United Kingdom
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Employer of Record UK Cost: What You Actually Pay
Hiring someone in the United Kingdom sounds straightforward until you start looking at the costs. Between payroll setup, tax obligations, pension contributions, and compliance requirements, the numbers add up quickly. And if you are comparing an Employer of Record (EOR) to setting up your own UK entity, the picture gets even more interesting.
So, how much does an EOR actually cost in the UK? Let us break it down properly.
How much does an Employer of Record cost in the UK?
Most EOR providers charge between £300 and £700 per employee per month for UK-based staff. That is the standard per-employee monthly fee model, and it is the most common pricing structure you will encounter. Some providers use a percentage of salary model instead, typically ranging from 10% to 20% of the employee's gross monthly pay.
What does that fee cover?
Generally, it includes running payroll, calculating and remitting income tax through PAYE, handling National Insurance contributions, managing pension auto-enrolment, and keeping you compliant with UK employment law. The exact scope varies between providers, which is why comparing like-for-like matters.
For a deeper look at how EOR employment works in the UK, see our guide to Employer of Record in the United Kingdom.
What pricing models do EOR providers use?
You will typically encounter two pricing models when shopping for an EOR in the UK.
Per-employee monthly fee
This is the most straightforward approach. You pay a fixed monthly amount per employee, regardless of their salary. The advantage is predictability. Whether your hire earns £30,000 or £80,000 a year, the EOR fee stays the same.
Typical range: £300 to £700 per employee per month.
Providers at the lower end often offer a more basic service, while those at the higher end tend to include additional support such as HR advisory, benefits administration, or dedicated account management.
Percentage of salary
Some EOR providers charge a percentage of each employee's gross salary. This model typically runs between 10% and 20%.
The upside? If you are hiring junior staff on lower salaries, your EOR costs scale down accordingly. The downside? Senior hires become significantly more expensive to employ through the EOR. A 15% fee on a £100,000 salary is £15,000 a year, compared to perhaps £5,000 to £7,000 under a flat fee model.
Which model is better?
For most companies hiring in the UK, the per-employee flat fee works out cheaper, especially for mid-level and senior roles. The percentage model can make sense if you are hiring entry-level staff on modest salaries, but run the numbers for your specific situation before committing.
If you are still deciding which provider to use, our review of the best Employer of Record providers in the UK compares the leading options.
What is included in the EOR fee?
A good EOR in the UK should handle the following as part of their standard fee:
Calculating gross-to-net pay, deducting income tax, National Insurance, student loan repayments, and pension contributions. Issuing payslips. Running payroll on your chosen frequency (usually monthly in the UK).
Registering as the employer with HMRC, operating PAYE in real time, submitting Full Payment Submissions (FPS) and Employer Payment Summaries (EPS) through the Real Time Information (RTI) system. For a full explanation of how PAYE works, see PAYE Explained.
Calculating and paying employer and employee National Insurance contributions. The employer's Class 1 NI rate is currently 15% on earnings above the secondary threshold (£5,000 per year). For a detailed breakdown, read our guide to National Insurance in the UK.
Enrolling eligible employees into a workplace pension scheme, calculating contributions, and managing the ongoing administration. The current minimum total contribution is 8% of qualifying earnings, with at least 3% coming from the employer.
Providing compliant employment contracts that meet the requirements of the Employment Rights Act 1996 and the terms of the particular employment.
Managing statutory sick pay (SSP), statutory maternity pay (SMP), statutory paternity pay, and statutory shared parental pay. These are legal requirements under the Social Security Contributions and Benefits Act 1992.
Advising on UK employment law, handling grievances and disciplinary processes, and ensuring compliance with the Equality Act 2010.
What might cost extra?
Not everything falls under the standard EOR fee. These items often attract additional charges:
Private medical insurance, dental cover, life insurance, gym memberships, and other perks. Some EORs offer benefits packages as add-ons, while others expect you to arrange and fund these separately.
If you need to sponsor a worker's visa under the Points-Based Immigration System, the EOR may charge extra for the Sponsor Licence application and ongoing compliance. This can range from £500 to £2,000 or more depending on the complexity.
Helping an employee move to the UK, including temporary housing, shipping, and settling-in services. This is typically billed separately.
DBS checks (Disclosure and Barring Service), right-to-work verification, and reference checks may carry additional fees.
Some EORs charge a one-time fee when an employee leaves, covering final payroll, P45 issuance, and any settlement agreements.
