The three routes, in one line each
Employer of Record. A UK company employs the person on your behalf and invoices you. Fast, simple, and the most expensive per head by a wide margin.
Direct payment scheme. Where the employer owes no UK employer's National Insurance, a DPNI is the employee's scheme, set up in their name (we make the application), and they account for tax and National Insurance directly. Where it does, as is usual for employers in the EU, the EEA and Switzerland, the scheme is an NI-only scheme in the employer's name. No UK entity required. Cheap to run, slower to set up, and on a DPNI the liability sits with the employee. One exception: if the employee works for a UK business, such as a UK client, that business may have to run PAYE and pay employer's National Insurance itself.
UK subsidiary. You incorporate, register as an employer and run a normal PAYE scheme. Most control, most admin, and it brings filing obligations that have nothing to do with payroll.
Question one: do you already have a UK entity
If you do, the answer is almost always a normal PAYE scheme through it, and the rest of this is academic. The exceptions are narrow and usually involve an employee whose duties sit entirely with the overseas parent.
Question two: how many people, and for how long
One person, indefinitely, is the classic direct-scheme case. Several people, or a plan to build a team, starts to argue for a subsidiary, because the admin per head falls and the structure stops being a workaround.
One person for a fixed spell of a year or less, with no intention of staying, is the case where an Employer of Record earns its fee. You are paying for speed and for not having to unwind anything afterwards.
Question three: when do they start
This is the question that decides more cases than cost does. An Employer of Record can have somebody employed in days. A direct payment scheme takes four to eight weeks to build with HMRC on our own estimate. A subsidiary takes longer still once you add incorporation, a bank account and registration.
If the start date is next month and nothing has begun, your options have already narrowed whatever the spreadsheet says.
Question four: who should carry the risk
On an EOR, the provider carries the employment relationship. On a subsidiary, you do. On a DPNI, the employee carries the tax and National Insurance liability, and that is a genuine consideration rather than a technicality. On an NI-only scheme, the employer carries the National Insurance and the employee deals with their own tax. It needs saying out loud at offer stage.
The cost point people get wrong
Comparing an Employer of Record fee against a payroll bureau fee is not the whole comparison. An EOR usually quotes its management fee separately and recharges the salary, employer National Insurance and pension on top, so the invoice is bigger than the fee. On a direct scheme or your own PAYE, the salary and pension are still yours to pay, and so is employer National Insurance where it's due.
Compare total cost of employment, not invoice against invoice. That is the only version of this sum that means anything. Our guide to Employer of Record cost per employee sets out the fee and the extras.
A rough shape
Short assignment, urgent start, one person: Employer of Record. One long-term hire, no UK entity, time to plan: direct payment scheme. Two or more hires, or a UK presence you want anyway: subsidiary.
Most cases land on one of those three sentences. The ones that do not are usually decided by the start date.
What none of the three change
Whichever route you pick, the UK employment rights come with the person. Statutory holiday of 5.6 weeks, the notice periods, the right to an itemised payslip and auto-enrolment into a pension all apply because the work is being done in the UK. They are not a feature of one route that you can avoid by choosing another.
Statutory sick pay and statutory family pay work differently. The law makes them payable by whoever owes UK employer's (secondary) National Insurance on the employee's earnings. On the Employer of Record and subsidiary routes, that's the EOR or the subsidiary. On a DPNI with no UK presence there's usually no employer's NI, so you generally aren't liable for them, though you can agree contractual sick pay instead. An employer in the EU, the EEA or Switzerland usually owes employer's NI through an NI-only scheme, so statutory pay does apply there.
The routes differ in who administers those obligations and who is liable when they are missed. Apart from statutory pay, they do not differ in whether the obligations exist. That is worth saying plainly, because the commonest reason an overseas employer picks the wrong route is a belief that one of them makes UK employment law optional.
Budget for the full cost of employment on any route: gross pay, employer National Insurance where it applies, the pension contribution and the holiday. Then compare the three on what they charge to run it, which is a much smaller number and a much easier decision.
If you want it narrowed down
The route finder covers the core of these questions and gives you an indicative answer without a conversation. If your situation is genuinely awkward, and some are, tell us what it is and we will say which route fits, including when the answer is that you do not need us.
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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.