US Expansion: US vs. UK Terms of Business

Exploring the Key Differences Between US and UK Terms of Business

Expanding your UK recruiting business to the US is an exciting opportunity. However, it is important to consider that it comes with unique differences in terms of business practices. In this blog we delve into the major distinctions between US and UK terms of business, with specific focus on permanent (perm) and contract (temp) recruitment.

Employment Contracts

UK (Perm):

Notice Periods

It’s common in the UK to include notice periods in employment contracts, allowing either party to terminate the contract with prior notice.

Redundancy and Severance

UK contracts also often detail redundancy procedures and severance packages for terminated employees.

US (Perm):

At-Will Employment

The US operates under the principle of at-will employment, meaning either the employer or employee can terminate the employment relationship at any time with or without cause, and without notice.

Compensation and Benefits

UK (Perm):

Benefits

Typically, UK contracts provide a range of statutory benefits, including paid holidays, sick pay, and pension contributions.

Salaries

Salaries are often quoted on an annual basis, and employees receive their pay on a monthly or weekly schedule.

US (Perm):

Benefits

The US lacks statutory paid vacation and sick leave requirements at the federal level, which can vary by state. Added benefits like health insurance and retirement plans are common within many contracts.

Salaries

US salaries are usually quoted on an annual basis, but employees may receive pay on a bi-weekly, semi-monthly, or monthly basis.

Recruitment Fees and Agreements

UK (Perm):

Placement Fees

In the UK, recruiters typically charge a one-time placement fee, often based on a percentage of the employee’s first-year salary.

US (Perm):

Placement Fees

The US operates under a similar fee structure, with placement fees calculated as a percentage of the candidate’s annual salary but the margins tend to be more lucrative than in the UK.

Temp Recruitment (Independent Contractors)

UK (Temp):

IR35

The IR35 Off-Payroll regulations determine the tax status of independent contractors in the UK. These regulations aim to prevent tax avoidance by treating some contractors as employees for tax purposes (“Inside IR35”).

US ( Temp):

Independent Contractors

In the US, independent contractors are either considered “corp-to-corp” (incorporated) or sole traders (also known as 1099s). The classification process is very similar to that used in the UK but may vary from state to state (the “ABC Test”, the “Right to Control Test” etc.)

Compliance and Employment Laws

UK (Temp)

Agency Worker Regulations (AWR)

The AWR provides certain rights to agency workers, such as equal treatment regarding pay and working conditions.

Holiday Pay

UK employment laws ensure that workers receive paid time off for holidays.

Conduct Regulations

The Conduct Regulations govern how recruitment agencies must act and the rules they must follow when placing employees or temporary staff.

US (Temp):

At-Will Employment

The US principle of at-will employment allows for flexible termination of employment without cause, providing fewer protections for employees.

Varied State Laws

Employment laws in the US can vary significantly from state to state, including regulations on issues like paid sick leave and minimum wage. There is no federal act equivalent to the Conduct Regulations.

Ensure your agency is equipped to expand to the US

Entering the US job market requires an understanding of the significant differences in terms of business, especially in the realms of employment contracts, compensation, and compliance.

Navigating these distinctions effectively is key to successful recruitment in the US. By staying well-informed, partnering with legal experts, and being adaptable, UK recruiters can make a smooth transition into the US job market, expanding their international recruitment efforts with confidence.

We can help

WTT Legal has extensive experience in both the UK and US recruitment market. As an APSCO Trusted Partner, we are well placed to advise on transacting business in the US and using your UK entity to engage with US clients.

Are you a recruitment agency considering your US expansion plans? Get in touch to arrange a free legal consultation with our specialist advisors. Email us at info@wttlegal.co.uk or call us on +44 (0)20 3468 0000 for more information.