The Post-Brexit Situation: Changes in UK Hiring and Compliance

Since the UK officially left the EU in January 2020 (with the transition period ending in December 2020), it has developed its own rules around data protection, employment law, immigration, and payroll. Companies now face dual GDPR obligations, rising payroll taxes, and stricter labor protections like unfair dismissal rights from day one. Hiring EU workers requires visas, which adds cost and delays, while missteps in areas like tax or right-to-work checks can lead to serious penalties.  

As of 2025, with new labor laws taking effect and the EU’s data-sharing agreement under review, it’s critical for businesses to understand how different the UK now is from the rest of Europe.  

What Changed Post-Brexit?

Employment Laws

The Employment Rights Bill and post-Brexit retention of EU-derived laws (e.g., Working Time Regulations) have strengthened UK worker protections, significantly impacting businesses. The changes include the following:

1. Employment Rights Bill (2025)  

• Day One Unfair Dismissal Rights: Employees can claim unfair dismissal from their first day, removing the two-year qualifying period (except for misconduct or redundancy). ‍
• Enhanced Flexible Working: Flexible working (e.g., remote, part-time) becomes a default right, with two statutory requests allowed per year and employers required to justify refusals within one month. ‍
• Proactive Harassment Prevention: Employers must take “reasonable steps” to prevent sexual harassment, with fines up to £1M for non-compliance (Employment Tribunal uplift). ‍
• Zero-Hour Contract Reforms: Workers gain rights to guaranteed hours after 12 weeks and compensation for short-notice shift cancellations. ‍
• Statutory Sick Pay (SSP) and Parental Leave: SSP is available from Day One, and paternity leave protections are strengthened.

2. Retention of EU-Derived Laws  

Post-Brexit, the UK kept EU-derived laws under the European Union (Withdrawal) Act 2018, including the Working Time Regulations 1998 (48-hour workweek limit, 5.6 weeks paid leave), Equality Act 2010 (anti-discrimination), and TUPE 2006 (employee protections during business transfers). These ensure continuity but are subject to UK amendments.

3. Other Reforms

• “Make Work Pay” Plan: Announced by the Labour government, this includes a genuine living wage, stronger trade union rights, and banned exploitative practices (e.g., fire-and-rehire). ‍
• Predictable Working Regulations (2024): Workers can request predictable schedules, impacting gig economy roles.

Businesses must grasp these employment law changes because the Employment Rights Bill and related reforms inflate dismissal costs (£2,000-£10,000/claim), complicate payroll with flexible working (5-10% cost rise), and risk £1M fines for harassment breaches.  

Immigration: End of Free Movement and Visa Requirements  

The end of EU free movement following Brexit marked a significant shift in the UK’s immigration policies, profoundly impacting hiring practices, employers, employees, and the broader economy. This change introduced visa requirements for EU workers, digital right-to-work checks, and substantial costs for employers, contributing to labor shortages and delayed revenue.

1. End of EU Free Movement  

Brexit terminated the automatic right of EU, EEA, and Swiss citizens to live and work in the UK, effective January 1, 2021. EU workers now require visas under the UK’s points-based immigration system, introduced in 2020.

Key Requirements:  

• Skilled Worker Visa: Requires a job offer, £38,000 minimum salary, and English proficiency, costing £719-£1,500 per worker (depending on stay length and shortage occupation status). ‍
• EU Settled/Pre-Settled Status: EU, EEA, and Swiss citizens in the UK by December 31, 2020, had to apply for settled or pre-settled status by June 30, 2021, to stay legally employed. Over 8.2 million applications (6.3 million people) were filed, with 5.7 million granted (4.09 million settled, 1.67 million pre-settled). Late applications persist (243,000 post-deadline grants), with automatic 5-year extensions and settled status conversions starting January 2025.

2. Digital Right-to-Work Checks  

Employers must verify EU workers’ right-to-work status via digital platforms (e.g., Home Office online checker) for those with settled status or visas, replacing physical document checks. Non-compliance risks fines of £20,000 per illegal worker. Employers use Identity Service Providers (IDSPs) for digital verification, costing £50-£200 per check for SMEs, or integrate with HR software for bulk checks.

3. Employer Sponsorship Licenses  

Companies hiring non-UK workers need a Home Office sponsor license, costing £536 for small businesses and £1,476 for large firms, with additional fees (£1,000-£5,000) for renewals and compliance audits.

Requirements: Employers must prove legitimate hiring needs, maintain records, and report changes (e.g., worker absences), adding administrative burdens.

Payroll and Social Security

UK’s departure from the EU replaced EU-wide social security coordination with bilateral agreements, impacting the Pay As You Earn (PAYE) system, National Insurance Contributions (NICs), and VAT compliance.

1. Separate Social Security Agreements with EU Countries  

Post-Brexit, the UK-EU Trade and Cooperation Agreement (TCA) and bilateral agreements (e.g., UK-France, UK-Germany) govern social security. These require Certificates of Coverage (A1 forms in the EU, issued by HMRC in the UK) to prove where contributions are paid, avoiding double taxation.

• Agreements cover posted workers (e.g., EU employees temporarily in the UK for <24 months) and multi-state workers (e.g., UK residents working partly in Germany).
• Without a Certificate, workers face contributions in both countries (e.g., 13.8% UK NICs + 20% German social security), doubling costs.
• Processing takes 6-12 weeks, with delays common due to bilateral coordination (e.g., 30% of applications delayed, per AccountsCo).

