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EOR explained
Employer of Record Services: What's Included and How They Work
If you are hiring in the UK but do not have a legal entity there, an Employer of Record (EOR) can be the fastest and most compliant way to get your team in place. But what exactly does an EOR do? And what services are included when you partner with one?
An EOR acts as the legal employer of your UK workers. That means it handles the employment paperwork, payroll, tax, benefits, and compliance obligations on your behalf, while you retain full control over day-to-day management and the working relationship. You choose who to hire, what they work on, and how they contribute to your business. The EOR makes sure everything behind the scenes is lawful and properly administered.
This guide breaks down the specific services an EOR provides, from payroll and tax to contracts, benefits, and offboarding, so you know exactly what you are getting.
What Does an Employer of Record Actually Do?
An Employer of Record like Agility takes on the legal responsibilities of employment. In the UK, this means the EOR is named as the employer on the contract, registered with HMRC for PAYE, and responsible for meeting all statutory obligations under UK employment law.
In practice, this covers a wide range of services: processing payroll, deducting tax and National Insurance, enrolling employees in a workplace pension, issuing compliant employment contracts, managing statutory payments, handling right to work checks, and ensuring compliance with the Equality Act 2010 and other legislation.
The client company retains the practical side of the relationship. You manage the employee's work, set their goals, and direct their day-to-day activities. The EOR handles the administrative and legal layer underneath.
This split is what makes EOR services so useful for companies expanding into the UK. You get the people you need without the cost and complexity of setting up a UK subsidiary.
What Payroll Services Does an EOR Include?
Payroll is the core of any EOR service. In the UK, payroll is not just about paying salaries. It involves a web of statutory obligations that are easy to get wrong if you are not familiar with the system.
A good EOR handles all of the following:
The EOR calculates gross-to-net pay, applies deductions, and issues itemised payslips to every employee each pay period. Payslips must show earnings before and after deductions, tax code, National Insurance number, and any variable deductions.
The EOR operates PAYE, deducting income tax and employee National Insurance contributions from each pay packet. It also calculates and pays employer National Insurance contributions, which are an additional cost on top of gross salary.
Since 2013, employers must submit Real Time Information (RTI) to HMRC every time they pay employees. This includes a Full Payment Submission (FPS) on or before payday and an Employer Payment Summary (EPS) when adjustments are needed. Late or inaccurate submissions trigger automatic penalties.
The EOR administers Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), and Shared Parental Pay (ShPP). Each has its own eligibility rules and calculation method.
The EOR issues P60 certificates to all employees at the end of the tax year and handles P11D reporting for any benefits in kind or expenses.
How Does an EOR Handle UK Tax Compliance?
Beyond payroll, an EOR manages the broader tax obligations that come with employing people in the UK.
The EOR registers as the employer with HMRC and operates the PAYE scheme. This includes applying the correct tax codes (which HMRC issues via P45 or P6 forms), handling starter declarations, and reporting changes.
Both employer and employee NICs are calculated and paid by the EOR. Employer NICs are currently 15% on earnings above the secondary threshold of £5,000 per year. This is a real cost that many first-time UK employers underestimate.
If the EOR's total pay bill exceeds GBP 3 million, it may be liable for the apprenticesiceship levy (0.5% of pay bill). For most EOR arrangements, this is managed at the EOR level and factored into pricing.
Using an EOR should not create a UK corporation tax liability for the client company, provided the arrangement is structured correctly and the client does not create a permanent establishment through other activities. This is a key reason to work with a reputable EOR.
What Employment Contracts Does an EOR Provide?
In the UK, every employee is entitled to a written statement of employment particulars from day one of employment. This is not optional, and failure to provide one can result in an employment tribunal awarding compensation of between 2 and 4 weeks' pay.
An EOR provides compliant employment contracts that include:
- Job title and description
- Date employment started and continuous employment date
- Pay and pay frequency
- Working hours, including agreed contracted hours
- Holiday entitlement (statutory minimum is 5.6 weeks per year)
- Sick pay provisions
- Notice period (statutory and contractual)
- Pension information
- Place of work and any mobility clauses
- Disciplinary and grievance procedures
- Any probationary period terms
The EOR also keeps contracts updated as legislation changes. UK employment law evolves frequently, and a contract that was compliant two years ago may not be compliant today. This ongoing maintenance is a significant value-add that most companies do not have the in-house expertise to manage.
How Does an EOR Manage Benefits Administration?
Benefits are a key part of the employment package, and they come with their own compliance obligations.
Since 2012, all UK employers must automatically enrol eligible workers into a qualifying workplace pension scheme. The employer must contribute a minimum of 3% of qualifying earnings, and the employee contributes 5% (with tax relief). The EOR selects and manages the pension scheme, handles enrolment communications, manages opt-outs, and handles re-enrolment every three years.
Many EORs offer private medical insurance as an optional benefit. This is not a statutory requirement but is a common way to attract and retain talent in the UK market.
Some EORs include group life insurance (death in service benefit) as part of their standard package. This pays a lump sum to the employee's beneficiaries if they die while employed.
The statutory minimum is 5.6 weeks per year (28 days for a full-time employee, including bank holidays). Many employers offer more, and the EOR administers the policy, tracks accrual, and manages carryover rules.
