Top 5 challenges of hiring in the UK and how an EOR can help

Home » News » Articles » Top 5 challenges of hiring in the UK and how an EOR can help

Gino Peters

Written By:

Gino Peters

Reviewed By: Belinda E.

June 3, 2026 7:27 pm

Category Tag: News

The rise of remote work made international expansion much easier in recent years, but hiring abroad still comes with legal and administrative complexity, as every country has its own labour laws and payroll rules that must be followed. In addition, not many companies can open a new entity in every new market that they are expanding into. That is when the Employer of Record (EOR) solution comes in handy.

The EOR serves as the legal employer on paper, while the client company manages important activities related to the employees responsibilities and performance.

In this guide we will cover what an employer of record is, how it works in detail, how much it can cost and which business should consider an EOR solution.

What is an Employer of Record (EOR)?

An Employer of Record (EOR) is a third party service provider that legally employs a person on behalf of another company in the country where the employee officially resides. As an official employer the responsibilities of EOR include issuance of an employment contract, processing payroll and withholding taxes and necessary social security contributions, as well as preparation of offboarding documents or any documentation that need to be signed by the employer. In addition, EOR ensures the compliance with local labour laws and serves as a first point of contact for any legal disputes.

The client company that hired the employee through an EOR also has a list of responsibilities. As an Employer of Record does not have the visibility on operational activities behind the scenes a client company needs to provide direction and ensure proper team integration.

In simple terms, the EOR provider acts as a legal employer in the country of the employee’s residence, while the client company takes on day-to-day manager work.

Responsibility	Employer of Record (EOR)	Client Company
Employment contracts & any other official documentation
Payroll processing
Income tax & social security contributions
Compliance with local labour laws
Statutory benefits administration
Managing daily work and projects
Setting goals and performance expectations
Providing equipment and tools
Leading the employee’s team and workflow

Employer of Record solutions gain more and more popularity in the field of global expansion as they allow businesses to hire best candidates fast and easy while staying compliant with local employment regulations. More information about EOR service are available if you would like to understand more.

EOR Meaning

The term “EOR” is the abbreviation for Employer of Record.

Employer in this instance stands for the company that hires the employee and takes on duties related to it, such as onboarding and offboarding process, payment of wages and compliance with other legal requirements.

“Record” from the EOR perspective refers to official registration with government authorities. The name of the EOR provider is stated in all payslips and tax filings, and should also be listed by the employee in any documents where employer must be stated, such as mortgage or loan applications.

One might ask a question of why this legal structure exists. As it is not possible to provide an employment contract directly to a person that legally resides in another country, the business expanding abroad typically needs to establish a local entity. That involves legal registration, arrangement of local bank accounts and organisation of payroll structure, as well as compliance with local law.

EOR allows to simplify the global hiring and reduce administrative burden through their existing legal entity.

There are some other hiring models that can be confused with EOR.

EOR and PEO

Many sources online refer to EOR as “international PEO”, which may create confusion as these models have 1 important difference.

A Professional Employer Organisation (PEO) serves as a co-employer of a client company. In other words, a business must already have an established entity in the country. The hiring tasks are, therefore, shared between 2 companies, while legal liability stays only with the client company. In the EOR model all legal risks are being taken by the official employer. Read more about the difference between PEO and EOR here.

EOR and staffing agency

Staffing companies mainly provide assistance for short-term projects by providing temporary workers. If the client wishes to employ a person for a longer time, EOR approach must be chosen.

EOR and contractor model

Contractor agreements assume the involvement of independent workers rather than employees. This model is also often used for temporary, project-based assignments. It is important to remember that there is a big misclassification risk between a contractor and an employee in the company which can lead to potential legal issues. An EOR ensures that employment is legally compliant with local labour law.

How does an Employer of Record work?

While it may sound complicated at first, a process behind the employer of record model is relatively straightforward.

The operating company selects a candidate

The client company recruits the employee they want to hire in another country

The EOR becomes the legal employer & local employment contract is issued

The Employer of Record uses its local legal entity to prepare and issue an employment contract that complies with labour law of the country where the employee is based. Depending on case-by- case situation, the work visa might need to be secured beforehand. Our company provides immigration services, more details can be found here.

