How to hire employees in the UK

Hiring an employee in the United Kingdom means either registering as an employer and running your own PAYE payroll, which in practice needs a UK presence, or engaging an employer of record (EOR) that employs the person for you. The first is the right foundation once you plan to build a UK team; the second gets a first hire working without setting up a company. Capstan does not offer EOR services, so if that is the route you need, engage a provider directly.

The UK is more centralised than the US: one tax authority, one national framework, and a well-worn payroll system in PAYE. This guide is a conceptual map, not a rate card. Thresholds, rates, and rules change, so confirm current figures with UK counsel or a UK payroll provider before you rely on them.

Entity or employer of record

If you set up a UK entity and register as an employer with HMRC, you operate PAYE yourself and carry the employment directly. That is worth doing once you intend to hire more than one or two people or stay for the long term.

If you are not ready for that, an EOR employs the person under its own UK entity, runs their payroll and statutory obligations, and invoices you. You direct the work; they hold the employment relationship. It costs more per head and gives you less control, and it is a reasonable bridge for a first hire. In both cases the person is an employee with employment rights, not a contractor.

PAYE, National Insurance, and pensions

Every UK payroll run withholds tax and contributions and reports them to HMRC. You do not need to run the maths, but you should recognise the pieces, because they shape what your payroll provider needs from you each cycle.

PAYE income tax. Income tax is withheld from wages each pay period under the employee’s tax code and remitted to HMRC, with reporting on or before each payday.

National Insurance contributions (NICs). Both employer and employee pay National Insurance on earnings above set thresholds. The employer share is a real cost on top of gross salary, so budget for it separately.

Pension auto-enrolment. Employers must automatically enrol eligible workers into a workplace pension and contribute, with the worker contributing too and able to opt out. It applies by age and earnings criteria rather than to everyone uniformly.

The pattern is a single national framework with thresholds that shift year to year. That is why the calculation belongs with a provider who tracks it, and why this guide gives you none of the numbers.

Contracts, notice, and probation

UK law requires a written statement of employment particulars, and a proper contract setting out role, pay, hours, and notice is standard. Statutory minimum notice increases with length of service, and contracts frequently set longer periods on top. Probation is a contractual convention that lets both sides assess the fit; it does not remove all rights, since some protections apply from day one and others accrue with service. Unfair dismissal protection is a meaningful part of UK employment law once the relevant service is met. Confirm how notice, probation, and dismissal should be handled with UK counsel before you rely on any of it.

Data protection: UK GDPR

Employee data in the UK falls under the UK GDPR and the Data Protection Act, which give individuals rights over their personal data and put duties on you as the employer handling it. You need a lawful basis for processing, clear retention, and appropriate security, and employees can ask what you hold about them. Keep employee data in one controlled place rather than scattered across drives and inboxes. Our note on HR data security and compliance covers the practices that hold up under GDPR-style regimes.

The contractor line: IR35 and beyond

The UK treats the contractor-versus-employee question seriously, and the off-payroll working rules (often called IR35) exist precisely because some people labelled contractors are, in substance, employees. Getting it wrong can bring tax liabilities and back payments. A genuine contractor runs their own business and bears real independence; someone who works under your direction, on your systems, as part of your team, looks like an employee whatever the invoice says. If you are unsure, read contractor versus employee and take advice before you commit.

Where Capstan fits

Capstan does not run UK payroll and is not an employer of record. It operates no PAYE scheme, holds no tax codes, and files nothing with HMRC. What it does is be the system of inputs around the calculation: employee records, pay structures, joiners and leavers, leave, attendance, and adjustments, compiled into a documented export for your UK payroll provider. Their computed payslips come back onto the employee record, so your record and their filings agree. Contractors live in the same workspace as your team, and the contractor module adds their portal, invoices and payout register on top; like every module it needs a paid plan under it.

Public holidays. An administrator can import a bundled set of United Kingdom public holidays for a year in one click and then edit it, because a bundled set is a starting point rather than an authority. The calendar also carries the working week it runs on, and holidays are typed as public or restricted, where a restricted holiday is optional and the calendar caps how many an employee may pick. Calendars are assigned to locations, and an employment inherits its calendar through its location.

Jurisdiction rules are data, not code. Nothing in Capstan hardcodes a country. Jurisdiction content ships as versioned country packs a workspace adopts, which is what lets a rate change be a new version of the content rather than a software release. Being exact about what exists today: the only pack authored is for India, and it covers contractor invoice withholding and tax lines rather than employee payroll. For the United Kingdom, the tax treatment comes from you and your provider.

The payroll export is the same shape everywhere. It carries day counts, the compensation components in force at period end, and joiner or exit prorations recorded as dates and payable days rather than prorated amounts. There is no United Kingdom branch in it, because there is no country logic in it at all. Your provider supplies the country; Capstan supplies clean, documented inputs and files the computed results back onto the record.

Where to go next

If your UK hire is one part of a cross-border team, the guide to hiring global contractors covers the wider picture, and the country notes for the US, Germany, and Singapore follow the same shape. For the current PAYE, NIC, and pension figures this guide has left out on purpose, speak to a UK payroll provider or employment solicitor. The structure is the durable part; the numbers you confirm each year.