A Guide to the Laws and Benefits of HR Outsourcing in UK

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HR management and processes are vital for every business. Whether small or large, all companies can benefit from effective and streamlined processes for recruiting and managing their people.

HR laws and regulations in the UK are well defined and have evolved to protect both businesses and employees well. But following them, staying up to date, and ensuring full compliance can be a cumbersome task. Outsourcing HR in the UK can be one way to deal with this, working with a Professional Employer Organization (PEO) to handle all or part of the HR functions in the UK.

The UK offers an exciting and business-friendly environment. And it has some of the top universities in the world, providing an exceptional range of skills and talent. Outsourcing HR functions allows a business to take advantage of this, with or without setting up their own legal entity.


Overview of HR laws and regulations in the UK

Several laws govern employment in the UK. Legislation for businesses and workers has a long history and is contained in many different laws. Some of the most important HR laws and regulations in the UK include:

  • Employment Rights Act 1996. This is the primary law governing employment and the rights of workers. It brings together many previous laws and acts covering specific areas of employment. This includes contract rights, time off, flexible working rights, and dismissal procedures.
  • The Maternity and Parental Leave Regulations 1999. This expands on the laws in the Employment Rights Act, governing leave for both parents.
  • Working Time Regulations 1998. Sets laws for working hours, monitoring, and leave entitlement.
  • Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000 and the Agency Workers Regulations 2010. These two laws help to ensure equal and fair treatment for these categories of workers.
  • Transfer of Undertakings (Protection of Employment) Regulations 2006. These are specialist regulations governing the rights of existing workers taken on by a new employer.
  • Equality Act 2010. This contains essential details regarding employee treatment and discrimination.
  • Employment Relations Act 1999. This governs relationships with trade unions and the procedures for industrial action.

Together these laws cover most areas of UK employment and HR law. There is a lot to take in, though!  Outsourcing HR in the UK is one way to ensure you stay up to date.

The following are some of the main areas of UK HR laws and regulations that are essential for any company taking on staff in the UK to understand:

UK Contract types

The main contract types that can be used in the UK are:

  • Contractor or freelance worker. Employing this type of worker carries the lowest legal requirements. To hire a worker for a specific project or contract, you enter into a contract for services rather than an employment contract. This carries a commitment to deliver on the contract but no ongoing responsibilities.
  • Full-time or part-time employment contract. To hire an employee to work for your company, a contract of service is signed between employer and worker. This provides the confidence and trust needed to work together, under terms well defined in law. A contract will always specify the nature of work, place of work, working time and hours, and termination and grievance procedures.
  • Zero-hours contract. These are increasingly common in the UK and are a way of bringing on board an employee for a flexible number of hours. This is useful when the level of work is not guaranteed. Changes to the law in 2015 ban employers from using exclusivity clauses, so an employee on such a contract is also able to work elsewhere.

Working hours

Full-time working hours in the UK are at least 35 hours (although 37.5 or 40 hours is also typical). Employees can be contracted for any amount up to this time (part-time hours) or for no minimum commitment (a zero-hours contract).

There is an additional requirement introduced in the Working Time Regulations 1998 that employers need to be aware of and track. For employees working more than standard full-time hours, this must average over the year no more than 48 hours per week (although workers can agree to opt-out of this).

Holidays and time off work

Company employees are entitled to the following time off:

  • Annual vacation. All full-time employees are entitled to 5.6 weeks of paid annual leave per year.
  • UK bank holidays. In addition, the UK has eight bank holidays each year. Many companies will close and give employees these days off, but these can be changed to other days.
  • Maternity and paternity leave. Women are entitled to six months paid maternity leave and another six months additional maternity leave. They remain under contract throughout this period, but the pay is reduced to 90% for the first six weeks and to a flat rate (£148.68 per week in 2019/2020) after this. Fathers are entitled to up to two weeks of paternity leave, paid at the same flat rate.
  • Unpaid leave. Employees are also entitled to take unpaid leave to deal with family emergencies, including childcare. This is generally up to two weeks per year.

Contract termination and employee dismissal

The notice must be given to terminate a contract. This is a minimum of one week per year of service (up to a maximum of 12 weeks) but can be more depending on the contract.

Employees must also give a valid reason for dismissal. If this is redundancy, due to business reasons, compensation must be offered in line with the length of service (generally one week’s pay per year of service, but with caps and limitations).

Employees who feel they have been unfairly dismissed or the termination has not been handled correctly can raise a claim through an Employment Tribunal.

Employee discrimination

Employees are protected from discrimination (from both the employer and other employees) at every stage of the employment process. This includes any unfair treatment due to age, gender, race, religious belief, sexual orientation, or disability. Claims can be brought through an Employment Tribunal, usually leading to loss of earnings compensation in successful cases.

