Entering the UK Market: UK Entity vs PEO/EOR

When expanding into the UK and taking on employees, businesses typically choose between:

1. registering their business in the UK by incorporating a standalone UK entity or a wholly owned UK subsidiary (as a private limited company)*, or
2. using a Professional Employer Organisation (PEO) or Employer of Record (EOR).

While a PEO/EOR is perceived as an attractive all in one platform that “outsources” an employer’s legal and compliance duties, that’s not necessarily the reality. Using a PEO/EOR is not a substitute for establishing a real UK presence and can create legal and tax compliance issues, contractual and IP risks, and may limit commercial opportunities. Overall, it is far more expensive than operating a UK entity, with ongoing service fees on top of salaries.

By contrast, incorporating a UK entity is quick, cost-effective, and provides full control, credibility, and long-term flexibility. Setting up a UK company usually takes 24 – 48 hours and, with support from advisers such as Oury Clark, the administrative steps can be implemented seamlessly.

In short: if your business is serious about the UK market, incorporating a UK entity is the best solution from the outset for both legal, and financial/tax reasons.

It is very easy to set-up a UK entity and employ staff in the UK. You will need:

• A director (does not need to be based in the UK)
• Payroll
• Employment contract
• Employer’s Liability Insurance
• Pension
• Bank account (this does not need to be a “traditional” UK bank account initially, unless you require a sponsor licence, therefore, an e-money account can be used in place of a “traditional” UK bank account)

If you intend to sponsor an overseas worker, you will normally need a sponsor licence. Therefore, in addition to the above, you will also need:

• A traditional bank account that is both FCA (Financial Conduct Authority) and PRA (Prudential Regulation Authority) regulated
• A UK based senior employee (full-time or part-time) to act as your Authorising Officer

If you are considering sponsorship and would like our support, please get in touch with our immigration team.

The table below outlines the key pros and cons of each model across a range of practical and legal factors.