Payroll and taxes are managed

The EOR takes on recurring responsibilities related to a payroll and ensures correct processing of income tax, social security contributions etc

Benefits are administered

Paid leave, sick leave, pension contributions and any other statutory benefits are being managed by the EOR.

Ongoing compliance and HR support

It is the responsibility of the EOR to monitor changes in local labour law and ensure ongoing compliance.

Example:

Imagine a UK-based tech company found a perfect candidate in Germany for a position of a software developer.

Instead of going through the administrative burden of opening a legal entity in Germany, the company chooses to work with an Employer of Record. The EOR hires the developer under a German employment contract and manages payroll and taxes. At the same time the UK company welcomes the new employee in the team and manages the daily work of a developer.

What services does an Employer of Record provide?

The Employer of Record does more than just providing an employment contract to the employee. Typically a wide range of HR and compliance services is included in the EOR offer. For example, read about the services included in our EOR package here.

Employment and HR administration

Locally compliant employment contracts and support with other documents requested by authorities
Employee onboarding
Employee record management. For example, control over PTO

Payroll and tax management

Regular payroll processing
Tax withholding and reporting of social security contributions with authorities
Payslip generation and creation of annual wage tax certificates

Benefits administration

Management of statutory benefits
Pension contributions (where required)
Support with benefits such as maternity leave allowance, sick leave allowance etc

Compliance and risk management

Insuring compliance with local labour law
Management of onboarding and offboarding processes
Representation in difficult legal and court cases

Additional services:

Some EOR providers ( such as ThisWorks EOR Services) provide additional services such as:

Work permit and dependent visa support
Background checks
Relocation support
Value added services: support with housing, company car, banking, etc ( depending on the country).

This vast list of services allows businesses to manage international teams, while staying compliant and avoiding complex local employment administration.

Benefits of using an EOR service

There are multiple advantages the businesses can get from working with an Employer of Record provider.

Faster global hiring

Setting up a new entity can take up to several months. With an EOR the hiring process can take several days.

Reduced compliance risk

A trustworthy EOR provider ensures the compliance with all local regulations. As the labour law varies greatly between countries, having a knowledgeable party to rely on can make a big difference.

Lower expansion costs

Establishment of a new entity is not only a time-consuming process, but also costly. With EOR services these costs can be avoided.

Access to global talent

The location of a remote candidate is not a problem if the company uses Employer of Record services. In other words, the best candidate for specific business purposes can be chosen.

Scalable hiring model

EOR services are ideal for organisations that want to scale international hiring quickly. They are particularly useful in the following situations:

Remote-first teams and organisations
Companies testing new markets abroad
Startups expanding internationally

How to choose the right Employer of Record

Choosing between several EOR providers is important, as it influences not only compliance, but also employee experience for new hires and how your company is perceived on the job market.

Here are some important things to keep in mind when deciding on your EOR partner:

Geographic coverage

Make sure that EOR provider can cover the country where you want to expand globally. Read about our EOR coverage here.

Pricing transparency

Check that EOR provider does not have any hidden costs and the pricing is clearly outlined in your MSA.

Compliance expertise

A strong EOR provider should have a team of experienced local HR specialists who understands all in and outs of a national labour law.

In-house vs partner model

Some EOR providers rely on their third-party partners, while others manage employment directly through their own local entities.

Customer support

It is important to find a EOR partner that helps with any questions or concerns in a quick and professional manner. That can be crucial when dealing with employee offboarding or any legal disputes.

Warning signs

Understanding the importance of choosing a right party, your company should be cautious of providers that lack local expertise and cannot give clear answers to your labour law questions. In addition, companies with slow response times can prove to be unreliable in critical situations. Furthermore, providers with complex pricing models with many hidden fees can create a lack of cost transparency and result in unforeseen expenses.

By selecting a provider with strong expertise in local labour law and reliable support from dedicated teams, your company can ensure a smooth international growth. Learn why companies choose ThisWorks as their EOR partner.

How much does an employer of record cost

The vast coverage of services the employer of record provides makes many businesses ask how much an EOR costs.

Pricing models vary greatly on the provider and the country of coverage, but most EORs use one or more of the following structures.

Flat monthly fee per employee.

The EOR provider charges a fixed monthly fee for each employee they have on the payroll from the client.