Data protection in the UK

The UK (in line with other European countries) has strict laws for data protection. This was updated and strengthened in recent years, with the new Data Protection Act 2018 and the General Data Protection Regulations (GDPR).

This sets rules for how companies collect and store employee data and their responsibilities for protecting this. Employees also have the right to see copies of all data held and be informed about where it has been shared.

The role of trade unions in the UK

Trade Unions play an important part in employment in many industries in the UK. These are groupings of employees who join together to oversee and improve working terms and conditions with individual employers.

Unlike in some countries, trade unions have specified legal rights in the UK. Employers must allow workers to join, and there are regulations on employer and trade union engagement.

NOTE – Changes to UK HR laws and regulations when the UK leaves the EU

The UK is currently in the process of leaving the European Union. Many of its HR laws and regulations are agreed upon at the EU level and then enforced through national legislation. Although it will no longer be part of the EU, no immediate or significant changes are expected to labor laws. For example, the new data protection and GDPR laws were introduced (in line with Europe) in 2018, and the UK has committed to keeping them.

Of course, over time, this may change, and HR Outsourcing in the UK will ensure you stay up to date with any changes.


What are the HR functions in the UK?

To meet the legal and administrative requirements, companies tend to operate several HR functions in the UK. Some of these may be handled internally, and some may be outsourced to another company.

HR functions can, of course, vary across companies depending on size, industry, and complexity of operations, but will usually include:


Advertising for roles, interviewing, and selecting the correct staff is a vital part of good HR operations. This also includes background checks on employees.

Employee hiring, onboarding, and contract handling

Once selected, employees will need to be brought on board in line with company policies. The appropriate contract needs to be defined and agreed upon with the employer. It is essential to get this right as much of HR law in the UK is based on a robust contract.

Managing the ongoing employee relationship

HR responsibilities include managing the ongoing relationship between employees and the company. This can include communication, performance monitoring or reviews, handling of disputes, and ultimately contract termination and employee dismissal.

Provision and management of employee benefits

Throughout the period of employment, HR will manage, document, and control the employee’s specific benefits. This includes statutory and any additional vacation, unpaid leave, and illness.

Salary and payroll handling

HR needs to work with payroll to ensure employees are paid correctly and on time. This includes involvement in several areas:

  • Employee salary calculation and payment
  • Handling any salary deductions, bonuses, and other entitlements
  • Liaison with payroll to handle social security payments, tax and other filings (this is generally the responsibility of the payroll function)

Handling work permits, visas, and company sponsor license

Of course, employees can be hired locally, from within the European Union or from other countries. There is currently a free labor movement within the EU, making it easy to employ a national of any EU country in the UK.

For employees from other countries, the company will need a sponsorship license to hire workers. All employees will also need to apply for a work visa (backed by a company with a sponsorship license). The application process for this license is complex and also brings significant ongoing compliance requirements. 

HR is responsible for ensuring the company remains up-to-date and compliant with all areas of HR, employment, and payroll law in the UK. This involves communicating this to relevant other departments and handling any legal cases or claims.

How NNRoad can help you with HR outsourcing in the UK

Outsourcing some, or all, of your HR functions in the UK, can make a lot of sense. It offers advantages for all businesses, whether in the pre-startup stage or well-established in the UK.

According to the UK Chartered Institute of Personnel and Development (CIPD), around 39% of small and medium-sized businesses outsource some of their HR functions in the UK, with payroll the most commonly outsourced HR function.

NNRoad is a leading market entry partner in more than 38 countries, including the UK. We can help companies set up a legal entity in the UK or act as the PEO in the UK and hire staff for companies without forming a local company. In both cases, we offer complete HR outsourcing solutions for HR functions in the UK.

Some of the main advantages of engaging with NNRoad for HR outsourcing in the UK include:

  • You concentrate on your core business, while NNRoad handles employee administration and management.
  • Carry out business in the UK without a company presence of your own if desired.
  • Ensures you comply with all the correct laws and regulations and file appropriate taxes and other paperwork correctly and on time. Rules and requirements can change, and NNRoad will stay up to date with this.
  • Can save money, and time, over setting up your own HR functions in the UK.
  • Gain access to specific expertise, and IT systems, that may not be available in-house.
  • Easier and faster to scale up and down HR functions in the UK as business changes.
  • Remain compliant as the UK exits the European Union. NNRoad will remain fully up to date with changes as the exit process continues, ensuring constant HR compliance.


NNRoad can help with all areas of business setup and ongoing management in the UK – providing a true one-stop solution. Take a look at our guides to company formation in the UK, Payroll in the UK, and visa sponsorship in the UK.

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