7 Expensive Mistakes Foreign Companies Make When Hiring in the UK (2026 Edition)

On paper, hiring in the UK feels like an obvious choice: an English-speaking country, a highly educated workforce and excellent time zone coverage for global teams. Seems pretty straightforward, right?

Not quite. The UK is currently rolling out major employment law changes under the Plan to Make Work Pay, with new rules coming in gradually through 2026 and 2027. For foreign employers, this means hiring in the UK is getting more complex and harder to manage. Even a small slip-up in right to work checks can now lead to fines of up to £60,000 per worker.

With that in mind, here are the seven most common hiring mistakes in the UK. The good news? Most of them are easy to avoid once you know what to look for.

The “right to work” check fail (the £60k fine)

It might seem like a simple box-ticking exercise, but right to work checks are one of the most important compliance requirements for UK employers. Get it wrong and you could face tens of thousands of pounds in penalties for a single worker.

You accepted a scanned passport

Someone emails you a photo of their passport. It looks legitimate, so you move on. The problem is that a scanned copy alone is generally not enough to satisfy right to work requirements. If that person is later found not to have the right to work in the UK, you may face significant penalties if the check was not carried out correctly.

What the law actually requires

Fines go up to £60,000 for employing illegal workers. You have three options:

• Examine the original document in person
• Use the Home Office online portal for workers with a right to work share code
• Use a certified Identity Service Provider (IDSP) for British and Irish passport holders

Bear in mind that even if you use a certified provider, the responsibility stays with you. You still need to make sure the person in front of you matches the identity that was verified.

How to stay compliant from day one

Do the check before their start date, not after. A check done after employment has already begun won’t protect you if the person is found to be working illegally. Build it into your offer process and the risk of mistakes drops substantially.

Forgetting the Apprenticeship Levy (the hidden 0.5%)

You’ve probably never heard of this. Most foreign companies haven’t, until it shows up on their invoice.

You assumed it didn’t apply to you

The Apprenticeship Levy kicks in for any employer with a UK pay bill over £3 million. If you are a small company, you’re likely under the threshold. But here is the catch: if you’re using an EOR to hire in the UK, you probably aren’t.

Why it may still affect you

Your EOR is the legal employer of your staff. Their combined payroll is likely to exceed £3 million. That means they pay the Levy, and some may pass it straight to you, built into their pricing.

How to avoid unexpected charges

Ask your EOR one simple question: Do you pass the Apprenticeship Levy on to clients? If yes, how? Get the answer in writing before you sign. It might not sound like much, but unexpected costs add up quickly when you’re hiring multiple employees.

Misclassifying workers as contractors (IR35)

This is one of the most expensive compliance mistakes. And it often catches foreign businesses off guard because the UK’s approach to contractor classification can be very different from what they are used to.

You treated an employee like a contractor

You’ve hired someone. You tell them what to do, when to do it and how. But instead of putting them on payroll, you pay them through invoices and call them a contractor. HMRC has a term for this arrangement: disguised employment. And they have a law to deal with it: IR35. What matters under IR35 is the day-to-day working relationship, not what the contract says.

Why IR35 matters

This is what surprises people the most. If HMRC finds a breach, penalties and sanctions can include backdated tax and National Insurance, interest and fines linked to the unpaid tax. In many cases, the financial responsibility falls on the hiring company rather than the contractor.

How to assess your IR35 risk

Use HMRC’s free Check Employment Status for Tax (CEST) tool. If you control the work, set the hours and the person works exclusively for you, there is a strong possibility the relationship falls inside IR35 and should be reviewed carefully.

Ignoring statutory notice periods

This is often one of the biggest surprises for foreign employers hiring in the UK.

You expected a quick exit

Many foreign employers assume they can end an employment relationship quickly if things don’t work out. In the UK, notice periods can make the process much more expensive than expected.

What notice periods actually mean

After two years of service, employees get one week’s notice for every year worked, up to a maximum of 12 weeks. In practice, most professional roles come with contractual notice of one to three months. During that notice period, the contract stays in place. In other words, they’re still employed and still entitled to their usual pay and benefits.

How to plan for notice costs

Before you make an offer, calculate what you would owe if it didn’t work out. Notice periods are a financial liability. Treat them like one from day one.

