UK Expansion  –  5 Common Startups’ Questions When Expanding

UK is one of the most attractive destinations for setting up a company’s European headquarters when deciding to expand. Based on my experience working for UK companies and helping a variety of startups expand internationally as part of what we do at Emeraldo, I entirely understand why UK expansion could be a good choice for many startups.

A few main reasons for expanding to UK:

The 5 most common questions we get at Emeraldo from our customers:

1. I just want to test out the market and we are still not ready to setup a local company. Can we onboard our first few people as contractors?

Yes you can. However, you need to make sure you do it correctly. If the contractor is a Sole Trader, you are at risk of creating an employee-employer relationship for tax and employment law purposes. Make sure the contractor sets up a Limited Liability Company or uses an Umbrella Company.

2. I found my first UK employee and I want to make her an offer. How do I find out how much to offer?

First, you need to know that there are London salaries and then there is the rest of the UK. On average, the rest of the UK salaries will be 10% lower.

3 ways to benchmark a salary:

  1. Ask the candidate. It is currently not illegal to ask a candidate how much they make in their current job.
  2. Search online — Takes a lot of time to find reliable sources and even then the credibility of each salary type can vary.
  3. Buy a salary survey. The most comprehensive ones (and therefore one of the more expensive) in the UK are provided by Willis Tower Watson.
3. I found my first UK employee and I want to make her an offer. What are the standard employee benefits that start-ups usually provide?

The table below summarises the mandatory benefits, what most employers provide and what most employees would like to receive:

4. How much should I contribute to an employee pension scheme?

If you are competing for talent with larger employers, you can expect to contribute 5% of salary. Same goes if you are competing for talent with other high-flying startups.

If you are competing for talent from smaller employers (not necessarily startups), you can contribute anything between the minimum and 5%. Since the introduction of auto-enrolment, contribution levels for SMBs have been going down because most employers automatically opt for the minimum contribution.

5. A question that often comes from American based companies: should I use a global PEO in the UK?

PEOs (Professional Employment Organizations) are very popular in the USA because of the structure of unemployment tax and medical systems. However, in the UK most employers form direct hiring relationships with employees.

Using a global PEO costs between ~15–25% of the employee salary (not including benefits), while the costs of setting up a local entity and employing directly are usually lower, and include:

  • Company set-up (one off): £20 for DIY or £500 for a lawyer to do it
  • Payroll: £4–15 per payslip (done by a local accountant)
  • Annual returns: starting at ~£185

 

Leave a Comment

Your email address will not be published. Required fields are marked *