Do I Need a Local Entity to Hire in The United Kingdom?

In the United Kingdom, a "local entity" typically refers to a legally recognized presence that can act as the employer, such as a subsidiary or branch office. This setup allows you (or a provider acting on your behalf) to be recognized locally as an employer and fulfill payroll and employment obligations.

Without a local employing setup, it’s usually not possible to do all of the following compliantly: register as an employer, manage mandatory National Insurance contributions, run local payroll with the required withholdings, and issue compliant employment contracts. The UK’s HM Revenue and Customs (HMRC) outlines employer responsibilities for paying National Insurance contributions, which is a core part of being an employer in the UK.

What is Required to Employ Someone in The United Kingdom?

• Local employing entity required to directly employ? Yes (unless using an EOR)
• Payroll registration required? Yes (employer registration with HMRC is mandatory)
• Withholding/tax remittance required? Yes (payroll withholding obligations apply)
• Social contributions required? Yes (National Insurance contributions must be paid)
• Local employment agreement required? Yes (written contracts are standard practice)
• Mandatory benefits to budget? Yes (statutory leave, pension contributions, and other entitlements)
• Works council/collective agreements considerations? Usually (some sectors may have collective agreements)

Best Options If You're Hiring in The United Kingdom

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but it can be risky if the relationship resembles employment.

Contractors don’t require you to set up a local entity like direct employees do, but the UK has strong worker protections, and misclassification can lead to significant liabilities. Authorities often assess the nature of the relationship beyond the contract, focusing on whether the contractor operates independently or is integrated into your business.

• Misclassification risk is higher if the work is exclusive or closely controlled.
• If you dictate hours, location, or methods, it may look like employment.
• Embedding the contractor into your team can increase scrutiny from authorities.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in the United Kingdom, depending on the required registrations.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated £200–£500 per month ($250–$620)
• Payroll provider: Estimated £20–£50 per employee per month ($25–$62)
• Employer registrations and recurring compliance: Varies by complexity
• Corporate tax filings and annual reporting: Estimated £1,000–£3,000 per year ($1,250–$3,750)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., National Insurance contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in The United Kingdom

Hiring in the United Kingdom can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in the United Kingdom quickly without establishing a local entity, eliminating incorporation costs and ongoing administration.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.