The pension auto-enrolment trap

Miss this deadline, and the catch-up costs can arrive before you even realise there is a problem.

You missed a deadline you didn’t know existed

The moment you hire an eligible UK employee, a clock starts ticking. You have to enrol them in a workplace pension, and you have to do it properly, on time. You can delay by up to three months through the postponement option, but only if you send a written notice to the employee within six weeks of the postponement start date. Miss that, and you owe backdated contributions from day one.

Who needs to be enrolled and when

Most employees who meet the eligibility criteria and earn above the earnings threshold of £10,000 a year must be enrolled automatically. Minimum total contributions in 2026 are 8% of qualifying earnings, at least 3% of which must come from the employer.

How to stay on top of your obligations

Fines start at a £400 fixed penalty and can escalate to £10,000 per day for persistent non-compliance. If you’ve already missed the deadline, contact the Pensions Regulator now. Waiting to be found out always costs more.

Underestimating employer NICs (15%)

What you pay the employee and what the employee costs you are two very different numbers.

You budgeted for salary alone

Employer National Insurance Contributions are paid by you, on top of gross salary. Many foreign companies focus on salary costs and overlook employer-side taxes when budgeting for a UK hire.

What a UK hire really costs

Employer NICs are charged at 15% on earnings above £5,000 a year. On a £50,000 salary, that’s around £6,750 in NICs alone, before pension contributions or anything else. Budget roughly 18-20% on top of gross salary to cover NICs, pension auto-enrolment and the Apprenticeship Levy where it applies. You can also use Native Teams’ global payroll calculator to estimate the expenses for hiring employees in the UK.

How to budget more accurately

The rate recently went up from 13.8% to 15%, and the threshold where it kicks in dropped from £9,100 to £5,000, meaning you pay more, on more of your payroll, than you would have two years ago. If your budget was built on outdated numbers, your total employment costs will be higher than anticipated.

Using personal bank accounts for business payroll

It can seem like a practical shortcut when you’re making your first UK hire, but it can create avoidable compliance issues.

You used a personal account to pay staff

No UK business account yet. Hire starts Monday. You send the salary from your personal Wise or Revolut. It clears. No one says anything. Except now you’ve created a payroll compliance problem that’s much harder to fix than it was to cause.

Why payroll needs a compliant setup

UK payroll runs through PAYE. That means registering as an employer, running a compliant payroll system, submitting real-time information reports to HMRC on or before every payday and paying income tax and NICs by the 22nd of the month. Personal accounts are not built for payroll, making it much harder to keep your PAYE records accurate and compliant.

How to build a compliant payroll process

You need a UK business bank account, HMRC employer registration and either payroll software or a payroll provider. Not ready to set that up? An Employer of Record can handle them on your behalf.

The solution: Native Teams’ EOR

After looking at these common hiring mistakes in the UK, one thing becomes clear: finding great talent is only half the job. Staying on top of payroll, compliance and local rules is the other half. That’s where an Employer of Record (EOR) can make life a lot easier.

Why foreign employers choose an EOR

An Employer of Record lets you hire people in the UK without opening a local legal entity. The EOR takes care of payroll, compliance and employment responsibilities, while your team focuses on the work itself.

Instead of figuring out local rules, tax requirements and paperwork on your own, you have a partner handling it for you. That means less admin, fewer headaches and a much lower risk of costly mistakes.

If you’re hiring in the UK for the first time, it’s often the quickest and safest way to get started. For more in-depth information, check out our article on how to hire in the UK using an EOR.

What Native Teams handles for you

Native Teams helps businesses hire, pay and manage employees in the UK without getting buried in paperwork. Their EOR service covers:

• Employment contracts 
• Payroll and tax reporting
• Employer National Insurance contributions
• Pension enrolment requirements
• Right to work checks
• Ongoing compliance support

Everything is managed through one platform, so you don’t have to juggle multiple providers or systems. The result? Less time spent on admin and more time spent building the right team.

Final thoughts

The challenge isn’t finding great people. It’s making sure the hiring process doesn’t create expensive surprises later on. Whether you hire directly or work with an EOR, taking the time to get things right from the start can save a lot of time, money and stress down the road.

Thinking beyond the UK? Check out Native Teams’ country guides to compare hiring costs, local requirements and employment rules around the world.