Percentage of salary

While not being a popular approach, some EOR providers charge a percentage of the employee’s salary, typically ranging between 5%-15%.

Setup fees

Some providers charge onboarding or offboarding fee for each employee.

The fee that the business needs to pay to an EOR provider also depend on the location of a service. Local labour law complexity of some countries can influence the fee. In addition, some countries have specific statutory benefits and payroll administration requirements. Furthermore, employee headcount in the specific location can influence the fee.

EOR vs setting up a legal entity

To establish a new entity the organisations needs to go through legal and tax registration. In addition, accounting support and ongoing compliance costs such as the fees for local labour lawyers can make setting up a legal entity significantly more expensive.

An EOR allows companies to expand globally without these upfront investments.

EOR vs hiring contractors

Some businesses decide to hire international workers as contractors. However, this approach can often lead to a misclassification risk, which can cause legal and tax liabilities.

A professional EOR provider ensures that the new starters are compliantly onboarded under local employment regulations.

EOR FAQs

Is an EOR the same as a PEO?

No. PEO model assumes co-employment and requires the business to already have established local entity, while EOR employs new talents through its own entity only.

Can an EOR hire contractors?

While some EOR providers can support hiring contractors, it is important to remember that main function of EOR is the employment of full-time workers legally in a country. A risk of misclassification between EOR and contractor should be also considered carefully.

Is an employer of record legal?

Yes, when established and structured properly, Employer of Record entities are legal and widely used for international expansion by many companies.

When should you use an EOR?

The most common reason for using EOR include:

Hiring employees located in another countries remotely
Testing new markets before establishing an entity
Expanding internationally

Can you switch from EOR to your own entity?

Yes. Many companies initially hire through an EOR for the ease and speed of expansion and later transition employees to own legal entities upon their establishment. It is important to remember that some countries require specific procedure to be followed in such a scenario.

Get in touch with ThisWorks

Expanding your team globally does not need to be long and administratively complex.

With the use of Employer of Record the businesses can have access to the best talent from around the world while ensuring full compliance with local labour laws.

ThisWorks can support your global expansion with our compliant Employer of Record services.

Contact our team to find our how we can help your international team glow fast and compliantly!

Top recruitment challenges 2025: Strategies to overcome

82% of UK employers are finding employees to fill roles in 2025, trapped in a recruitment battlefield shaped by Brexit aftershocks, an aging workforce, and a digital revolution. According to the statistics, 1.1 million job openings plague industries including engineering, technology, and healthcare. Nurses are hard to come by in hospitals. Coders are in high demand by tech businesses. Engineering firms gaze at unoccupied desks.

Brexit tore holes in the talent pipeline in addition to redrawing borders. Visa requirements increased dramatically, EU workers disappeared, and a greying population means there are more retirements than replacements. To overcome recruitment challenges in 2025, employers must adopt agile strategies like leveraging EOR services and rethinking talent pipelines. Let’s take a deep dive into the challenges of hiring in the UK and how to overcome recruitment challenges in 2025 with EOR.

The UK labour market in 2025: Trends driving challenges

An aging population, the lingering effects of Brexit, and the digital revolution present a perfect storm of issues for the UK labor market in 2025.

Post-Brexit talent dynamics

Brexit destroyed the UK’s talent pool in addition to upending its political foundations. 330,000 EU workers have quit their jobs in the UK since 2020, creating a huge void in sectors like healthcare, construction, and hospitality. Stricter visa regulations are closing doors, but employers are increasingly rushing to fill positions that were formerly dominated by EU workers. The wage requirement for the skilled worker visa will reach £38,700 by 2025, which is too much for a lot of small enterprises. Consequently, there will be a severe shortage of talent that is only growing worse.

Aging workforce & youth skill gaps

The workforce in the UK is rapidly aging. Nearly three out of ten employees will be over 50 by 2025, and many of them plan to retire. The worst part is that the younger generation isn’t prepared to replace them. According to two-thirds of UK businesses, recent graduates lack the abilities necessary to succeed right away. Employers require problem-solvers, critical thinkers, and tech-savvy innovators, but universities produce degrees. Improving candidate commitment during recruitment demands transparent communication about career progression and aligning roles with personal values. Regular feedback loops during hiring can also reduce ghosting and build trust.

