Employer of record in the UK: the real cost in 2026

EOR, own company or contractor?

There are three ways to work with someone in the UK. Each one fits a different case.

Employer of record

The EOR employs the person for you and runs the payroll. You need no UK company. This suits one or a few employees, or a first test of the market.

Your own UK company

You can register a private limited company online with Companies House for £100. Each share can have any value. The company must then register as an employer with HMRC before the first payday.Register your company, Limited company shareholders, Register as an employerChecked 1 Oct 2026

Contractor

A contractor sends you invoices. When the contractor works through their own company, the off-payroll working rules (IR35) can apply. A public sector client, or a medium or large private client, must decide if the work counts as employment for tax. For a small private client, the contractor's company decides.Understanding off-payroll working (IR35)Checked 1 Oct 2026

HMRC's online tool, Check Employment Status for Tax (CEST), helps with this decision. HMRC stands by its results when the information that you give is accurate.

Sources: Check employment status for taxChecked 1 Oct 2026

Agency work rules

An EOR is the legal employer, but the person works for you and follows your instructions. This can make the arrangement agency work under UK law.

The Agency Workers Regulations 2010 cover a person whom an agency supplies to work temporarily for a client, under the client's supervision and direction. If they apply, these rules follow:

• After 12 continuous calendar weeks in the same role with the same client, the worker gets the same basic working and employment conditions as a direct recruit for the same job.
• The Conduct of Employment Agencies and Employment Businesses Regulations 2003 apply to all agencies. Since 7 April 2026, the Fair Work Agency enforces them.
• Some agencies need a licence: those that supply workers in agriculture, horticulture, shellfish gathering, and food processing and packaging.

Ask each provider these questions before you sign:

• Do you treat this arrangement as agency work?
• If so, how do you apply the 12-week rule to the pay and the working conditions?

These rules are complex. Ask a lawyer how they apply to your case.

Sources: Agency Workers Regulations 2010, regulation 3, Agency Workers Regulations 2010, regulation 5, Agency Workers Regulations 2010, regulation 7, Conduct Regulations 2003: guidance, Licences for employment agenciesChecked 1 Oct 2026

Employment rules in the UK

Written terms

The employer must give a written statement of the main terms on or before the first day of work. Some details, such as pensions and training, can follow within 2 months.Employment Rights Act 1996, section 1, Employment Rights Act 1996, section 2Checked 1 Oct 2026

Working hours

At most 48 hours a week on average, normally over 17 weeks. A worker can agree in writing to work more. The worker can end this agreement with at least 7 days' notice in writing.Working Time Regulations 1998, regulation 4, Working Time Regulations 1998, regulation 5Checked 1 Oct 2026

Minimum wage

From 1 April 2026: £12.71 an hour from age 21, £10.85 from 18 to 20, and £8 under 18. Apprentices under 19, or in the first year of the apprenticeship, get at least £8.National Minimum Wage and National Living Wage ratesChecked 1 Oct 2026

Minimum holiday

5.6 weeks of paid holiday a year. On a 5-day week, this is 28 days, which is also the most that the law requires. The employer can count bank holidays as part of it. England and Wales have 8 bank holidays in 2026.Holiday entitlement, UK bank holidaysChecked 1 Oct 2026

Sick pay

Statutory Sick Pay is £123.25 a week, or 80% of average weekly earnings if that is lower. Since 6 April 2026, it starts on the first day of sickness, and it has no minimum earnings level.Statutory Sick Pay: entitlement, Employment Rights Act 2025: timelineChecked 1 Oct 2026

Maternity

Up to 52 weeks of maternity leave. Statutory Maternity Pay is 90% of average weekly earnings for 6 weeks. Then it is £194.32 a week, or 90% of average weekly earnings if that is lower, for 33 weeks.Maternity leave, HMRC, rates and thresholds for employers 2026 to 2027Checked 1 Oct 2026

