A Guide To Hiring Employees In The UK Without Setting Up A Local Entity

Home » News » Articles » A Guide To Hiring Employees In The UK Without Setting Up A Local Entity

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!

How to hire employees in the UK without a local entity – Full Guide

Employing people in the UK without starting a business may seem difficult. But it’s easier than most companies think. Many businesses want to hire people from the UK but would rather stay out of trouble with the law. Thankfully, there are legal alternatives to recruit without creating a UK company.

The best approach is to collaborate with an Employer of Record (EOR). Employers may use this service to recruit staff without worrying about payroll, taxes, or compliance issues. Employing independent contractors, who manage their own taxes, is an additional choice that provides flexibility and financial benefits. Businesses, however, need to be mindful of such hazards such as labor misclassification.

Strict labor laws in the UK safeguard workers’ rights with relation to pay, benefits, and contracts. Employers are also required to abide by data protection rules and tax restrictions. Penalties for violations may be expensive. This article discusses how to legally hire employees in the UK, the UK employment law for foreign businesses and a lot more precious info for you. Let’s start!

Requirements for compliance and law

Strict adherence to labor laws, tax legislation, and data protection standards is necessary while hiring in the UK. Employers must maintain compliance to avoid financial fines and legal threats.

Worker rights and employment laws

Fair treatment of employees is guaranteed under UK employment legislation. Workers are entitled to safe working conditions, paid time off, and fair compensation. By default, employees are not allowed to work more than 48 hours a week unless they provide written permission. Salary, work position, and notice periods must all be included in employment contracts. Furthermore, it is unlawful to fire an employee without a good cause, and if they are treated unjustly, they may file a lawsuit. UK employment contract laws require that all employees receive a written contract outlining their terms of employment.

Taxes, payroll, and data security

Employers are required to withhold taxes and National Insurance (NI) from workers’ paychecks in addition to making their own contributions to pension and NI plans. Businesses are required to abide by the General Data Protection Regulation (GDPR), which guarantees the safe processing and storage of employee data. There may be harsh financial consequences for noncompliance with data security regulations. Payroll compliance for UK employers involves adhering to HMRC’s Pay. As You Earn (PAYE) system, which ensures accurate tax deductions and timely submissions. Non-compliance can lead to penalties, making it crucial to stay updated on payroll regulations.

Classification of workers and right-to-work verification

Independent contractors and employees are classified differently under the law. To avoid fines for incorrect worker categorization, businesses must categorize employees accurately. Additionally, before employing foreign workers, employers must confirm that they have the necessary work licenses and right-to-work paperwork. Ignoring these inspections might result in severe penalties and legal repercussions. UK work visas for foreign employees are essential for hiring non-UK nationals. Employers must ensure that candidates have valid visas, such as the Skilled Worker Visa, to avoid legal issues and fines.

Legal methods for hiring employees in the UK without an entity

Employing independent contractors or utilizing an Employer of Record (EOR) are the two primary choices for businesses wishing to enter the UK market without establishing a local corporation. Every choice has advantages, disadvantages, and legal implications of its own. Budgetary restrictions, regulatory requirements, and corporate objectives all play a role in selecting the best strategy.

Employer of Record (EOR)

A third-party service provider that formally hires employees on behalf of a business is known as an Employer of Record (EOR). The EOR assumes complete legal responsibility for labor law compliance, payroll, employment contracts, and tax filings. This makes it possible for companies to employ people from the UK without having to set a shop there. Employer of Record UK services are ideal for businesses looking to hire UK employees without establishing a local entity. These services handle everything from payroll to compliance, ensuring a seamless hiring process.

Advantages of an EOR

Rapid hiring process: The EOR can swiftly onboard personnel, reducing the typical processing period from months to days, since it already has a registered organization in the UK. For companies who want to grow quickly, this is perfect.

Savings: Creating a UK organization requires office space, tax preparation, business registration, and legal advice. Businesses may avoid these expenses by using an EOR, which lowers the cost of recruiting people abroad.

Complete adherence to UK laws: UK employment laws are complex and include stringent guidelines about pay, benefits, employee rights, and tax obligations. By ensuring adherence to these rules, an EOR helps to avoid expensive penalties or legal issues.

Payroll and benefits management: The EOR is in charge of managing payroll and benefits, including all salary payments, tax deductions, pension contributions, and statutory benefits including paid time off and sick leave. This lessens the employing company’s administrative burden.

Decreased legal and tax risks: The EOR is in charge of worker categorization, tax filings, and employment disputes as it is the legal employer. This protects companies from possible noncompliance.

The distinctions between employees and contractors

Workers: Get advantages like paid time off, pensions, and job security while working under corporate control and according to a set schedule. On their behalf, employers are required to deduct income tax and make National Insurance (NI) contributions.