If you are paying your EOR invoice in a currency other than pounds sterling, expect exchange rate markups or conversion fees.
How does EOR cost compare to setting up a UK entity?
This is the question most companies ask, and the answer depends on how many people you plan to hire and how quickly you need them working.
Cost of setting up a UK entity
Setting up a limited company in the UK is relatively inexpensive in itself. Companies House online registration costs £100 (from 1 February 2026). But the real costs come after:
- Registered office address: £100 to £500 per year
- Accountant and payroll provider: £2,000 to £10,000 per year depending on complexity
- Legal setup (articles of association, shareholder agreements): £1,000 to £5,000
- Employer's liability insurance: £200 to £1,000 per year (legally required)
- PAYE registration and payroll software: £200 to £1,000 per year
- HR and compliance consultancy: £1,000 to £5,000 per year
- Corporation tax registration and filing: Included in accountant fees typically
Total first-year setup cost: Roughly £5,000 to £20,000, depending on the level of support you need.
Ongoing annual cost: £3,000 to £15,000 for a small operation (accountancy, payroll, insurance, compliance).
For a full comparison, see our detailed analysis of EOR vs entity setup in the UK.
Cost of using an EOR
For a single hire at £500 per month, your annual EOR cost is £6,000. For five hires, that is £30,000 per year.
At first glance, the EOR looks more expensive. But factor in the time savings, the reduced legal risk, the speed of onboarding (days rather than weeks or months), and the absence of ongoing entity maintenance, and the picture changes.
When does an EOR make financial sense?
- One to five UK hires. An EOR is almost always cheaper and faster.
- Testing the market. If you are not sure the UK will work out, an EOR lets you avoid committing to a permanent entity.
- Speed matters. You can have someone employed and working within a week through an EOR. Setting up an entity, opening a bank account, and registering for PAYE takes considerably longer.
- Compliance confidence. UK employment law is detailed and strictly enforced. An EOR takes that burden off your shoulders.
When does your own entity make sense?
- More than 10 to 15 UK employees. The per-employee EOR fees start to outweigh the fixed costs of running your own entity.
- Permanent presence. If you are committed to the UK long-term and plan to grow, an entity gives you more control.
- Complex operations. If you need to hold intellectual property, enter contracts in your own name, or manage a physical office, your own entity is necessary.
What is the total cost of employing someone in the UK?
Beyond the EOR fee, you need to understand the full employment cost. In the UK, the total cost of employing someone may typically run between 115% and 130% of their gross salary.
Here is what makes up that figure for a hypothetical employee earning £50,000:
| Cost component | Annual amount |
|---|---|
| Gross salary | £50,000 |
| Employer's National Insurance (15% above £5,000) | ~£6,750 |
| Workplace pension (3% of qualifying earnings) | ~£1,300 |
| Apprenticeship levy (0.5% of pay bill, only payable on pay bills over £3 million and offset by a £15,000 annual allowance) | usually £0 for a single £50,000 salary |
| Employer's liability insurance | ~£200 |
| EOR fee (mid-range) | ~£6,000 |
| Total employer cost | ~£64,250 |
That puts the total at roughly 126% of gross salary before you add the EOR fee, or about 138% with it. For more senior hires with higher salaries, the proportional impact of the EOR fee drops, and you are looking at closer to 120% to 125% of salary all in.
Note that the Apprenticeship Levy only applies to employers with an annual pay bill exceeding £3 million, so many smaller employers will not pay it.
What hidden fees should you watch for?
Not all EOR pricing is transparent. Here are the charges that sometimes catch companies off guard:
Some providers charge a one-time onboarding fee per employee, ranging from £200 to £1,000. Ask whether this is waived for your first few hires.
Some contracts require a minimum number of employees or a minimum contract length. If you only need one hire, make sure there is no minimum.
Terminating an employee through the EOR may trigger fees, particularly if a settlement agreement is involved. UK redundancy law requires statutory redundancy pay for employees with two or more years of service, and the EOR may charge an admin fee on top.
If your company operates in US dollars or euros, check how the EOR handles currency conversion. A 2% to 3% markup on each invoice adds up over time.
Some EORs charge separately for managing employee benefits, even if they advertise benefits as part of their service.
Need to change an employee's role, salary, or terms? Some providers charge for each contract variation.
Basic payroll reports may be included, but custom reporting or real-time dashboards might cost extra.
