Employee benefits considerations when transitioning from an Employer of Record

For many overseas businesses expanding into the UK, using an Employer of Record is a practical and low-risk way to hire employees quickly.

However, as your UK presence grows, it’s common to transition employees from the Employer of Record to your own UK legal entity. This often involves a TUPE transfer (Transfer of Undertakings – Protection of Employment), which protects employees’ terms and conditions.

When this happens, it’s important to consider whether you’d like employees have the same level of benefits in the new entity or, if they didn’t have any, whether this is the opportunity to do so.

Below, we outline the key areas overseas employers should carefully consider.

Automatic Enrolment compliance is your responsibility

Once you establish a UK entity, you become responsible for:

• Selecting a qualifying workplace pension scheme
• Assessing employees and enrolling eligible jobholders
• Making minimum employer contributions and deducting minimum employee contributions
• Ongoing communication, compliance and reporting

Employer of Record providers typically handle this for you but post-transfer, the regulatory burden sits with you.

You’ve some flexibility in redesigning pension provision but must remain compliant with UK Automatic Enrolment legislation.

Replicating existing benefits (or not?)

Under TUPE, employee benefits may form part of contractual terms. This means you must replicate benefits on a like-for-like basis, unless changes are agreed.

Common benefits to review include:

• Private Medical Insurance (PMI)
• Group Life Assurance
• Income Protection
• Dental, cash plans, Employee Assistance Programmes (EAPs)

However, “like-for-like” doesn’t always mean identical providers or policies.

Medical underwriting and continuity of cover

This is one of the most commonly overlooked risks. If employees are moving from an Employer of Record sponsored insurance policy:

• They may have existing medical underwriting terms which they’d like transferring over to avoid exclusions being applied to recent symptoms or treatment
• They may be mid-claim and therefore need some continuity of care to allow them to use the same consultant/facilities for a set period

Differences in terms and conditions

Employer of Record arrangements often include benefits that are:

• Packaged differently
• Priced differently
• Structured in a non-transparent way

Watch out for:

• Different pension contribution definitions (basic vs total salary)
• Eligibility rules
• Insured benefit multiples (e.g. 4x vs 2x salary life cover)
• General exclusions

These need to be carefully mapped to ensure TUPE compliance and avoid unintended benefit reductions.

There’s often a cost saving opportunity

Employer of Record providers typically bundle benefits and charge a premium for administration and risk.

Once you establish your own UK entity, you can:

• Go direct to the market
• Negotiate terms based on your own workforce
• Align benefits with your global strategy

It’s very common to achieve lower insurance premiums.

Aligning with your global employee benefits strategy

Moving away from an Employer of Record is a chance to:

• Standardise benefits across jurisdictions
• Introduce global providers or frameworks
• Ensure consistency in employee benefit offerings

But UK-specific compliance (especially pensions) must still be considered.

Transitioning employees from an Employer of Record to your own UK entity is a significant milestone but it requires careful planning around pensions and benefits.

Handled correctly, it’s an opportunity to:

• Improve benefit design
• Take control
• Reduce costs
• Strengthen employee engagement

How SG Corporate Services can help you

If you're planning a transition from an Employer of Record to a UK entity, we can help you:

• Audit existing benefits
• Design compliant UK pension arrangements
• Replicate or improve insured benefits
• Manage insurer negotiations
• Support employee communications

Important information

The information provided is for general guidance only and reflects our understanding of HMRC rules at the time of writing. It does not constitute legal, tax, or accounting advice. Employers should seek specific advice from their accountant or tax adviser to ensure the approach taken is appropriate for their circumstances.