Contractors: Manage their own tax files, operate autonomously, and choose their own work schedules. Companies that hire contractors are exempt from paying for their pensions or other benefits. However, misclassifying contractors as workers may result in harsh fines under UK law, which rigidly enforces worker categorization.

Benefits of hiring contractors

Reduced costs: Because employers are exempt from providing sick pay, pensions, or statutory benefits, contractors are a more cost-effective choice.

Flexible workforce: Companies may scale their workforce up or down as needed by hiring contractors on a project basis.

Simplified onboarding: The recruiting process is sped up since contractors are not employees and do not need complicated payroll or tax registration procedures.

Cons of employing contractors

Limited control by the employer: Unlike employees, contractors work independently and are not subject to the same management. Businesses that need constant supervision may find this to be a drawback.

Misclassification risks: UK authorities have the right to reclassify a contractor as an employee if it is discovered that they are operating in an employee-like manner. Penalties, fines, and back taxes may result from this.

Lack of long-term stability: Since contractors are not subject to long-term agreements and are free to go at any moment, it may be difficult to maintain commercial operations.

Business goals determine whether to use an EOR or hire contractors. While contractors provide flexibility for short-term tasks, an EOR is the ideal option for full-time staffing. Companies should carefully consider their alternatives to guarantee operational effectiveness and compliance.

Worker protections and employment contracts

On their first day of work, all UK employees are required to obtain a formal employment contract. Salary, employment duties, working hours, notice periods, and termination procedures should all be included in the contract. Before granting permanent employment, many firms also use a probationary term to evaluate performance. UK labor law compliance for employers requires that all employees receive a written contract outlining their terms of employment. This ensures transparency and helps avoid disputes over pay, working hours, or job responsibilities.

Employment contract types

Fixed-term contracts: Have a predetermined expiration date and do not automatically renew without an extension agreement.

Zero-hour contracts: Do not provide a minimum amount of working hours, but they do enable flexible work arrangements. Employers have no control over zero-hour workers’ ability to find employment elsewhere.

Employee rights and equitable treatment

Strict labor rules safeguard workers in the UK. Depending on their age and nature of work, they must receive at least the National Living Wage (NLW) or National Minimum Wage (NMW). Unless they want to freely opt out, employees cannot be made to work more than 48 hours each week. Employees are entitled to paid time off for 5.6 weeks, which includes public holidays. Additionally, employers are responsible for providing a safe environment free from unfair treatment and discrimination.

Sum Up

With the correct approach, it is completely feasible to hire in the UK without creating a local business. While employing independent contractors gives a more economical and flexible option, Employer of Record (EOR) services offer a legal and effective approach to hire full-time employees. To prevent legal concerns, employers must make sure that UK employment laws, tax rules, and worker safeguards are followed.

A methodical strategy guarantees a seamless recruiting procedure while upholding compliance. Businesses may concentrate on long-term development and successfully expand into the UK by employing contractors or utilizing an EOR.

Frequently Asked Questions

What are the legal requirements for hiring employees in the UK?
Employers must verify the employee’s right to work, comply with minimum wage laws, provide a written employment contract, register with HMRC, and follow workplace regulations.

Do I need a local entity to hire employees in the UK?
Yes, businesses typically need a UK-registered entity to hire employees directly, but alternatives like an Employer of Record (EOR) can handle employment on your behalf.

What is an Employer of Record (EOR) and how does it help with hiring in the UK?
An EOR is a third-party organization that legally employs workers on behalf of a company, handling payroll, tax compliance, and HR duties without requiring a local entity.

What documents do I need to verify an employee’s right to work in the UK?
Employers must check valid passports, biometric residence permits, work visas, or a share code from the UK government’s online right-to-work checking service.

How do I register as an employer with HMRC?
Employers must register online with HMRC before the first payday, obtain a PAYE reference number, and set up payroll to manage tax and National Insurance contributions.

What are the tax obligations when hiring UK employees?
Employers must deduct income tax via PAYE, pay employer National Insurance contributions, report payroll to HMRC, and manage workplace pension contributions if applicable.

What employment laws should I be aware of in the UK?
Key laws include the Employment Rights Act, National Minimum Wage Act, Equality Act, Working Time Regulations, and Health & Safety at Work Act, covering contracts, wages, discrimination, and working hours.

What are the penalties for non-compliance with UK employment laws?
Non-compliance can result in fines, legal claims, back payments, business restrictions, and reputational damage, with severe violations leading to criminal prosecution.

Can I hire contractors instead of employees in the UK?
Yes, businesses can hire contractors, but they must ensure proper classification to avoid IR35 tax liabilities, which can reclassify contractors as employees for tax purposes.

What payroll requirements exist for UK employers?
Employers must operate PAYE, deduct taxes and National Insurance, provide payslips, comply with Real-Time Information (RTI) reporting, and offer pensions under auto-enrollment rules.