This is the single most misunderstood fact about direct payment schemes, and it is the one that changes an employee's mind when they finally understand it. It is worth being blunt about, because nobody is well served by finding it out late.
A DPNI exists because an overseas employer with no UK presence cannot be compelled to operate UK PAYE. A UK branch, agency or representative office counts as a presence, even without a UK company. HMRC's answer is to move the obligation. Rather than the employer deducting tax and National Insurance and paying it over, the employee operates the scheme on their own earnings and pays HMRC directly.
The employee is registered as the person responsible. The scheme is in their name. The submissions are made on their behalf, and the money that goes to HMRC comes out of their account.
On a DPNI, the employee. If the tax is not paid, HMRC pursues the individual, not the company abroad. There is no UK presence to pursue, which is the entire reason the scheme exists in this form.
That isn't true of every arrangement. Where the employer is in the EU, the EEA or Switzerland and owes UK employer's National Insurance, the scheme is an NI-only scheme that the employer sets up and pays, so that National Insurance is the employer's to pay. And where the employee actually works for a UK business, such as a UK client that directs their work, that business can be required to run PAYE itself.
That means the person receiving the salary carries a liability they may never have carried before, and in most cases they have never had to think about tax at all, because every previous employer deducted it before they saw it.
Because the offer letter looks better. Gross pay with nothing deducted reads as a larger number than the same job with PAYE applied, and unless someone spells out how much of it is not theirs, it is an easy mistake to make. On 2026/27 rates outside Scotland, Income Tax and employee's National Insurance together take about 16% of a £30,000 salary, about 24% of £60,000 and about 31% of £100,000. Scottish rates differ.
People can be three months into a role who had spent money that was never theirs. That is not carelessness. Nobody told them, and the first bill arrived long after the money had gone.
The liability sitting with the employee does not make it the employee's problem alone. Employers who handle this well do three things.
They say it out loud at offer stage, in writing, before anyone signs. They set the gross salary knowing the employee carries the admin and the risk, and they price that in rather than quietly pocketing the saving. And they pay for the scheme to be run properly, so the employee is not left to work out National Insurance categories on a Sunday evening.
None of that is required. All of it is the difference between an arrangement that lasts and one that ends in a resignation and an argument.
A clear statement of what is deducted and what is not. Confirmation of who is running the scheme and who pays for it. And a number, not a vague reassurance, for what they should be setting aside every month.
If the employer will not put those in writing, that is information in itself.
The employee also carries their own National Insurance on a DPNI. If employer contributions are in scope, the scheme is not a DPNI at all but an NI-only scheme in the employer's name, which is usual for employers in the EU, the EEA and Switzerland. Whether employer NI applies at all depends on where the employer is established, whether it has a UK place of business, whether the employee works for a UK business, and any social security agreement or certificate, and it is not safe to assume either way. It is the question to settle before the first payday, not after.
A scheme that is set up correctly makes all of this routine. A scheme that is set up in a hurry, or not set up at all, turns it into a personal debt with penalties attached.
Setting up and running these schemes is what this practice is built to do, on both sides. We set them up with HMRC, we run the monthly payroll, and we tell the employee in plain terms what is theirs and what is not, in the first week rather than the first tax bill.
If you are an employer weighing this up, the honest question is not whether a direct scheme is cheaper. It is whether the person you are hiring understands what they are agreeing to.
This page is general information, not tax, legal or employment advice, and reflects the published rates for the 2026/27 tax year. Your own position may differ, so please check it or get advice before acting.
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