2. National Insurance Contributions (NICs) Increase  

Employer NICs (Class 1 secondary) rose from 13.8% to 15% starting April 6, 2025, on earnings above £5,000/year (down from £9,100), as announced in the Autumn Budget 2024. Class 1A/1B rates (on benefits/expenses) also increased to 15%. The Employment Allowance rose to £10,500 from £5,000, removing the £100,000 eligibility threshold.

3. Mandatory 20% VAT Compliance  

UK businesses must comply with a 20% standard VAT rate (or reduced rates, e.g., 5% for hospitality) under the VAT Act 1994, separate from EU VAT rules. Firms selling to EU customers or importing goods face additional registration and reporting.  

Non-compliance risks penalties (£10,000-£100,000/year). Businesses with EU operations must register in both UK and EU jurisdictions, adding £2,000-£10,000 in accounting costs.

4. Day One Sick Pay Reform  

The Employment Rights Bill (2025) introduced Statutory Sick Pay (SSP) from the first day of employment (previously after three days), with the rate rising to £118.75/week from April 6, 2025. This applies to all employees, increasing employer costs by £50-£200/month for frequent absences (e.g., 1.5M workers claim SSP annually).

Data Protection

Post-Brexit, the EU General Data Protection Regulation (GDPR) ceased to apply directly in the UK. The UK introduced the UK GDPR, which retains the EU GDPR’s core principles—such as lawful data processing, transparency, and accountability—but operates as a separate framework under UK law, complemented by the Data Protection Act 2018. The UK GDPR governs how personal data, including employee data, is collected, processed, stored, and transferred in the UK.

Businesses must process employee data lawfully (e.g., with consent or for contractual purposes), implement robust security measures (e.g., encryption), notify the Information Commissioner’s Office (ICO) of data breaches within 72 hours, and, in some cases, appoint a data protection officer. Employees have rights to access, correct, or erase their data.  

Non-compliance can result in penalties of up to £17.5 million or 4% of global annual turnover, whichever is higher, enforced by the ICO.

Ensuring Proper Hiring and Compliance in the UK Post-Brexit

By adopting a structured process and leveraging expert partnerships, companies can navigate these changes, hire compliantly, and build a strong UK workforce.

1. Research Local Regulations Thoroughly

To stay compliant when hiring in the UK, review key updates like zero-hour contract reforms and day-one Statutory Sick Pay (£118.75/week) under the Employment Rights Bill. Ensure compliance with UK GDPR by securely storing employee data and reporting breaches within 72 hours. Understand visa rules such as the Skilled Worker Visa, which requires a minimum £38,000 salary, and check if Certificates of Coverage are needed to avoid double social security contributions.  

Use reliable sources like GOV.UK, the ICO, and the EU-UK TCA for accurate guidance, and create a compliance checklist covering contracts, data protection, payroll, and right-to-work checks.

2. Choose the Right Hiring Model

When expanding into the UK, companies can choose from several hiring methods. Employer of Record (EOR) services, like Knit, handle full compliance—including UK GDPR, payroll (15% NICs and VAT), visa sponsorship, and Certificates of Coverage—making them ideal for fast, compliant hiring without a subsidiary. Professional Employer Organizations (PEOs) co-employ staff and manage HR compliance, including new harassment prevention rules, fitting for larger teams. Freelancers offer flexibility but must be classified carefully under UK laws like IR35 and the Employment Rights Bill’s predictable working rules. Direct hiring requires deep local expertise and is best for well-resourced companies due to the complexity of TUPE and VAT compliance.

3. Draft Compliant Contracts

To create compliant UK employment contracts, include key terms like salary, working hours (within the 48-hour limit), 5.6 weeks of paid leave, notice periods, and flexible working rights, while also addressing harassment prevention and UK GDPR data consent. Clearly define worker status—citing visa or settled status for EU workers and using IR35-compliant terms for contractors to avoid misclassification. It’s best to have contracts reviewed or drafted by experts, such as an EOR like Knit or UK labor lawyers, to ensure alignment with the Employment Rights Bill and relevant collective agreements.

4. Set Up Payroll and Benefits Compliantly

To manage payroll in the UK, outsource to EORs like Knit or local providers who handle NICs, VAT, SSP calculations, and timely HMRC filings—avoiding penalties and securing Certificates of Coverage for cross-border workers. Ensure benefits are compliant by offering the required 3% pension contributions and 5.6 weeks of paid leave, while also providing competitive perks like flexible work and supplemental health insurance in line with the Employment Rights Bill. Monitor overall costs, factoring in a 5–10% rise from NICs and SSP, and use the £10,500 Employment Allowance to reduce contributions for small businesses.

5. Onboard Employees with Compliance and Culture in Mind

Conduct digital right-to-work checks using Home Office platforms or IDSPs to verify settled status or visa eligibility and include UK GDPR-compliant data consent forms. Promote cultural sensitivity by training employees on UK workplace norms—such as polite communication and flexible schedules—and outlining protections under the Employment Rights Bill, including day-one unfair dismissal and harassment policies. Strengthen engagement through virtual or in-person sessions that explain visa conditions, benefits like SSP and paternity leave, and company policies, helping build trust in the post-Brexit labor market.