How to Hire Overseas Employees Outside the UK

Why Hire Overseas Employees?

• Access to talent you can't find locally. Tapping a global pool fills skill gaps the UK labour market can't cover fast enough on its own.
• A genuinely different perspective. International hires bring working practices and market knowledge your existing team doesn't have.
• Lower cost for some roles. Hiring overseas, especially for remote positions, can reduce total labour cost depending on the country and role.
• A foothold for expansion. Someone with local market knowledge is often your fastest route into a new region.

How to Hire Oversees Employees Outside the UK: 2 Methods

Before anything else, work out whether you're hiring an employee in the UK or engaging a contractor. This decision drives everything downstream – tax withholding, benefits, termination rights, and which of the two pathways below applies to you.

Employees typically:

• Work set hours you control
• Work exclusively, or close to it, for your business
• Follow your processes rather than setting their own
• Receive a regular salary with deductions made at source
• Are entitled to statutory benefits like leave and, often, a probation period

Contractors, by contrast, run their own business: they take on multiple clients, set their own schedule, invoice per project, and handle their own tax. Misclassifying an employee as a contractor to avoid payroll and benefits obligations is one of the fastest ways to trigger back-pay claims and penalties – regulators in the US, EU, and UK have all stepped up enforcement in recent years, and a Californian employer found that out the hard way.

Once you know which one you're hiring, move to the pathway that matches where they'll actually work.

A. Hiring Someone Who Will Work in the UK (Immigration and Right-to-Work Apply)

If the person will be physically based in the UK, immigration law governs the hire – regardless of their nationality or where they currently live.

The Skilled Worker visa is the main route for most non-UK hires. As of the 22 July 2025 rules update, the general salary threshold is £41,700 a year, or the going rate for the occupation's SOC code, whichever is higher – up from the previous £38,700. Some roles qualify for lower thresholds: new entrants and workers under 26, in study, or in professional training can be paid 70–90% of the going rate provided the salary is at least £33,400.

Every UK employer, sponsored hire or not, must also run a right-to-work check before employment starts, either via original documents or the Home Office's online share code service. Getting this wrong is expensive: civil penalties currently run up to £45,000 per illegal worker for a first breach, and £60,000 for repeat breaches.

Depending on the role and candidate, you might also look at the Global Talent, Graduate, or Temporary Worker visas instead of Skilled Worker – worth checking against gov.uk or an immigration adviser before you commit to a route.

Path A checklist:

• Confirm the role sits on the eligible occupations list and meets the SOC-code going rate
• Apply for or confirm you hold a valid Sponsor Licence
• Issue a Certificate of Sponsorship once you've made the offer
• Run a right-to-work check before the start date (share code or original documents)
• Pay the Immigration Skills Charge and Immigration Health Surcharge where applicable
• Set a reminder for ongoing sponsor reporting duties (change of role, salary, or departure)
• Book the follow-up right-to-work check if the visa is time-limited

B. Hiring Someone Who Will Work Abroad (Local Employment and Tax Apply)

If the person will be based outside the UK – whether they're a UK citizen relocating, a local hire, or a long-term remote worker – UK immigration rules don't apply. Instead, you're on the hook for the employment, tax, and labour law of wherever they actually work.

You don't get to choose UK law just because your company is based here. The country where the work is physically performed almost always governs statutory leave, minimum wage, notice periods, and social security contributions. There's one carve-out worth knowing: a UK citizen working abroad as a contractor still owes UK tax on that income unless a double-taxation agreement between the UK and their country of residence says otherwise.

You have four practical ways to employ someone legally in another country, without one of them requiring you to keep them on UK payroll (which usually isn't viable – see the table below).

Path B checklist:

• Confirm the worker's classification under local law, not just UK law – tests differ by country
• Choose your hiring route: local entity, EOR/PEO, or contractor agreement
• Check whether your activity there could create a Permanent Establishment
• Register for or confirm withholding tax and social security obligations in that country
• Draft a locally compliant contract covering statutory leave, notice, and termination terms
• Set up a data protection transfer mechanism if personal data will move between the UK and that country
• Confirm who is legally responsible for payroll, benefits, and tax filings before the start date

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 Comparing Your Options for Hiring Abroad

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Local Tax and Labour Obligations to Get Right

• Withholding tax: Most countries require the legal employer to withhold income tax from wages and remit it. This sits with the EOR, local entity, or partner in Path B – contractors handle their own.
• Social security and employee contributions: Employer and employee contributions to pensions, unemployment, or health schemes are usually mandatory and non-negotiable, regardless of company size.
• Statutory benefits (leave, sick pay): Minimum paid leave and sick pay entitlements are set by local law, not company policy – and they're often more generous than UK defaults.
• Minimum wage: Applies by the country where the work is performed, not where the company is headquartered.
• Working time rules: Many jurisdictions cap weekly hours and mandate rest periods; this matters for both Path A (UK Working Time Regulations) and Path B (local equivalents).
• IP assignment: Contracts should explicitly assign work product IP to your company – default ownership rules vary by country and don't always favour the employer.
• Data protection (UK GDPR and cross-border transfers): Moving personal data – including HR data – between the UK and another country can trigger UK GDPR's restricted transfer rules. The ICO's updated guidance sets out a three-step test for when a transfer is "restricted" and needs a safeguard like an International Data Transfer Agreement.
• PE risk triggers: Habitually concluding contracts through a local employee, or maintaining a fixed place of business, can create a taxable presence even without an entity. This risk sits almost entirely in Path B, and it's the reason EORs and careful role design matter.

There is significant potential for UK companies to expand internationally through overseas hires. Understanding employee classifications and implementing effective onboarding processes are crucial for compliance and productivity. When recruiting from outside the UK, compliance with local regulations, including termination procedures and health insurance, is essential.

For streamlined HR functions without the need to set up a legal entity, consider partnering with an Employer of Record. Playroll offers valuable resources for navigating global hiring, making it easy for UK companies to recruit talent worldwide while staying fully compliant.