The UK is one of the most attractive places in the world to hire — a deep English-speaking talent pool, strong time-zone overlap with both North America and Europe, and a legal system that international companies find familiar. What trips up most first-time employers isn't finding the talent. It's everything that happens after the offer letter: PAYE registration, employer National Insurance, pension auto-enrolment, a statutory leave entitlement that's far more generous than the US norm, and day-one rights that don't exist in an at-will world.
This guide walks through what a US or global team actually needs to know to employ someone in the UK compliantly in 2026 — the leave rules, the payroll math, the contract requirements — and the two routes to getting it done: setting up your own UK entity, or using an employer of record (EOR) like Deel that already has one.
UK Employment at a Glance (2026/27)
Figures reflect the 2026/27 UK tax year. Rates and thresholds change every April — always confirm current numbers against gov.uk and HMRC before running payroll.
Two Ways to Hire in the UK: Entity vs. Employer of Record
Before any of the compliance detail matters, you face one structural decision: do you become a UK employer yourself, or does someone do it for you? There's no single right answer — it depends on how many people you're hiring and how permanent your UK presence is.
| Factor | Your own UK entity | Employer of record (EOR) |
|---|---|---|
| Time to first hire | Weeks (incorporation + PAYE + pension setup) | A few days |
| Who is the legal employer | You | The EOR's UK entity |
| Upfront cost | £100 incorporation + setup & advisory fees | None — pay a per-employee monthly fee |
| Ongoing compliance burden | You run RTI payroll, NIC, pensions, filings | Handled by the EOR |
| Best for | Scaling a permanent UK team | 1–2 hires, market testing, speed |
Setting up an entity is cheaper to run per-head once you have a sizeable team, and it gives you full control. But it's a real commitment: you'll register a company at Companies House (the online incorporation fee rose to £100 in February 2026), register as an employer with HMRC for PAYE, set up a qualifying pension scheme, and take on every ongoing filing obligation that a UK business has. Many companies that hire one or two people through an entity discover the compliance overhead outweighs the savings.
An employer of record flips the model. The EOR already operates a UK entity and becomes the legal employer of your worker — running compliant payroll, withholding the right taxes, administering the pension, and issuing a UK-law employment contract — while you direct the person's day-to-day work. You can be live in days instead of weeks, which is why most teams making their first one or two UK hires start here and only build an entity once headcount justifies it.
Statutory Annual Leave: Why UK PTO Looks Nothing Like US PTO
This is the single biggest culture shock for American employers. In the US, there is no federal law requiring a single paid vacation day, and the average American gets only about 11–15 paid vacation days after several years of service. In the UK, paid leave is a hard legal floor.
Every UK worker is entitled to 5.6 weeks of paid annual leave per year — that's 28 days for someone working a standard five-day week. Part-time staff get the same 5.6 weeks pro-rata (a three-day-a-week employee is entitled to 16.8 days). The entitlement is capped at 28 days, so a six-day-a-week worker isn't owed more.
The one nuance that surprises people: the UK's eight bank holidays in England and Wales are not automatically extra. An employer can choose to count them within the 5.6-week entitlement or grant them on top — but it must be spelled out in the contract. A common competitive package is "25 days plus bank holidays," which works out to 33 days off and sits comfortably above the legal minimum.
Running UK Payroll: PAYE, National Insurance, and Pensions
UK payroll runs through PAYE (Pay As You Earn), the system by which employers withhold income tax and National Insurance from each paycheque and report it to HMRC in real time (an "RTI" submission) on or before every payday. There are three employer cost centres to budget for on top of gross salary.
Income tax (PAYE)
You withhold employees' income tax via PAYE. For 2026/27, the personal allowance is £12,570 (tax-free), the basic rate of 20% applies up to £50,270 of total income, the higher rate of 40% up to £125,140, and the additional rate of 45% above that. Scotland sets its own income-tax bands, so a Scotland-based hire is taxed on a different scale — flag the work location early.
Employer National Insurance
This is the cost American employers most often forget. On top of salary, employers pay Class 1 National Insurance contributions of 15% on earnings above a secondary threshold of £5,000 per year (the rate rose from 13.8% and the threshold fell in April 2025). Employees separately pay 8% between £12,570 and £50,270, and 2% above — but that comes out of their pay, whereas the 15% employer NIC is a true additional cost. Many small employers can offset some of it via the £10,500 Employment Allowance.
Pension auto-enrolment
UK law requires employers to automatically enrol eligible workers — those aged 22 to State Pension age earning over £10,000 a year — into a workplace pension. The minimum total contribution is 8% of qualifying earnings (the £6,240–£50,270 band), of which the employer must pay at least 3% and the employee makes up the rest. Workers can opt out, but you must re-enrol eligible staff roughly every three years. Getting auto-enrolment wrong is a common and penalised mistake.
