Employing US citizens in the UK workplace

Are Americans posted to the UK covered by British employment rights?

Americans may claim unfair dismissal if they are ’employed in Great Britain’. The test focuses principally on the location of the work. In borderline cases (eg, where the employee works in many countries or is in the UK only for a limited period), a range of factors will be relevant, including the contract terms, the time spent inside and outside the UK, and where the employer and employee are based).

British anti-discrimination laws will protect Americans unless they ‘work wholly outside Great Britain’. Only those whose presence here is minimal are likely to be excluded by this test.

Contractual rights are generally governed by the law chosen by the parties or, if no law has been chosen, by the law of the country with which there is the closest connection. However, some mandatory laws override a choice of law, eg an employee on a US ‘at will’ contract may nevertheless be entitled to UK statutory minimum notice.

Do Americans working in the UK retain US employment rights?

Yes, in some circumstances. If a US citizen works in the UK for a US employer (or for a company controlled by a US employer), they will usually be protected by US federal anti-discrimination laws.

What permission is required to work in the UK?

US citizens normally require a work permit to work in the UK. Work permits are specific to an employer, so a new one is required for each new employer.

What fundamental issues should we agree before a transfer?

Planning for the end of the assignment is vital. How long will the assignment last or what notice is required? On termination, is the employee guaranteed their old US job or a pre-agreed severance package? Will you pay relocation expenses back to the US, whatever the reason for termination?

Should Americans working here have a UK employment contract?

There are several ways to structure a UK assignment, including:

  • Local employment – the individual surrenders their US contract in favour of a UK contract with the UK employer
  • Secondment – the individual retains their US contract, but has a secondment agreement setting out the terms and conditions of the UK assignment
  • Dual contract – the individual splits their time between the US and the UK and has separate contracts at home and abroad for work performed in each country.

Multiple agreements must be co-ordinated and consistent. Each agreement should state its governing law and where disputes will be resolved. Secondment agreements should also ensure that the ‘home’ company retains control over the employee (in respect of reporting lines, grievances, discipline, pay decisions, etc) to avoid the ‘host’ company inadvertently becoming the employer.

Do we need to consider any tax issues?

US citizens and green card holders are subject to US tax on their worldwide income and gains, regardless of where they are resident. However, up to $80,000 can be excluded as ‘foreign earned income’ and certain housing costs (ie, rent and utilities) qualify for the ‘foreign housing exclusion’ (so renting in the UK may be more advantageous than buying).

Dual contracts and assignments lasting less than three years can reduce liability to UK tax. However, be careful – they can also reduce the foreign tax credits that can be offset against US tax. Employees should monitor their foreign tax credits to ensure they are being used efficiently.

If an employee is seconded to the UK (and not employed by a local company), they can remain within the US social security system and their employer can continue paying contributions at 6.2% instead of 12.8%. Perhaps unsurprisingly, this makes secondments a popular choice.

Withers has published Opening Doors In London: Legal Do’s and Don’ts for Americans Living and Working in London

One Response to Employing US citizens in the UK workplace

  1. Hiam Awad 25 Jul 2014 at 12:46 pm #

    Hello, I am considering a position in the UK with a US company… I am originally from the US and have SSN… I would like to know what contract would be best for me to do taxes on for long term benefit… As everyone may know, that US unemployment does not really pay much incase the loss of job, and god knows if by the time I retire, will be enough money from the government. What I am trying to do, is secure a life in the UK, what would be the best option for me to to taxes.