Setting up a UK subsidiary is an exciting step for any business. Whether you’re making your first hire in the UK, building a local team or supporting an existing operation from overseas, having the right people in place will play a big role in your success.

But employing people in the UK comes with responsibilities too. The UK’s employment law framework is well established and designed to provide clarity and protection for both employers and employees. If you’re used to a different way of working, particularly in countries where employment laws are less prescriptive, some of the requirements may come as a surprise.

As part of the Shaw Gibbs Group, Reality HR works with international businesses and UK subsidiaries every day, helping them understand their responsibilities as employers and build people practices that support long-term success.

From making your first UK hire to managing a growing workforce, getting the HR basics right early can save time, reduce risk and help you focus on what matters most – growing your business.

Understanding the UK’s employment landscape

If you’re setting up or growing a UK subsidiary, one of the first things you’ll notice is that employment law works differently here than it does in many other countries.

For organisations used to US at-will employment or less regulated employment systems, the UK’s approach can feel unfamiliar at first. Employees have a range of rights from the start of their employment, and employers are expected to follow clear processes when managing people.

That might sound daunting, but it shouldn’t be. The UK’s employment law framework is well established and generally straightforward to work within once you understand the basics. In many ways, it provides a clear roadmap for employers, helping you make decisions confidently and consistently.

The key is understanding your responsibilities early, rather than trying to fix problems later. With employment law continuing to evolve, including changes being introduced through the Employment Rights Act 2025, having the right support in place has never been more important.

Why HR foundations matter from day one

When you’re focused on launching or growing a UK operation, HR documentation can sometimes feel like something that can wait until later. In reality, it’s one of the most important things to get right from the beginning.

Every employee should receive clear, compliant employment documentation from day one. This includes an employment contract, key workplace policies and an employee handbook that explains how your organisation works.

These documents ensure compliance and also help your employees understand what’s expected of them, provide managers with consistency and create a positive experience from the very start of employment.

For overseas organisations, it’s also important to remember that documentation used elsewhere won’t automatically work in the UK. Contracts and policies often need to be adapted to reflect UK legal requirements and employment practices. This is a normal part of operating across different countries and can help prevent issues further down the line.

Getting these foundations right early means you can spend less time worrying about compliance and more time focusing on building your business.

Unfair dismissal and the UK approach to ending employment

One of the biggest differences international businesses encounter is the UK’s approach to dismissal.

In some countries, employers have significant flexibility to end employment relationships with relatively little process. In the UK, there is a more structured framework designed to ensure decisions are fair, reasonable and properly documented.

In most situations, employers are expected to have a fair reason for dismissal and follow an appropriate process before reaching a decision. This applies whether the issue relates to performance, conduct, capability, redundancy or another business reason.

While this can seem restrictive to organisations unfamiliar with the UK system, it actually provides clarity for both employers and employees. Everyone understands the process and what is expected.

This area is becoming even more important as employment law develops. Under the Employment Rights Act 2025, the qualifying period for ordinary unfair dismissal protection will reduce from two years to six months from January 2027. In addition, compensation for successful unfair dismissal claims will become uncapped.

Rather than seeing these changes as a challenge, employers should view them as a reminder of the value of good people management. Clear expectations, regular communication, manager training and consistent processes can make a significant difference when issues arise.

The businesses that tend to navigate these situations most successfully are those that invest in strong HR foundations from the beginning.

Payroll, pensions and employment status

Alongside employment law, there are several practical areas you’ll need to get right when employing people in the UK.

One of the most important is employment status. UK law recognises employees, workers and self-employed contractors, with each category carrying different rights and obligations.

It’s important to understand that employment status isn’t determined simply by what a contract says. The reality of the working relationship matters too, which is why taking advice before engaging contractors can often save time and risk later.

You’ll also need to operate payroll through the PAYE system, ensuring tax and National Insurance contributions are deducted correctly. Most employers are required to automatically enrol eligible employees into a workplace pension scheme and make employer contributions.

If you’re engaging contractors, you’ll also need to consider IR35 off-payroll working rules. While the rules can seem complicated, the principle behind them is relatively straightforward: if someone works like an employee, they should generally be taxed like one too.

These areas are often easier to manage when considered at the outset, rather than after your workforce has started to grow.

Culture and compliance go together

The organisations that tend to perform best are those that combine strong compliance with a positive workplace culture. UK employees place a high value on fairness, communication and good management, and businesses that invest in these areas often see benefits in recruitment, retention and overall performance.

When employees understand what is expected of them, feel valued and trust the decisions being made around them, they are generally more engaged and productive. A positive culture can also strengthen your reputation as an employer and help you attract talented people as your UK operation grows.

Getting the HR foundations right is about creating an environment where people can do their best work and where your business can thrive.

How Reality HR can help

Setting up and growing a UK subsidiary comes with plenty of opportunities, but it also brings responsibilities as an employer.

As part of the Shaw Gibbs Group, we work with international businesses at every stage of their UK journey. Whether you’re making your first UK hire, reviewing your current arrangements or looking for ongoing HR support, we can help you navigate UK employment law with confidence.

Our Start-Up Toolkit gives you the essential HR documents and guidance needed to hire compliantly from day one. Our HR Health Check helps identify any gaps in your current arrangements, while our 3-Month Introductory Retainer provides practical, hands-on HR support as your business grows.

If you have any questions, or would like to chat about our flexible HR support, please contact me, Sally-Ann Hall Jones at sally-ann@realityhr.co.uk or call 01256 328428.