How to Hire Employees in the UK from the USA
A US company can hire employees in the UK, but it needs the right employment structure before the first person starts working. In most cases, the choice is between using an Employer of Record or establishing a UK entity and employing people directly.
The right route depends on your hiring volume, timeline, internal resources and long-term plans. Understanding those differences early helps you avoid unnecessary costs, compliance gaps and delays.
Can a US company hire employees in the UK?
Yes. However, hiring someone in the UK involves more than issuing an American employment agreement and paying them from the US.
The employer must account for UK requirements such as payroll withholding, employment documentation, workplace pensions, statutory leave and right-to-work checks. Employers generally need to report employees through PAYE and deduct the relevant tax and National Insurance amounts through payroll.
There are two main ways to create a compliant employment structure:
Option 1: Use an Employer of Record in the UK
An Employer of Record, or EOR, becomes the employee’s formal local employer. Your company remains responsible for the employee’s role, objectives and day-to-day work, while the EOR manages the local employment administration.
This can include:
- Preparing locally compliant employment documentation
- Running UK payroll
- Managing tax and payroll deductions
- Supporting pension enrolment and benefits
- Providing ongoing HR and compliance guidance
- Managing changes during the employment lifecycle
An EOR can be suitable when you want to hire your first UK employees, test the market or employ someone without immediately building a local HR and payroll infrastructure.
The main trade-off is that the employee is not employed directly by your US company or a UK subsidiary. You also pay a recurring service fee. Whether that is more cost-effective than an entity depends on the number of employees, the expected duration and the support your business requires. Important to note that although EOR is involved, the US company must still follow corporate tax obligations as the governing body, HMRC, recognises permanent establishment risks via the fixed place of business.
Option 2: Set up a UK company from the USA
Establishing your own UK entity may be more appropriate when the UK is becoming a long-term strategic market or when you expect to build a larger local team.
Direct employment gives your company greater control over contracts, payroll providers, benefits and internal processes. It also creates additional responsibilities.
Your organization may need to arrange:
- Company registration and corporate administration
- Employer registration with HMRC
- UK payroll and PAYE reporting
- Workplace pension arrangements
- Employers’ Liability insurance
- Local employment contracts and HR policies
- Ongoing tax, accounting and compliance support
Employers must generally obtain Employers’ Liability insurance when they begin employing people in Great Britain. This must cover at least GBP 5 million and also be provided by an authorised issuer. Workplace pension duties may also include enrolling eligible employees and making employer contributions.
Entity setup therefore offers control, but it should not be treated as a one-off registration exercise. It requires ongoing ownership across finance, payroll, HR and compliance.
Employer of Record versus a UK entity
| Consideration | Employer of Record | Own UK entity |
| Local legal employer | The EOR | Your UK company |
| Initial setup | No entity required | Entity and infrastructure required |
| Day-to-day management | Your company | Your company |
| Payroll administration | Managed by the EOR | Managed internally or outsourced |
| Local HR support | Usually included | Must be arranged separately |
| Control over processes | Shared structure | Greater direct control |
| Common use case | Initial hires or market testing | Larger or long-term UK presence |
Neither option is automatically better. A company hiring one specialist has different needs from a business planning to build a 30-person UK operation.
UK employment law considerations for American employers
US employers should not simply transfer their existing employment templates and policies to the UK. Local employment rights and employer obligations need to be reflected from the start. US employers and companies should also know that the UK regularly make changes to employment law so US employers should be aware of future changes that may come into play the following year and not just the current year they decide to start business in the UK.
Written employment particulars
Employees and workers must receive a written statement containing the main employment conditions before they start or the day they start. This covers matters such as pay, working hours, holiday, workplace, probation and benefits. Additional information must also be provided within the required timeframe.
Paid annual leave
Almost all workers are legally entitled to 5.6 weeks of paid annual leave per year. For someone working five days a week, this normally equals 28 days. Bank holidays may be included within that entitlement.
Workplace pensions
Employers must assess their pension responsibilities and automatically enrol eligible employees into a qualifying workplace pension scheme. Employer contributions and ongoing administration should therefore be included in your hiring plans.
Right-to-work checks
Before employment begins, the employer must verify that the candidate is permitted to work in the UK. Depending on the employee, this may involve an online check, original documents or an approved identity service provider.
Employment status
Hiring someone as an independent contractor does not automatically make them self-employed. The practical working relationship helps determine their employment status and rights. Contractor classification should therefore be assessed carefully rather than used as a shortcut around employment obligations.
Hiring costs for a UK employee
The employee’s gross salary is only one part of the total cost. A realistic budget may also include:
- Employer National Insurance contributions. Please note, the rate can be changed yearly. 2026 yields the rate of 15% above the secondary threshold.
- Workplace pension contributions
- Paid leave and statutory absence
- Insurance
- Benefits
- Payroll and HR administration
- Legal and accounting support
- EOR fees or entity maintenance costs
The final cost depends on the employee’s compensation, benefits, location and employment structure. Comparing only an EOR fee with the cost of company incorporation gives an incomplete picture. Your internal workload and ongoing compliance responsibilities also have value. You should also consider that UK has a national minimum wage of GBP 12.71 per hour. This can also rise depending on location as London has an optional living wage of GBP 14.80 per hour minimum. This is not a legal requirement however.
Is opening a London office enough?
A London office and a compliant employment structure are not the same thing.
An overseas company with a physical place of business or branch in the UK may need to register a UK establishment with Companies House. However, office registration does not remove the need to arrange payroll, employment documentation, pensions and HR compliance.
Similarly, you do not necessarily need a physical London office to hire a UK-based employee. The right setup depends on how your company will operate, manage staff and build its presence in the market.
How to choose the right hiring route
An EOR may fit when you are making your first hires, need local support or want to validate the market before establishing an entity.
A UK entity may fit when you expect sustained growth, want direct ownership of employment processes and have the resources to manage the ongoing obligations.
Parakar’s local employment specialists help US companies assess those factors before selecting a route. Instead of applying a standard model, we look at your hiring plans, desired level of control and long-term ambitions. We then support the employment, payroll and HR processes required to put that structure into practice.
Planning to hire employees in the UK from the USA? Speak with a Parakar expert to determine which employment structure fits your business and your UK team.
This article provides general information and does not constitute legal or tax advice.
Get in touch