Paternity

Up to 2 weeks of paternity leave. Since 6 April 2026, the leave is a right from the first day of the job. Statutory Paternity Pay is £194.32 a week, or 90% of average weekly earnings if that is lower. The pay needs 26 weeks of work and average earnings of at least £129 a week.Paternity leave, Paternity leave: eligibility, HMRC, rates and thresholds for employers 2026 to 2027Checked 1 Oct 2026

Notice period

After 1 month of work, the employer must give at least 1 week of notice. After 2 years, the notice is 1 week for each full year, up to 12 weeks after 12 years. The employee must give at least 1 week.Employment Rights Act 1996, section 86Checked 1 Oct 2026

Unfair dismissal

Today, an employee can claim unfair dismissal after 2 years of work. The Employment Rights Act 2025 cuts this to 6 months, for dismissals from 1 January 2027. It also removes the limit on the compensatory award. The government says that future dates can change.Employment Rights Act 1996, section 108, Employment Rights Act 2025: timelineChecked 1 Oct 2026

Right to work

Before the job starts, the employer must check that the person can work in the UK. The fine is up to £60,000 for each illegal worker.Check a job applicant's right to work, Penalties for employing illegal workersChecked 1 Oct 2026

Payroll and taxes

The employer, or the EOR, must register with HMRC before the first payday. It runs the payroll through PAYE: it takes income tax and the employee's National Insurance out of each payment. It reports each payment to HMRC on or before the payday.

The employee pays 8% National Insurance on pay from £12,570 to £50,270 a year, and 2% on pay above that.

The employer pays 15% on pay above £5,000 a year. For employees under 21 and apprentices under 25, the employer pays 0% on pay up to £50,270. The Budget 2025 keeps the £5,000 threshold until April 2031.

The Employment Allowance takes up to £10,500 a year off the employer's National Insurance bill. It is for the whole employer, not for one employee, so our estimate leaves it out.

The Apprenticeship Levy is 0.5% of the employer's whole pay bill, with an allowance of £15,000 a year. So it costs nothing when the pay bill is £3 million or less. For an employer with a larger pay bill, each extra salary adds 0.5% to the levy.

Sources: Register as an employer, Running payroll: reporting to HMRC, HMRC, rates and thresholds for employers 2026 to 2027, Budget 2025, HMRC, pay Apprenticeship LevyChecked 1 Oct 2026

Benefits

The law requires a workplace pension. The employer must enrol each employee who is aged 22 to State Pension age and earns more than £10,000 a year.

The minimum total contribution is 8% of qualifying earnings, and the employer pays at least 3%. Qualifying earnings are the pay from £6,240 to £50,270 a year in 2026 to 2027.

From April 2029, National Insurance applies to pension contributions through salary sacrifice above £2,000 a year.

Other benefits, such as private health cover, a bonus or extra holiday, depend on the contract.

Sources: Pensions Act 2008, section 3, The Pensions Regulator, making contributions, DWP, review of the automatic enrolment thresholds for 2026/27, Changes to salary sacrifice for pensions from April 2029Checked 1 Oct 2026

How hiring through an EOR works

1. Compare providers and ask for quotesAsk for the monthly fee in the UK, the deposit, the exchange rate and the notice period of the EOR contract. Ask if the provider treats the arrangement as agency work.
2. Agree the employment termsAgree the salary, the start date, the holiday and the notice period with the candidate.
3. The EOR checks the right to workBefore the start date, the EOR checks that the person can work in the UK.
4. The EOR signs the contractThe EOR becomes the legal employer. It gives the written statement of terms by the first day of work.
5. The EOR runs the payrollEach month, the EOR pays the salary, takes out the income tax and National Insurance, pays the pension contributions and reports to HMRC.
6. You manage the daily workYou set the tasks and the goals. The EOR handles the employment administration.

Sources: Check a job applicant's right to work, Employment Rights Act 1996, section 1, Running payroll: reporting to HMRCChecked 1 Oct 2026