Beyond SSP, many employers offer enhanced sick pay. The EOR administers both statutory and contractual sick pay, including fit note requirements and return-to-work processes.
What Compliance Duties Does an EOR Handle?
UK employment law is detailed and constantly evolving. An EOR keeps you compliant across multiple areas:
Before anyone starts work, the employer must verify their right to work in the UK. This involves checking original documents (such as a passport or biometric residence permit) or using the Home Office online checking service. The EOR manages this process and retains copies of the evidence for at least two years after employment ends. Getting this wrong can result in civil penalties of up to GBP 60,000 per illegal worker.
For roles that involve working with children or vulnerable adults, the EOR arranges Disclosure and Barring Service (DBS) checks at the appropriate level.
The EOR handles employee data in compliance with the UK GDPR and the Data Protection Act 2018. This includes data processing agreements, privacy notices, and data retention policies.
The EOR has a duty of care as the legal employer. This includes risk assessments, workplace safety policies, and reporting obligations under RIDDOR.
The EOR ensures contracts and workplace practices meet the requirements of the Equality Act 2010, including reasonable adjustments for disabled employees and anti-harassment measures.
How Does an EOR Handle Offboarding and Termination?
Ending employment in the UK is not as simple as telling someone their role is finished. There are legal requirements at every stage.
The EOR ensures that both the employer and employee give and receive the correct notice. Statutory minimums range from one week (for employees with 1 month to 2 years' service) to 12 weeks (for 12+ years). Contracts often specify longer notice periods.
If a role is made redundant, the EOR calculates statutory redundancy pay based on the employee's age, length of service, and weekly pay (capped at £751 per week from 6 April 2026). Employees with 2+ years' service are entitled to redundancy pay.
Where appropriate, the EOR can facilitate settlement agreements (formerly compromise agreements) to end employment on agreed terms. These must be accompanied by independent legal advice for the employee.
When an employee leaves, the EOR issues a P45 showing their pay and tax deductions for the year. This is a legal requirement and must be provided promptly.
If the EOR arrangement changes (for example, you switch EOR providers), the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) may apply. The outgoing and incoming EORs must consult with affected employees and ensure continuity of employment.
What Is the Difference Between an EOR and an Umbrella Company?
These two structures are often confused, but they serve different purposes.
An Employer of Record directly employs your chosen workers. You select the person, and the EOR hires them on your behalf. The employment relationship is between the EOR and the worker, with you directing their work.
An umbrella company is typically used by contractors and freelancers. The contractor becomes an employee of the umbrella company, which then invoices the end client or agency. Umbrella companies are common in the UK contracting market, particularly in the context of IR35 off-payroll working rules.
The key difference is control. With an EOR, you have a direct, ongoing employment relationship and full control over who you hire. With an umbrella company, the relationship is usually project-based and mediated through a recruitment agency.
For companies building a permanent UK team, an EOR is the right choice. For project-based contractor engagement, an umbrella company may be more appropriate.
What Should You Look for in an EOR Service Provider?
Not all EORs deliver the same level of service. Here is what to check:
Direct vs aggregator model
Some EORs employ people directly through their own legal entity. Others use a network of local partners (aggregators). Direct EORs give you a single point of accountability. Aggregators can introduce inconsistency and risk if a local partner changes or fails.
UK entity presence
Does the EOR have its own UK entity, or does it rely on a third party? A UK-based team with local expertise is better placed to handle HMRC queries, tribunal claims, and compliance issues.
Transparent pricing
EOR fees vary. Some charge a flat monthly fee per employee. Others take a percentage of salary. Watch for hidden costs in pension contributions, benefits administration, and offboarding fees.
SLA guarantees
What happens if payroll is late? If a compliance issue arises? Look for an EOR that offers clear service level agreements and a named point of contact.
Track record
How long has the EOR been operating in the UK? What do their clients say? A proven track record matters more than a slick sales pitch.
See our guide to the best EOR providers in the UK.
Agility EOR is far more than just a service provider. We’re flexible, innovative and focused on outstanding client service. Supporting you every step of the way – and valuing your people as the cornerstone of success.
Frequently Asked Questions
Yes. Using an Employer of Record is a fully legal way to employ workers in the UK. The EOR acts as the legal employer and handles all statutory obligations. It is a common structure for international companies expanding into the UK without setting up a subsidiary.
An EOR allows you to hire employees in a country where you do not have a legal entity. It handles payroll, tax, compliance, contracts, and benefits on your behalf, so you can build a team without the administrative burden of setting up and managing a foreign subsidiary.
An EOR directly employs your chosen workers on an ongoing basis. An umbrella company employs contractors on a project basis, usually through a recruitment agency. EORs are for building permanent teams; umbrella companies are for contractor engagement.
When using an EOR, the EOR is the legal employer. For references, background checks, and HMRC purposes, the EOR's name and details are used. The employee's day-to-day work is directed by the client company, but the formal employment is with the EOR.
Speak to an expert
Agility EOR provides all the services described in this guide, delivered by a UK-based team with deep knowledge of UK employment law. If you are hiring in the UK and want a partner that handles the complexity, learn more about our EOR services.