AI adoption & digital transformation

AI is more than just a catchphrase; it is changing the hiring practices of UK companies. AI is currently used in hiring by nearly half of UK businesses, from chatbot interviews to resume screening. AI’s impact on job interviews and recruitment is dual-edged: while it speeds up screening, over-reliance risks dehumanizing the process and alienating candidates. Employers must audit tools for bias and ensure human oversight to maintain ethical standards. At the same time, human interaction diminishes, and many businesses become increasingly uniform.

Top 5 UK Recruitment Challenges in 2025

1. Sector-specific skills shortages

The skills crisis that the UK is currently experiencing is particularly painful. Hospitals are overworked and patients are waiting longer as a result of the NHS’s (National Health Service) 120,000 staff shortage. Half of tech companies are in a panic because they are unable to locate the cloud and AI experts they sorely need. Also, every year, the UK lacks 20,000 engineering graduates, which causes projects to stall and innovation to be stifled. This is happening because top talent is being poached by global competitors, apprenticeships haven’t kept up with modern needs, and Brexit drove EU talent packing.

2. Candidate power & changing expectations

The candidates are not afraid to take the initiative. According to 62% of UK workers in 2025, flexible work schedules are more important than a large salary. With 43% “quiet quitting,” or working the bare minimum while searching for something better, Gen Z is changing the rules. Methods to attract passive candidates in 2025 include personalized outreach and showcasing unique career development opportunities. Highlighting ESG (Environmental, Social, and Governance) commitments can also resonate with candidates prioritizing purpose-driven work.

3. Ethical and legal risks of AI recruitment tools

Although AI is meant to make recruiting simpler, it is really posing a number of moral and legal dilemmas. Although bias audits are required under the UK’s Algorithmic Transparency Standard (2023), many technologies continue to favor particular populations. Discriminatory methods, such as face analysis technologies that exclude individuals based on their gender or color, have already been cautioned against by the ICO.

4. Post-Brexit compliance burden

Brexit buried firms in red tape in addition to reducing the talent pool. EU nationals’ right-to-work inspections are currently a bureaucratic nightmare due to the new digital ETA system’s delays. Sponsoring non-UK talent’s visas? Even terrible. The procedure is costly, labor-intensive, and complicated. The hardest-hit enterprises are small businesses. Due to the expense of compliance, 40% of UK SMEs completely avoid recruiting non-British workers. Building a strong employer brand in a competitive market requires emphasizing inclusivity, flexibility, and clear pathways for international hires to navigate visa complexities.

5. Persistent DEI Gaps

Diversity, equality, and inclusion (DEI) continues to be a source of contention in the United Kingdom. Only 10% of FTSE 350 (Financial Times Stock Exchange) executive positions are held by ethnic minorities, while the gender pay gap remains at 14.9%. Women and minorities are still underrepresented in leadership positions in high-growth industries such as technology and engineering. Adapting to flexible working expectations in recruitment means offering hybrid roles and investing in tools that support remote collaboration, which can attract underrepresented groups often excluded by rigid schedules.

Strategies to tackle the challenges

Bridging skills gaps: The UK’s skills issue will not resolve itself, but sensible solutions are within reach. Expanding T-Levels and Degree Apprenticeships, such as the NHS Digital Academy (National Health Service), may help to close the education-to-employment divide. Partnering with local universities for sector-specific training—think CyberFirst for cybersecurity—ensures that workers have the skills that companies want. CyberFirst is a UK government initiative aimed at developing young talent in cybersecurity through programs, scholarships, and training. It’s time to stop waiting for talent and begin developing it.

Retaining talent in a competitive market: Keeping talent in 2025 requires thinking beyond the 9-to-5 box. Over 60 UK businesses are now testing 4-day workweeks, and the results are in: happier workers, decreased turnover, and no decrease in production. Add strong ESG commitments, such as B Corp accreditation (Benefit Corporation Accreditatio), and you have a formula for loyalty. Managing AI-scripted interview responses from candidates necessitates shifting focus to practical assessments and behavioral questions that reveal genuine skills over rehearsed answers.

