Employer of record or your own UK company

An employer of record is a company that already exists in the UK and employs someone on another business's behalf. The worker is on the employer of record's payroll and its contract; the client directs the work and pays a monthly fee per head. Nothing is incorporated, so a first UK hire can start in days.

The alternative is the group's own UK company: incorporated in a day, registered for PAYE, running its own payroll and holding its own contracts. It takes weeks rather than days to reach the first payday, because the tax registrations and the bank account have their own clocks.

Both are legitimate. They answer different questions, and the choice is usually decided by how many people, for how long, and what else the UK operation has to do besides employ them.

Where an employer of record is the better answer

• One person, starting now. A single hire who needs to be employed this month, before an entity could realistically be registered for PAYE.
• Testing whether the market is there. A twelve-month experiment that may not be renewed. Closing an employer of record arrangement is a notice period; closing a company is a strike-off or a liquidation with its own filings.
• No UK trading. The person supports the group and the UK does no invoicing, importing or contracting of its own.
• Somewhere without in-country expertise. Across a dozen countries at once, a single provider is a reasonable trade against a dozen local advisers. That argument is weaker in the UK than almost anywhere, because English-language advice here is plentiful and cheap by comparison.

Where the group's own company is the better answer

• More than one or two people. The fee is per head and does not fall with headcount.
• UK customers who want a UK counterparty. Enterprise procurement and public-sector buyers frequently require a UK-registered supplier with UK accounts on the register. An employer of record gives the group no entity to put on the contract.
• Goods, VAT or importing. An employer of record does not give the group a UK VAT registration or an EORI number.
• Research and development. The relief is claimed by the company that employs the people and bears the cost. Staff supplied through a third party fall into the externally provided worker rules, which are restricted and have their own conditions, rather than ordinary staffing costs.
• Share plans. UK tax-advantaged plans require the participant to be an employee of the company or of a company in its group. Somebody employed by an employer of record is neither.
• Permanence. Once the UK operation is understood to be staying, the arrangement is a monthly fee for something the group could own.

What an employer of record does not solve

This is the part that is rarely on the front of a provider's website, and it is the reason the decision is not only about cost.

A permanent establishment is created by activity, not by an employment contract. Where a person in the UK habitually exercises authority to conclude contracts on behalf of the overseas parent, the parent can have a UK permanent establishment: a UK corporation tax filing obligation, and a transfer pricing question about how much profit belongs here. Routing that person's employment through a third party does not change what they do here. A salesperson closing UK deals raises the question whoever technically employs them, and the permanent establishment guide sets out the tests.

Direction and control still sit with the group. The employer of record holds the contract and the payroll liabilities. The day-to-day management, the performance conversations and the decision to end the employment sit with the client, and the commercial cost of an exit generally passes back under the service agreement.

The intellectual property route needs writing down. Work created by an employee vests in the employer, and the employer here is the provider. Providers handle this by assignment in their terms, and the assignment is worth reading rather than assuming, particularly for engineering and design hires.

The cost, as published

Two of the largest providers publish per-employee pricing. Checked on 8 September 2026: Deel lists $599 per employee per month for employer of record, and Remote lists $699. Both are the service fee, on top of salary, employer National Insurance and the workplace pension, which the group pays either way.

At one employee that is roughly $7,200 to $8,400 a year. At three it is $21,600 to $25,200. Those are the numbers to hold against the cost of incorporating and running a UK company, which is quoted rather than listed here, and against what the group gets for it: an entity that can contract, invoice, register for VAT, claim reliefs and hold a share plan.

The comparison is rarely close above two or three people. Below that it usually turns on speed and on whether the UK operation needs to do anything other than employ someone.

Moving from one to the other

Groups commonly start with an employer of record for the first hire and move to their own company once the UK team is three or four people. That move is ordinary, and it is worth planning rather than improvising.

Incorporate and register for PAYE before serving notice on the provider, so there is no gap between one payroll and the next. Agree the leaving date with the provider against the first pay run of the new company. Continuity of service and accrued holiday should be dealt with expressly in the new contracts rather than left to be argued about later, and whether the transfer carries employment rights across is fact-specific and worth a short conversation with an employment solicitor before the notice goes in. Pensions need re-enrolment into the new company's scheme, and any share awards granted while the person was employed elsewhere need looking at again.

What we do

We do not sell an employer of record service and we do not take a referral fee from one, so the advice on this page costs us nothing to give. Where an employer of record is the right answer for a first hire, that is what we will say.

Where the group's own company is the answer, we incorporate it, register it for corporation tax, PAYE and VAT, set up the payroll and the workplace pension before the first payday, and take over the running of it. Where a group is already using an employer of record and wants to bring the people in-house, we sequence the incorporation, the registrations and the first pay run against the notice period so nobody misses a payday.