Setting up and managing a payroll in the UK
WIth one of the strongest economies in the world, a diverse economy, and a well-educated populace, the UK is an excellent place to do business and attracts many foreign businesses looking to expand their operations.
An important part of establishing a business in the UK is hiring employees locally and setting up and managing a UK payroll. This can be a lengthy process, with a unique set of employment regulations to deal with and even regional differences between the UK’s constituent countries.
To avoid the bureaucracy and set up a payroll as efficiently as possible, many organizations choose to outsource the process. At Horizons, we offer a comprehensive platform for UK payroll outsourcing of payroll setup and management, helping you build a UK payroll faster, even if you don’t have a UK entity.
Why choose the Horizons payroll solution?
If you have an entity
Do you already have an entity established in the UK? We can take care of all of your payroll setup and management in the country. Our experts will handle all compliance work and manage your HR, administration, and more so you can focus on a successful expansion into the UK.
If you don’t have an entity
If you don’t and established entity in the UK, we can still help you set up and manage a compliant UK payroll quickly and efficiently. You can hire your employees through our UK PEO & Employer of Record, acting as employer of record and enabling you to fast-track your UK expansion.
Hire and pay talents
with Horizons in
180+ countries
UK payroll guide
Tax and withholdings rules in the UK
The UK follows a progressive model for income tax, with employees paying more tax as they earn more. The rate varies from 0% up to 45% depending on income. The country uses a ‘Pay As You Earn’ (PAYE) model, where income tax is taken automatically before being paid to workers.
In addition to income tax, employees and employers both need to pay national insurance contributions, which goes towards social benefits programs. Employers need to pay roughly 13% of salaries, and workers need to pay around 12%.
National Insurance Rate | 13.80% |
Pension Fund | 3% |
Apprenticeship Levy (applies to employers with total pay-slips which exceed 3 million GBP) | 0.5% |
Total Employment Cost | 16.8% |
Up to £719 a month | 0% |
£719.01 up to £4,167 a month | 12% |
Over £4,167 a month | 2% |
Pension Fund | 5% |
Up to 12,500 | 0% |
12,501 – 50,000 | 20% |
50,001- 150,000 | 40% |
Over 150,000 | 45% |
Entitlements and terminations terms in the UK
When hiring in the UK, it is necessary to have a clearly written employment contract in place. Contracts should include details of the various entitlements and termination terms, along with any other details of employment.
Legally, the statutory minimum periods are as follows:
- – One week or more for workers employed for between one month and two years.
- – One week of notice for every year of employment between two years and 12 years.
- – 12 weeks of notice for workers employed for 12 years or more.
While these are the legal minimums, many employment contracts will include agreements for requiring different lengths of notice.
How to establish UK payroll outsourcing
It is possible to establish a UK payroll yourself, but it requires careful adherence to the relevant employment laws and you will need to register with various government departments, including HMRC. This can be a complicated process and may take more time than expected.
Many organizations choose to outsource their payroll setup and management to our UK PEO. Our team of UK experts can set up and run your UK payroll in full compliance with the law, helping you start your hiring and expansion efficiently and without any hold-ups.
Manage payroll in UK
Whether it’s EOR service or just payroll management, Horizons’ employment experts can help you get started in 24h.