Ethical AI implementation: AI can be a game changer, but only when handled properly. The REC’s AI (Recruitment & Employment Confederation) in Hiring Toolkit promotes openness, and UK-based auditors like Faculty.ai may identify prejudice before it becomes an issue. What’s the goal? Use AI to improve recruiting, not to replace the human touch. After all, candidates want to speak with individuals, not algorithms.

Simplifying compliance: Post-Brexit compliance does not have to be a nightmare. GOV.UK’s Employer Checking Service simplifies right-to-work verifications, while UK EORs like Boundless and Playroll manage visa sponsorships and payroll issues. These solutions offer a lifeline for small and medium-sized businesses drowning in red tape.

How Employer of Record (EOR) Services can transform UK recruitment?

In a labor market fraught with shortages, shifting worker expectations, and complicated rules, EOR services provide a compelling option. Effective recruitment strategies in a competitive job market include partnering with EORs to access global talent and streamline onboarding, ensuring businesses stay agile amid skill shortages. EORs enable UK firms to remain competitive by streamlining global recruiting, reducing regulatory constraints, and providing access to hard-to-find talent.

Managing Post-Brexit Compliance with ease

Brexit has made recruiting overseas talent a logistical headache. Visa sponsorships are expensive, right-to-work checks are complicated, and compliance violations may result in significant penalties. An EOR eliminates these bottlenecks by addressing work permits, tax duties, and legal procedures, resulting in smooth cross-border employment. Instead of dealing with immigration regulations, firms may concentrate on development while the EOR handles the paperwork.

Expanding access to global talent

With the UK experiencing a skills shortage, firms must explore outside borders. EOR services let companies employ qualified individuals from Europe, the United States, or rising tech centers such as India without having to establish foreign businesses or navigate various tax jurisdictions. Future trends in recruitment and how to prepare emphasize the need for cross-border hiring frameworks and adaptive compliance strategies, which EORs expertly provide.

Hassle-free hiring

Time-to-hire is an important consideration in a competitive market, but long legal formalities slow things down. EORs simplify onboarding, contracts, benefits, and payroll from the start. Companies may get excellent personnel quickly while eliminating the risk of misclassification associated with employing contractors or freelancers.

Conclusion

Hiring in the UK in 2025 is tough due to skill shortages, changing worker expectations, and Brexit rules. Businesses must train talent, offer flexible work, and use AI carefully. Employer of Record (EOR) services make hiring easier by handling legal work and finding global talent. With the right approach, companies can overcome these challenges and build a strong workforce. We at ThisWorks are more than happy to assist you with your global expansion, weather you are planning to expand to the UK or any other country, such as Germany, the Netherlands, or Spain.

FAQ

What are the top recruitment challenges anticipated in 2025?

Less trained workers, rising job seeker needs, AI recruiting concerns, stringent immigration regulations, and fierce rivalry are the top recruitment challenges for 2025.

How can organizations address the ongoing skills shortage?

To overcome skills shortages, businesses should educate employees, establish apprenticeship programs, collaborate with educational institutions, and recruit talent from other nations.

What strategies can improve candidate commitment during the hiring process?

Reduce the length of the recruiting process, maintain communication, provide outstanding perks, and streamline the process to increase applicant commitment.

How is AI influencing recruitment and candidate behavior?

AI speeds up the hiring process, but it may also be unjust and make it seem less human.

What are effective methods to attract passive candidates?

Use employee recommendations, demonstrate professional advancement, give them tailored job offers, and establish a solid reputation for the business to draw in passive prospects.

How can companies enhance their employer brand to stand out in a competitive market?

Businesses may improve their employer brand by showcasing their corporate culture, providing competitive benefits, promoting social causes, and maintaining an active internet presence.

What role does flexible working play in attracting top talent?

Because flexible work arrangements promote job satisfaction and work-life balance, people want them.

How can businesses adapt to the high expectations of flexible working arrangements?

To satisfy flexible work expectations, companies should permit remote work, make use of internet resources, and prioritize outcomes above working hours.

What are the implications of jobseekers using AI to script interview content?

While AI assists job applicants in preparing their interview responses, employers may find it more difficult to assess genuine abilities.

How can organizations overcome the challenge of a highly competitive job market?

Businesses should provide higher compensation, distinctive perks, a fantastic work atmosphere, and an easy recruiting procedure in order to succeed in a competitive employment market.