Free 60-second tool
PAYE, DPNI or EOR, which UK payroll route is right for you?
Hiring in the UK from overseas throws up one big question: how do you actually run the payroll? Answer a few quick questions and we'll point you to the right route.
Hiring in the UK from overseas throws up one big question: how do you actually run the payroll? Answer a few quick questions and we'll point you to the right route.
It asks up to four questions, and each answer rules a route in or out. Here is what each question is testing, so you can see why you got the answer you did.
Payroll is for employees. Someone who genuinely works for themselves deals with their own UK tax, and a sole trader does that by registering for Self Assessment.
Status is not always obvious. GOV.UK points out that a person can have a different employment status in tax law, and that courts and tribunals make the final decision on employment status. If you are not sure, choose "Not sure" and the tool carries on as if they are an employee, so you still see the payroll routes. Our guide to the employed or self-employed test goes further.
PAYE has a territorial limit, and HMRC's manual says it is restricted to cases where the employer has a tax presence in the UK. HMRC treat a branch or agency in the UK, or a UK representative office, as a tax presence. If you have one, you will normally run an ordinary UK PAYE scheme.
A place of business can be less than an office. HMRC's National Insurance manual lists signs such as a registered office in the UK, a lease or rent agreement for premises, letter-headed paper and a UK bank account, and says that whether an employer meets the test is a matter of fact.
If your employee is placed with a UK client or a UK group company, that business may have to run PAYE on their pay, even though you employ and pay them. HMRC's manual says it is the UK business's duty to operate PAYE on employees seconded to it, whoever pays them. It is worth settling this with the UK business before anything is set up, because a direct scheme is usually not the route here.
If you do, and you have no UK presence and the person works only for you, an HMRC direct scheme usually fits. Which one depends mainly on where your company is based.
Someone working in the UK for an employer in the EU usually pays UK National Insurance, unless they have a certificate of coverage (an A1) from that country. When someone works in the UK for an employer based in the EU and UK National Insurance is due, it is due on both sides, the employee's and the employer's, so the scheme is an NI-only scheme in the employer's name and not a DPNI or DCNI. Having no UK office or place of business doesn't on its own remove UK employer's National Insurance, because where a social security agreement applies, it treats the employer as if it were based in the UK. An NI-only scheme deals with National Insurance only, not income tax. The employee's income tax is then paid through Self Assessment or, if they prefer, a separate tax-only scheme.
HMRC's DPNI guidance includes employees of an overseas employer that has no UK address it pays wages from. The employee sets up a DPNI and pays both their income tax and their employee National Insurance to HMRC under one PAYE reference.
We'll ask HMRC for the scheme that fits your facts, and once they have the full facts they may suggest a different one.
If you would rather not be the employer, an Employer of Record becomes the legal employer for you and charges a fee for doing so.
The result is a starting point, not a ruling. We'd allow four to eight weeks for HMRC to set the scheme up, and that's our own estimate, not a figure from HMRC.
Prices for every route are on our pricing page. We're not VAT registered, so no VAT is added and the price shown is the total. Send us your answers through the enquiry form and we reply within one UK business day.
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