Employment Contracts and Day-One Rights
There is no at-will employment in the UK. Every employee must receive a written statement of employment particulars on or before their first day — a day-one right since 2020. It must cover pay, hours, holiday entitlement, sick pay, notice periods, place of work, job title, probation terms, and benefits. A compliant UK contract also typically includes intellectual-property assignment clauses so that work product belongs to the employer.
Notice periods are set by statute as a floor: an employer must give at least one week's notice after one month of service, rising to one week per year of service after two years, capped at twelve weeks. Contracts often specify longer.
Probation periods of three to six months are normal, but they're a contractual convention — there is no statutory probation period, and statutory rights still apply throughout. Crucially, employees currently need two years of continuous service before they can claim ordinary unfair dismissal, which is why dismissals during probation are lower-risk. That's changing: the Employment Rights Act 2025 will cut the qualifying period to six months from 1 January 2027. (Note: this is not the "day-one" rule that was originally floated — that version was dropped — but it's a significant tightening, so build a fair, documented process into your management from the start.) Discrimination and automatically-unfair claims already apply from day one regardless of service.
Sick Pay and Family Leave
Statutory Sick Pay (SSP) was overhauled on 6 April 2026. The weekly rate is £123.25, and — importantly — the old three "waiting days" and the lower-earnings gate were abolished, so eligible employees are now paid SSP from the first day of sickness. Any older guidance saying "the first three days are unpaid" is now out of date.
Family leave is far more generous than US norms. Statutory maternity leave runs up to 52 weeks (39 weeks paid: 90% of earnings for the first six weeks, then a flat statutory rate). Statutory paternity leave is two weeks at the flat rate and became a day-one right in April 2026. These are minimums — many employers enhance them to stay competitive.
How Deel Handles UK Hiring
If you're hiring one or a handful of UK employees and don't want to incorporate, this is exactly the problem an employer of record solves. Deel operates its own UK entity and employs your worker on your behalf, which means the PAYE, National Insurance, and pension complexity above becomes its responsibility rather than yours.
Specifically for the UK, Deel calculates and files PAYE, National Insurance, the Apprenticeship Levy, and statutory leave pay, submitting RTI reports to HMRC through its built-in dashboard. It automates pension auto-enrolment end to end — workforce assessments, enrolment letters, contribution tracking, opt-out handling, and the three-yearly re-enrolment — and issues a UK-law-compliant employment contract with the required clauses, including IP assignment. With an entity already in place, onboarding a UK hire takes days rather than the weeks an entity build would require.
Hire your first UK employee without setting up a company
Deel's UK entity handles PAYE, National Insurance, pension auto-enrolment, and a compliant contract — so you can onboard in days instead of incorporating.
See how Deel hires in the UK →Deel isn't the only option — it competes directly with Remote.com and others in the EOR space, and the right pick depends on your country mix, headcount, and budget. We break down the leading EOR providers side by side in our Deel vs. Remote.com comparison. For a wider view of the HR platforms behind these tools, see our best HR software guide.
Frequently Asked Questions
How much annual leave do UK employees get by law?
UK employees are entitled to a statutory minimum of 5.6 weeks of paid annual leave per year — 28 days for a full-time, five-day-a-week worker. Employers can choose whether the eight England and Wales bank holidays count toward that 28 days or are granted on top; the law caps the statutory entitlement at 28 days. Part-time workers get 5.6 weeks pro-rata.
Do I need a UK company to hire a UK employee?
No. You can either incorporate a UK entity and register for PAYE with HMRC, or use an employer of record (EOR) that already has a UK entity and legally employs the worker on your behalf. An EOR lets you hire in days without setting up a company; an entity makes more sense once you're scaling a permanent UK team.
What is the employer National Insurance rate in the UK for 2026?
For the 2026/27 tax year, employers pay Class 1 National Insurance contributions of 15% on employee earnings above the secondary threshold of £5,000 per year. This is on top of gross salary, alongside the minimum 3% pension auto-enrolment contribution, so budget for both when you set a salary.
How does UK pension auto-enrolment work?
Employers must automatically enrol eligible workers (aged 22 to State Pension age earning over £10,000 a year) into a workplace pension. The minimum total contribution is 8% of qualifying earnings, of which the employer must pay at least 3%. Employees can opt out, but must be re-enrolled roughly every three years.
Can I dismiss a UK employee during their probation period?
UK employees currently need two years of continuous service before they can bring an ordinary unfair dismissal claim, so dismissals during a typical three-to-six-month probation are lower-risk. However, discrimination and automatically-unfair claims apply from day one, and the Employment Rights Act 2025 will cut the qualifying period to six months from 1 January 2027. Always follow a fair, documented process.
How long does it take to hire someone in the UK?
With an employer of record that already operates a UK entity, you can typically onboard a UK employee in a few days. Setting up your own UK company and registering for PAYE takes longer — incorporation itself is quick, but allow time for the PAYE reference and pension scheme setup before the first payday.