Employer of Record in the United Kingdom: Complete Guide 2026

An Employer of Record (EOR) in the United Kingdom is a third party that legally employs workers for you, so you can hire in the UK without setting up a local entity. The EOR runs payroll, withholds tax and National Insurance, and keeps employment compliant, while you direct the day-to-day work. Payoneer Workforce Management can act as your EOR in the UK.

This guide covers how an EOR works in the UK, what it costs, the employment laws you need to meet, the risks of getting it wrong, and how an EOR compares to setting up your own company.

Hiring in the United Kingdom? Payoneer Workforce Management can act as the legal employer of your UK hires, run PAYE payroll, and handle pensions and statutory benefits, so you can start without a local entity. 

Speak to our team about hiring in the UK. Book a demo today!

How do you hire employees in the United Kingdom?

You have three routes: register a UK entity, engage contractors, or hire through an EOR. They differ in speed, cost, and where the compliance sits, as the table shows.

Route	Setup time	Who is the employer	Best for
Register a UK entity	Weeks to months	You	A large, long-term UK team
Hire contractors	Fast	No employment relationship	Short-term work (mind IR35)
Hire through an EOR	Days	The EOR, on your behalf	Employing local talent without an entity

1. Set up a local entity: You may choose to register your business in the United Kingdom. This is a good choice for building a significant workforce in the UK, but it can be a costly and time-consuming option.

2. Hire independent contractors or freelancers: If you need to hire for a short-term project, you may choose to work with contractors or freelancers. You’ll need to be careful not to misclassify a contractor as an employee, though, or you could risk financial penalties.

3. An Employer of Record: An EOR in the UK makes it possible to engage and pay employees without a legal entity. For the employer, this means shorter set-up times, less admin, and the opportunity to scale up and down as required.

At Payoneer Workforce Management, we assist you with onboarding talent, employment contracts, payroll, benefits, and more. More details in our UK hiring guide.

How does an EOR compare to a PEO in the United Kingdom?

A Professional Employer Organization (PEO) in the United Kingdom can support HR and payroll functions, but requires you to have a legal entity in-country. By contrast, an Employer of Record in the United Kingdom does not require a legal entity and instead serves as the legal employer for your local team. 

This often makes it the better choice for companies new to the UK market.

What happens if you hire in the United Kingdom without an EOR?

Hiring in the UK without an entity or a compliant partner exposes you to three main risks: misclassifying workers, mishandling PAYE, and unfair dismissal claims. Each can bring back tax, penalties, and tribunal awards. An EOR significantly reduces the risk by becoming the compliant legal employer.

Risk	What it can mean	How an EOR helps
Misclassification or IR35 breach	HMRC recovers unpaid PAYE tax and NI, plus interest and penalties	The EOR employs the worker under PAYE, so status is clear
PAYE or pension failures	Penalties for late or incorrect tax, NI, and auto-enrollment	The EOR supports running payroll and pension on time
Unfair dismissal claim	Employment tribunal awards and legal costs	The EOR manages compliant contracts and offboarding

Hiring staff in the UK without an entity can also raise corporate tax and permanent establishment questions, which depend on your activities and presence. Outcomes vary, so consult your own tax and legal advisors.

Talk to our team about compliant hiring in the UK.

How do you onboard employees in the United Kingdom?

When you engage an employee in the UK, the process of onboarding is how you meet your legal responsibilities as their new employer. It starts with a right-to-work check before day one. An EOR in the UK can handle onboarding for you.

Here are some of the key things to consider when onboarding talent in the UK:

• Enrollment in payroll and benefits: Enrolling an employee in the payroll management system and administering statutory benefits as per local law
• Device shipment: The procurement and shipment of your employee’s new work devices
• Induction: Arrange a company induction or an immersion program during the local hire’s first week to explain company procedures and their duties
• Team introduction: Set up some time for the local talent to get to know their colleagues

How do you pay employees in the United Kingdom?

In the UK, employees should be paid in British Pound Sterling (GBP) at the end of each working month. 13th-month pay bonuses are not mandatory in the UK. As of April 2026, the National Living Wage for workers aged 21 and over is GBP 12.71 per hour, with lower bands for younger workers and apprentices. The voluntary London Living Wage is around GBP 14.80 per hour and may change from time to time. 

Taxes and contributions

Individuals in the UK pay income tax based on their earnings. For England, Wales, and Northern Ireland, the rates and bands are below; Scotland sets its own:

Income tax band	Taxable income (GBP)	Rate
Personal allowance	0 to 12,570	0%
Basic rate	12,571 to 50,270	20%
Higher rate	50,271 to 125,140	40%
Additional rate	Over 125,140	45%

Public health insurance is also mandatory in the United Kingdom. This is funded by National Insurance contributions made by UK employers. Employers pay 15% on earnings above the GBP 5,000 secondary threshold, and employees pay 8% on earnings between GBP 12,570 and GBP 50,270, then 2% on earnings above GBP 50,270.

What does it cost to hire through an EOR in the United Kingdom?

Beyond salary, budget for employer National Insurance and a workplace pension (a 3% employer minimum), plus the EOR fee. The example uses a GBP 50,000 salary.

