work and compliance checks
• Local HR and employee support
• GBP payroll and payslips through a single platform
• Employment through Deel’s owned UK entity

Want an easier way to employ UK remote workers? Contact Deel to explore how our EOR can take care of payroll, compliance, and onboarding for you.