How Do You Know Your Employer of Record is Compliant in the UK?
A guide to EoR compliance regulations in the UK
Employer of Record (EoR) companies or payroll platforms have become increasingly popular over the last three years, primarily as a result of a pandemic-driven boom in the gig economy. However, due to their relative newness, many of these organisations are inexperienced in the often-complicated realities of employment regulations in countries such as the United Kingdom (UK). While technology and rapid timescales can purport to ease the process for global companies, businesses’ compliance with local laws is being investigated, and this can be hugely damaging for companies and workers alike if they are found to be non-compliant.
A whole host of issues await companies who fail to comply with employment regulations, from financial penalties to employment tribunals, to the cancellation of employee visas. As more and more companies are found to be non-compliant in this area, reports surface of companies leaving their employees stranded by suddenly ceasing their UK-based operations and pulling out of the UK market when they are discovered to have been non-compliant.
Mauve Group, with over twenty-seven years of experience in the field, has been operational in the UK since 1996, and our solutions has been carefully built and honed to comply with UK law.
Why is compliance important?
The compliance of the Employer of Record is vital to ensure that the employment of the workers strictly adheres to UK employment and tax laws.
Compliance is key to the success of any company and to the protection and support of its workers. If a company is found to be non-compliant with in-country employment regulations, they can face serious penalties such as large fines, revocation of their sponsorship license, and loss of employees if the employees lose their visas due to being misclassified, or otherwise improperly employed. In the UK, misclassification of workers can lead to organisations and workers falling foul of IR35 requirements, while employees found to be working before the on-boarding process has been completed also risk losing their worker status.
High profile instances of misclassification and its ramifications include $530 million worth of fines for Nike, and $46.5 million in fines for Instacart, which just goes to show that no matter the scale and influence of a company, they must still comply with regulations.
There are various red flags to look out for when speaking to a prospective Employer of Record. Key areas to watch out for include:
- Overly simplifying the onboarding process – Many EoRs claim to offer a blanket 24-hour onboarding timescale. Unfortunately, this sometimes means they are carrying out onboarding requirements after the worker has commenced work – leaving both employer and employee dangerously exposed.
- Willing to employ staff in the UK of an existing UK company – If a UK company is seeking an Employer of Record provider to hire staff on their behalf, it is likely that they are attempting to circumnavigate a legal responsibility. As a general rule, Mauve only contract with overseas companies which do not have their own local entities in the country in which they wish to employ.
- Claiming they can provide a solution that other EoRs have turned down – This doesn’t always mean the solution isn’t legitimate, but it can be a red flag if they ask no exploratory questions.
How does Mauve ensure compliance with its UK solution?
Mauve is a UK incorporated company that offers fully compliant EoR services for remote workers, whether UK nationals or those requiring a work permit to work in the United Kingdom. Mauve is licensed to obtain work permits and we can employ staff from many industries. Our EoR workers are provided with a fully compliant UK employment contract, which adheres to all the statutory labour laws of the UK, and we run a fully compliant payroll ensuring that all taxes and NI contributions are paid on behalf of our EoR employees. We only employ individuals after verifying their right to work in the United Kingdom, whether that be through our pre-boarding process or because we have obtained a work permit for them. We are not an employment agency, therefore we do not hire employees on behalf of other UK entities. Our EoR service provides a compliant UK employment solution for overseas clients who wish to engage remote workers in the UK. We do not outsource the employment of UK workers to third-parties.
With 27 years’ experience, Mauve Group can help support organisations and workers who have been impacted by non-compliant Employers of Record or payroll companies in the UK. You can contact our team of experts here.
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