Line item	Amount (GBP/year)
Gross salary	50,000
Employer NI (15% above 5,000)	6,750
Employer pension (3% of qualifying earnings)	1,313
Total employer cost (before EOR fee)	58,063
Employee income tax	7,486
Employee NI (8%)	2,994
Employee pension (5%)	2,188
Net take-home pay	37,332

Figures are illustrative; eligible employers can offset employer NI with the Employment Allowance (up to GBP 10,500). For a live breakdown, use the Employee Cost Calculator. 

EOR services start at $249 per employee per month, with final pricing depending on headcount and contract structure. You can also explore the payroll guide for the United Kingdom.

What are the key employment laws in the United Kingdom?

Anyone employing workers must always comply with local laws and regulations. Here are some of the laws to be aware of when engaging employees in the UK:

• Working hours: Workers cannot be required to average more than 48 hours a week under the Working Time Regulations, though they may opt out
• Overtime hours: Overtime pay isn’t mandatory in the UK, but an employee’s average pay for all worked hours must meet the National Minimum Wage
• Probation period: It is preferable for probation periods to last between 3 and 6 months

For more details, you can also explore the employment laws guide for the United Kingdom.

What should a UK employment contract include?

Both the employer and the new employee need to sign an employment contract, which outlines the rights and obligations of both parties. Employment contracts in the UK should include:

• The employer’s name and the employee’s name
• Employment start date (and end date if applicable)
• Job title and responsibilities
• Salary and pay date
• Hours and days of work, and location of work
• Holiday and any other benefit entitlements

What leave are employees entitled to in the United Kingdom?

In the UK, employers must offer leave, including vacation time, public holidays, sick leave, and more.

Vacation leave and public holidays

Most workers who work a 5-day work week must receive at least 28 days’ paid vacation leave per year. The UK also observes 8 public holidays per year. The employer may decide whether public holidays are to be included in the 28 days or added on top.

Sick leave

Employees in the UK are entitled to GBP 123.25 per week of Statutory Sick Pay (SSP), paid by the employer, up to a maximum of 28 weeks. An employee may self-certify their sick leave for up to 7 days, but after this, they will need a fit note to be eligible for SSP.

Parental leave

New mothers in the UK are entitled to up to 52 weeks of maternity leave, with Statutory Maternity Pay for up to 39 weeks (90% of average earnings for the first 6 weeks). New fathers can choose to take either 1 or 2 weeks of statutory paternity leave. Parents can also share leave through shared parental leave, and statutory parental bereavement leave (2 weeks’ pay) applies if an employee’s child dies, or after a stillbirth from 24 weeks of pregnancy.

Other leave

You must legally give an employee time off work if they are called to jury service or if they need to fulfill their duties as a magistrate.

You can also explore the leave policy guide for the United Kingdom.

Do employees need a work permit in the United Kingdom?

Non-British citizens usually need a work permit to live and work in the UK. You can use the government’s check-if-you-need-a-UK-visa tool to determine whether your employee needs a work permit. Most work visas, such as the Skilled Worker route, require the employer to hold a sponsor license. An EOR that holds the right credentials can often employ eligible talent without you taking on sponsorship, though routes vary by role and nationality.

Can you run background checks in the United Kingdom?

You may want to conduct background checks before engaging someone in the UK. This can include employment, education, criminal history, or social media checks. While background checks are legal in the UK, you will likely need the employee’s consent before performing one. You should also outline exactly what personal data you are looking into, and consult local regulations before running any checks.

How does employment termination work in the United Kingdom?

While an employer can terminate employment in the UK, this must be based on valid grounds, such as resignation, mutual agreement, termination during probation, or dismissal for misconduct, performance issues, or absence without leave. You may be required to give statutory notice, which depends on the length of service:

Length of service	Statutory notice
1 month to 2 years	At least 1 week
2 to 12 years	1 week per year of service
12 years or more	12 weeks (maximum)

You may also be required to pay statutory redundancy, which increases with the employee’s age:

Age group	Redundancy pay per year of service
Under 22	0.5 week’s pay
22 to 40	1 week’s pay
41 and over	1.5 weeks’ pay

The weekly pay used in the calculation is capped (GBP 751).

How do you register a company in the United Kingdom?

If you are planning to build a significant workforce in the UK, you might be considering registering as a local entity. You can find details on how to do this on the UK government website. However, an EOR offers a simpler route to hiring in the UK. Payoneer Workforce Management enables compliant onboarding and engagement of talent in 160+ countries without having to set up a legal entity.

How can Payoneer Workforce Management help you hire in the United Kingdom?

Payoneer Workforce Management helps growing companies onboard, pay, and manage employees in the UK without setting up a local entity. As your EOR in the UK, we offer assistance with employment contracts, benefits administration, taxes, and payroll, while you retain control over daily operations.

EOR services start at $249 per employee per month, with final pricing depending on headcount and contract structure. Payoneer Workforce Management was also named a Global Leader in the G2 Spring 2026 reports. 

Hire in the United Kingdom with Payoneer Workforce Management. Book a demo to get started.

Frequently asked questions (FAQs)

About the author

Martyna Krawczyk

HR and Immigration Lawyer, Global HR Operations 

Martyna Krawczyk is an HR and Immigration Lawyer and Associate within the Global HR Operations team at Payoneer Workforce Management (formerly Skuad). She holds an LPC LL.M. from the University of Law in the UK and an Associate CIPD certification. Martyna also serves as Vice President of the Labour Law Association of Poland and was recognized at the Wolters Legal Hackathon 2024. Her areas of focus include international employment law, cross-border workforce compliance, and global immigration, supporting organizations in managing international workforces.