In the UK, employees are entitled to 5.6 weeks of paid annual leave under the Working Time Regulations 1998. Make sure your EOR is accounting for this correctly and not charging you separately for holiday pay calculations.
What does EOR cost look like by company size?
The economics of using an EOR shift as your team grows. Here is a realistic breakdown:
If you are hiring a single person in the UK, an EOR is almost certainly your best option. At £500 per month, your annual cost is £6,000. Compare that to the £5,000 to £20,000 you would spend setting up an entity in the first year, plus the ongoing admin of running your own payroll and compliance. For one person, the EOR wins on both cost and convenience.
At this scale, an EOR still makes strong financial sense. Five employees at £500 per month each is £30,000 per year in EOR fees. Setting up and maintaining your own entity for five people would cost a similar amount once you factor in accountant fees, payroll software, insurance, and the time your team spends on admin rather than revenue-generating work.
This is the grey area. Six employees at £500 per month is £36,000 per year in EOR fees. At this point, the cost of running your own entity might start to look competitive. But do not forget to factor in the hidden costs of entity management: the time spent dealing with HMRC, the risk of compliance errors, and the overhead of managing a UK payroll function. Many companies in this range choose to keep using an EOR for the simplicity and peace of mind.
Once you reach 15 or more UK employees, it is worth seriously evaluating whether your own entity makes sense. The per-employee EOR fees add up, and the fixed costs of running a UK entity become proportionally smaller. At this stage, setting up a UK subsidiary and bringing payroll in-house typically offers better value, provided you have the resources to manage compliance properly.
The key takeaway? There is no universal answer. Run the numbers for your specific situation, and remember to include the cost of your own time and the risk of getting UK compliance wrong.
How do you compare EOR providers?
When evaluating EOR costs in the UK, look beyond the headline price. Here is a practical framework:
Request a full cost breakdown
Ask each provider to itemise what is included and what costs extra. Request this for the specific roles you plan to fill, at the salary levels you expect.
Calculate the total cost for your scenario
A provider charging £400 per month but adding fees for pension administration, benefits, and offboarding may end up more expensive than one charging £600 all-in.
Check contract terms
Look for minimum commitments, notice periods, and termination clauses. A cheaper monthly rate locked into a 12-month contract may not be cheaper if your plans change.
Ask about compliance updates
UK tax thresholds, NI rates, and pension requirements change regularly. Your EOR should update their processes automatically without charging you extra.
Evaluate the support model
Will you have a dedicated account manager? How quickly do they respond? What happens if there is a payroll error? The cheapest provider is not a bargain if you spend hours chasing corrections.
For a detailed comparison of the top providers, see our guide to the best Employer of Record providers in the UK.
What about employer NI changes?
It is worth noting that employer National Insurance contributions have been a moving target. The rate and thresholds change with government budgets, and recent years have seen increases. Your EOR should absorb these changes into their standard service, but always confirm this. A provider that charges separately for NI administration on top of their base fee is adding unnecessary complexity.
Understanding how NI works is essential even when using an EOR. Read Agility's complete guide to National Insurance in the UK for the full picture.
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
For one to five employees, yes, an EOR is usually cheaper and significantly faster. Setting up a UK entity involves registration fees, legal costs, accountant fees, insurance, and ongoing compliance obligations. An EOR bundles all of this into a monthly per-employee fee. Once you exceed around 10 to 15 employees, running your own entity typically becomes more cost-effective.
Often, yes. Many EOR providers offer volume discounts if you are hiring multiple employees. Some will reduce their per-employee fee for longer contract commitments. It is always worth asking, especially if you are comparing multiple providers.
Some providers increase fees annually, often in line with inflation or changes to UK employer obligations. Check your contract for price review clauses. A fixed-rate agreement for the first 12 to 24 months gives you cost certainty.
Most EOR contracts allow you to transition employees to your own entity when you are ready. There may be a transfer fee, and you will need to handle the TUPE (Transfer of Undertakings) process under the TUPE Regulations 2006. Discuss the exit process before signing your EOR agreement.
Yes. EOR fees are a legitimate business expense and can be deducted from your corporation tax liability if you have a UK entity, or treated as an operating cost for tax purposes in your home jurisdiction.
Speak to an expert
Ready to hire in the UK without the overhead of setting up a local entity? Agility EOR handles payroll, tax, pensions, and compliance so you can focus on building your team. Get in touch to discuss your UK hiring plans.