PAYE vs Employer of Record (EOR): which is right for hiring in the UK?
Hiring in the UK from overseas, you'll quickly meet two options: run your own UK payroll (PAYE, or a direct payment scheme if you've no UK entity), or use an Employer of Record (EOR). They solve different problems, here's how to choose.
Short answer: With your own payroll you remain the employer and pay a service to run the payroll and compliance; with an EOR, a third party legally employs your worker on your behalf. If you want to employ directly but have no UK company, a direct payment scheme allows you to run compliant UK payroll as the real employer.
The core difference
With your own payroll, you remain the employer, you keep the direct relationship and pay a service to run the payroll and compliance. With an EOR, a third party legally employs your worker on your behalf, so they sit on the EOR's payroll, not yours.
When an EOR makes sense
- You want to start very fast and don't yet want any UK footprint.
- You're testing the UK with one or two hires and value speed over cost.
- You want someone else to carry the legal employment risk.
When running your own payroll wins
- You want to stay the direct employer and keep the relationship with your team.
- You're settling in the UK for the longer term, it's usually significantly cheaper ongoing.
- You've no UK entity but still want to employ directly, a direct payment scheme (DPNI) or, for employers in the EU, the EEA and Switzerland, an employer-run NI-only scheme does exactly that, without forcing you to incorporate. If the employee works for a UK business, such as a UK client, that business may have to run PAYE instead.
Side by side
| Your own UK payroll (PAYE or a direct payment scheme) | Employer of Record (EOR) | |
|---|---|---|
| Legal employer | You | The EOR |
| Speed to start | Days (existing scheme); a new direct payment scheme typically takes several weeks (four to eight on our own estimate) | Fastest |
| Ongoing cost | Lower, a payroll fee | Higher, a premium per employee |
| Control & relationship | Full, direct | Indirect, via the EOR |
| Needs a UK entity? | No, a direct payment scheme works without one | No |
The gap that matters most is ongoing cost. For the actual figures, see what an Employer of Record costs in the UK and the Employer of Record UK cost comparison.
The middle path most people miss: if you want to employ directly but have no UK company, you don't need an expensive EOR, a direct payment scheme (a DPNI, or an NI-only scheme for employers in the EU, the EEA and Switzerland) allows you to run compliant UK payroll as the real employer. That's our speciality. We will ask HMRC for the scheme that fits your facts, and they may suggest a different one once they have the full facts.
Not sure which you are?
Try our quick payroll route finder, four questions and it points you to PAYE, a direct payment scheme or EOR. Or just ask us.
Related guides
- What a DPNI scheme is, running your own UK payroll with no UK entity.
- How much an Employer of Record costs in the UK, the fee and the hidden extras.
- EOR vs your own UK payroll, the true cost compared.
- What a UK employee really costs once you add employer NI and pension.
- Employer of Record UK: the complete guide, every EOR guide in one place.