Hiring your first UK employee is an exciting milestone. It can open the door to a new market, local expertise and faster growth.
But it is also a compliance moment.
For a US company expanding to the UK, employing someone who works in the UK usually means entering a new payroll system , with different tax rules, National Insurance, pension obligations and reporting deadlines. Your US payroll provider may manage federal and state payroll perfectly, but that does not mean it can run compliant UK payroll.
The good news is that UK payroll for foreign employers is manageable when you prepare before the first payday.
This guide explains what US companies need to know about PAYE for overseas employers, UK payroll registration and the practical steps involved in hiring UK staff without unnecessary friction.
In many cases, yes.
If your employee is physically working in the UK and their earnings are subject to UK income tax or National Insurance, you will generally need to operate a UK PAYE scheme. PAYE : “Pay As You Earn” : is the system employers use to calculate and deduct income tax and employee National Insurance from wages before paying employees.
This can apply even if:
HMRC’s guidance on PAYE for globally mobile employees explains that the employee’s duties and UK tax position are central to the analysis.
There are exceptions, particularly where an employee performs no duties in the UK or specific international social security arrangements apply. However, if you are hiring someone who will normally work in Britain, it is safer to assess UK payroll obligations before agreeing the start date.
Before your first UK payday, you normally need to register as an employer with HMRC.
This applies to overseas businesses as well as UK companies. A foreign employer may be able to operate a UK payroll scheme without first incorporating a UK legal entity, depending on its circumstances. In practice, this is often handled as a non-resident employer payroll arrangement.
Registration provides the references you need to report payroll and pay amounts due to HMRC. You should allow time for the registration process and avoid waiting until the employee is already expecting their first salary.
You will typically need to establish:
For some businesses, UK subsidiary formation for US founders can simplify payroll administration and wider compliance. But it is not always required before operating a PAYE scheme, so the right answer depends on how you are entering the UK market.
This is where early advice can prevent an expensive detour. The payroll structure should fit your wider UK expansion plans : not operate as a disconnected administrative fix.
Once registered, you need a payroll process that can calculate UK deductions accurately and report them on time.
For each payroll run, you will generally need to:
HMRC requires employers to submit a Full Payment Submission, or FPS, on or before the employee’s payday. The submission includes details of the employee’s pay, deductions and employer contributions.
You may also need to submit an Employer Payment Summary, or EPS, for items such as statutory payments or periods when no employees are paid. PAYE and National Insurance are generally paid to HMRC by the 22nd of the following month when paying electronically, although different arrangements can apply.
You can review HMRC’s official guidance on running payroll and reporting pay through RTI.
Your UK employment budget is not limited to the employee’s gross salary.
You may also need to pay employer National Insurance Contributions : commonly called employer NIC : on qualifying earnings above the relevant threshold. For the tax year from 6 April 2026 to 5 April 2027, the main employer NIC rate is 15%, subject to the applicable thresholds, categories and reliefs.
The precise amount depends on factors such as:
For a US founder calculating hiring costs, this matters. An employee with a salary of £60,000 does not necessarily cost the business £60,000. Employer NIC, pension contributions, holiday entitlement, insurance and other employment costs can materially change the total.
A properly configured UK payroll setup gives you a more realistic view of your monthly burn rate and runway.
Workplace pensions are another major difference between US and UK employment administration.
Employers generally have workplace pension duties as soon as their first eligible employee starts working for them. You may need to automatically enrol an employee who:
The employer must make the required contribution to a qualifying pension scheme and provide the employee with the relevant information. Employees can usually choose to opt out, but this does not remove the employer’s ongoing responsibilities. Eligible staff must also be reassessed and, where necessary, re-enrolled periodically.
The Pensions Regulator’s guidance for new employers explains the duties that arise when you take on staff.
A US 401(k) plan is not a replacement for a UK qualifying workplace pension. You may need both systems if your international workforce spans both countries.
UK payroll is not only about paying a regular monthly salary.
Your payroll process may also need to calculate and process:
For example, eligible employees may receive Statutory Maternity Pay for up to 39 weeks, with tax and National Insurance deducted through payroll. Employers may be able to reclaim some statutory payments from HMRC, subject to the relevant rules.
Statutory Sick Pay rules also apply to eligible employees who meet the conditions, and annual leave continues to accrue during sickness absence.
These obligations can feel unfamiliar if your company has only operated US payroll. But they are part of the employee experience : and errors can affect trust from the very beginning.
A US payroll provider may be excellent at handling:
However, UK payroll requires a different compliance framework. A provider that is not set up for Britain may not be able to:
Trying to force UK staff into a US payroll system can create incorrect deductions, late filings and confusing employee records. It can also make your finance reporting harder when your US and UK costs need to be consolidated.
The key is not necessarily replacing your US provider. It is creating a compliant UK payroll process that connects properly with your existing international finance function.
The cost is not limited to an HMRC penalty.
Late or missing RTI submissions can result in penalties, while late PAYE and National Insurance payments may lead to interest and further charges. Incorrect payroll can also require retrospective calculations, amended submissions and professional fees to correct historical records.
There are wider commercial consequences too:
You also need to consider other employer responsibilities. For example, Employers’ Liability insurance is generally required as soon as you become an employer, with a minimum cover of £5 million in many cases. Failure to have appropriate cover can result in significant daily fines.
Compliance failures can quickly turn a straightforward first hire into a costly clean-up exercise.
Before hiring your first UK employee, we encourage you to:
Confirm the employment structure. Decide whether the US parent, UK subsidiary or another entity will employ the individual.
Review the employee’s working location and status. A UK employee, contractor and internationally mobile worker can create different obligations.
Register for PAYE before the first payday. Do not assume that paying from the US removes the need for UK registration.
Choose UK-compatible payroll software or support. The system must handle PAYE, NIC, RTI, payslips and statutory payments.
Budget for the complete employment cost. Include employer NIC, pension contributions, insurance and other benefits.
Set up workplace pension processes. Assess eligibility and meet your duties from the employee’s start date.
Create a monthly payroll calendar. Track payday, FPS, EPS, HMRC payment and pension deadlines.
Connect payroll to your accounting system. Accurate payroll journals help you understand cash flow, margins and runway.
At Price & Accountants, we support growing and overseas businesses with practical Payroll & Pension services, alongside bookkeeping, accounting and wider UK compliance. Our aim is to help you hire confidently, pay your team accurately and keep your UK operation ready for its next stage of growth.
If you are building a broader expansion plan, these guides may help:
Your first UK employee should be a growth milestone : not the moment hidden compliance problems surface.
If you are a US founder or overseas business planning to hire in Britain, we encourage you to review your UK payroll for foreign employers before agreeing the first payday. We can help you understand the PAYE registration process, establish a compliant payroll setup and coordinate UK payroll with your existing international finance systems.
Contact Price & Accountants to discuss your UK hiring plans and get your expansion on the right track.
This article provides general information and is not a substitute for advice based on your company’s specific structure, employees and international tax position. UK rates and thresholds can change, so confirm the current rules for the relevant tax year.
