People · 6 min read
Employer of record or your own UK company?
An employer of record puts one person on a UK payroll in days without a UK entity. It does not give you a UK company, does not stop a UK tax presence arising, and gets expensive past two or three hires. When each makes sense — and how to switch.
Key points
- An EOR legally employs your UK staff and re-bills you; you direct their work. No UK entity needed, live in days.
- Typical EOR fees are £300–£700 per employee per month on top of salary and employer costs.
- An EOR does not shield the parent from creating a UK permanent establishment if the employee sells for you.
- Past two or three hires, or any UK customer contracts, your own subsidiary is cleaner and usually cheaper within a year.
What an employer of record does
An employer of record (EOR) is a UK company that employs your UK-based person on your behalf. It runs payroll, pension auto-enrolment, statutory rights and HR compliance, and re-invoices you the salary plus employer costs plus its fee. You manage the person day to day. Nothing needs to be incorporated or registered, so an EOR can have someone on a UK payroll in under a week.
When it is the right answer
- You are testing the UK with one hire and have no UK customers yet.
- The role is genuinely support or engineering — not sales — so it is unlikely to create a UK tax presence.
- You need someone employed this month and the subsidiary will follow.
What it does not do
- It does not give you a UK company. UK customers, landlords, app-store and marketplace programmes, grant schemes and investors want to contract with a UK entity. The EOR is not yours.
- It does not stop a permanent establishment. If the EOR employee negotiates and closes deals for the parent, the parent can have a UK PE regardless of who issues the payslip.
- IP and confidentiality run through a third party. Workable, but another contract to get right.
- It cannot sponsor visas. A sponsor licence needs your own UK entity.
- The fee compounds. At £300–£700 per person per month, three staff cost £11,000–£25,000 a year in EOR fees alone — more than running a subsidiary with us on Establish or Embedded.
The comparison
| Employer of record | Your own UK subsidiary | |
|---|---|---|
| Time to first payslip | Days | 3–4 weeks (incorporation 24–48h; PAYE reference up to 15 working days) |
| UK entity to contract with | No | Yes |
| Protects parent from UK PE | No | Yes, if the subsidiary does the selling |
| Cost beyond salary and employer NI/pension | £300–£700 per employee per month | Fixed set-up, then from £750 a month for the whole company |
| Visa sponsorship | Not possible | Possible with a sponsor licence |
| Unwinding | Give notice to the EOR | Strike-off or sale of the company |
Switching from an EOR to your own company
Common and straightforward. We incorporate the subsidiary, register PAYE and the pension, and the employee moves across with continuity of employment recognised in their new contract. The EOR contract is ended on its notice terms. Most groups do this at the second or third hire, or when the first UK customer contract lands — whichever comes first.
This guide is general information for overseas businesses considering the UK, correct to the best of our knowledge at the date shown. It is not advice for your specific circumstances — rules and thresholds change. Check with us or HMRC before acting on it.