What is an Employer of Record?
An Employer of Record (EoR) is a company that takes on the responsibilities of being the legal employer for another company’s workers.
The EoR is responsible for the handling of all HR matters and payroll throughout the employment: from the contract execution and onboarding right through to offboarding.
Many companies may be more familiar with the terms PEO, GEO or outsourcing.
In truth, there are nuances between these terms, most significantly that an employer of record (EoR) has an established legal entity and therefore hires on behalf of the end company.
Not sure if EoR is the solution you need? Our team are here to help.
Why use an Employer of Record in the UK?
Navigating the complexities of UK HR and payroll can be complex, particularly if you are unfamiliar with the rules and regulations behind UK employment law.
If your company does not have a UK-based entity and you are looking to hire an employee based in the UK, the employer of record solution could be for you.
This removes the burden and hassle ensuring your worker is hired compliantly and reduces the cost of running your own entity.
How do I find the right employer of record?
Working with an employer of record should be a partnership. Although your employee will be performing their day-to-day activity for you as the end-company, the employer of record, as the legal employer, will be a significant part of this journey.
You will need to ensure that the company is legally registered as an employer in the UK and has full capability to manage the payroll and statutory filings and deductions for your employee.
They should also provide access to any statutory benefits and insurances that may be required. For example, in the UK it is a requirement to auto-enrol employees into a workplace pension and provide evidence of employers’ liability insurance.
What is the process for using an Employer of Record in the UK?
The Hiring Process in the UK
Often companies have already earmarked the suitable candidate for the role when they approach an employer of record service to hire their UK based employee.
Some EOR service providers may also offer recruitment and talent acquisition as an additional service.
Although this is something we do not offer in-house at EOR UK, we can certainly provide recommendations for some of our preferred UK-based recruitment agencies.
Most importantly, employers in the UK are required to carry out right to work checks before hiring a new employee. This should be confirmed before any formal offer is sent to the candidate.
The Contractual Process in the UK
As the employer of record, it is our responsibility to ensure all contractual documentation is in line with UK employment law.
In the UK, it is a legal requirement to provide a written statement as a minimum.
EOR service providers should give a more detailed contract of employment which covers pay, working hours, statutory rights, probationary period and termination.
The employer of record will have an approved UK contract template that they will complete for your approval before sharing with the employee.
Additionally, you may wish to include additional provisions, including confidentiality or IP clauses. This can be discussed and worked through with the HR team who will guide you as to what is appropriate in line with local legislation.
Employees in the UK should also have access to an Employee Handbook with details of the Code of Conduct and other policies.
The Onboarding Process in the UK
Once everything is in place and the contract has been countersigned, your employee will be onboarded by the employer of record.
The HR and onboarding team will need copies of the employee’s right to work and any required background checks.
HMRC, the UK’s tax authority, provide a ‘Starter Checklist‘ which ensures that the employee is enrolled correctly to HMRC and the correct tax code is allocated in payroll processing.
If the employee has been employed previously in the UK, a P45 (tax document provided upon termination) will also need to be sent to the employer of record.
At this stage, the employee will also be auto-enrolled into the workplace pension scheme selected by the employer of record. This is a legal requirement in the UK and employers are required to contribute a minimum of 3%.
Employees may, at their own discretion, choose to opt-out of the pension scheme.
The Payroll Process in the UK
Employees in the UK are paid through the the country’s PAYE (Pay-as-You-Earn) scheme.
This means that all statutory payments including income tax and national insurance contributions (social security) are deducted at source from the employee’s gross earnings.
There may be additional deductions including student loan repayments.
It is important to manage between the employee and the employer of record how expenses are declared as these must also be processed through monthly payroll.
The employer of record must legally provide all employees with a payslip and any financial year-end documentation, in the UK this includes the P60 and P11d, where applicable.
All financial reporting and filing will be managed by the employer of record. It is their responsibility to manage this and each month should provide you with detailed invoice and breakdown.
In turn, you will need to report any changes to payroll, including bonus or commission payments to allow for processing.
The HR Process in the UK
The responsibility and support from the HR team does not end at contract execution.
There are a number of regulations and requirements that must be upheld throughout the employment that the HR team of the employer of record will manage for you.
Any leave of absence including annual leave, sick leave and maternity/ paternity leave will need to be reported to the HR team. They will assist you in understanding the statutory rights in the UK that the employee is entitled to.
Any disciplinary issues must be discussed with the employer of record to ensure they are managed correctly and sensitively.
Upon termination of employment, the HR team will guide you as to what is required in line with UK employment law.
In the UK, employee’s have the right to claim unfair dismissal following two years’ continuous service. There are also a number of protected characteristics in the UK that prohibit any form of discrimination.
Why Employer of Record UK?
- As a UK headquartered team of EOR experts, our qualified HR and payroll professionals can provide you with the guidance and support you and your employee need throughout the employment journey.
- We care about your employees – unlike many platform-based EOR providers, we put the people before the process.
- We are solution-oriented – we will work with you to find the best solution for your employee(s). If we do not believe EoR is the solution you require, we will tell you.
- We value our clients – we see our relationship as a partnership to ensure the experience for you and your employees is smooth and you feel you have a point of contact who can offer expertise and guidance to support your queries.
There is no ‘one-size fits all’ solution in the EoR world, so we work together to adopt the approach and solution most-suited to you.
Scott Winter
HR Director
