UK company employing staff overseas

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How to employ someone overseas from the UK

1. Establish which case you are in. A UK employee working abroad stays inside HMRC's rules: you usually keep calculating and deducting PAYE income tax on their pay. A brand-new hire who lives abroad and has never worked in the UK is generally outside UK payroll altogether and must be employed under their own country's law, which is where an EOR or local entity comes in.
2. Settle the National Insurance position before departure. For staff sent abroad, NI depends on the destination. In EU and EEA countries and Switzerland the person normally joins the host country's social security unless a certificate covers a temporary posting. The UK also has reciprocal agreements with 19 countries, with certificate applications on form CA9107. For most other countries you deduct UK NI for the first 52 weeks if the employee was UK-resident and you keep a place of business in the UK.
3. Choose the employment vehicle in the host country. For a local hire, an employer of record employs the person through its in-country entity under a compliant local contract, runs payroll and social contributions and invoices you one fee; the verified pricing table on this site shows the published range. A local entity of your own replaces that fee with incorporation, registrations and ongoing filings, which pays off only as headcount in the country grows.
4. Run the ongoing obligations and review them yearly. Keep the evidence current: PAYE operating correctly for posted staff, certificates of coverage renewed, and the host country's payroll filings made on its calendar by whoever is the legal employer there. Postings that started as temporary drift into permanent, and the tax and social security answers change when they do.

The PAYE and National Insurance mechanics

HMRC's guidance for employees working abroad is unambiguous on income tax: the employer must continue to calculate and deduct PAYE on payments to an employee sent to work overseas, recording the date they went abroad. National Insurance splits by destination. In the EU, EEA and Switzerland the default is host-country social security, displaced only by a certificate for temporary work. For the 19 countries holding reciprocal social security agreements with the UK, including the USA, Canada, Japan and India, a posted worker can stay in UK NI with the right certificate, applied for on form CA9107. Everywhere else, the rule is UK NI for the first 52 weeks of the posting where the employee was resident in the UK before leaving and the employer has a place of business here.

The same framework, seen from the employee's side, appears in HMRC's guidance on National Insurance when working abroad, which also covers voluntary contributions to protect the State Pension during long postings. The practical discipline is to determine the NI position in writing before the person flies, obtain the certificate where one applies, and diarise the 52-week and certificate expiry dates; arrears assessments arrive years later, when the facts are hard to reconstruct.

Local hire abroad: EOR, entity or contractor

Someone who lives in Lisbon and has never set foot in your UK office cannot simply be put on UK payroll; they need a legal employer in Portugal. An employer of record supplies one: it employs the person under local law, runs local payroll and contributions, and charges a monthly fee, which suits the first few hires in a country. Your own entity becomes worth the fixed cost when headcount in that country justifies registrations, filings and local advice on a permanent basis. Engaging the person as a self-employed contractor avoids employment obligations only while the facts genuinely support contractor status under their local law; a full-time, single-client arrangement is likely to be reclassified, with back contributions owed.

Two further checks apply on the company side. Sustained activity abroad can create a taxable presence for the company itself in the host country, a question for advisers before the first hire rather than after. And employment terms for anyone abroad are controlled by the local contract and local statute, not by a UK handbook; policy and contract documents govern, and nothing on this page is legal or tax advice.

Common questions

Does a UK company keep deducting PAYE for an employee working abroad?

Usually yes. HMRC's guidance says the employer continues to calculate and deduct PAYE income tax on payments to employees sent to work overseas, and records the date the employee went abroad. The employee's own residence position is settled separately with HMRC.

When does UK National Insurance stop for staff posted overseas?

It depends on the country. EU, EEA and Swiss postings default to host-country social security unless a certificate covers temporary work; the UK's 19 reciprocal-agreement countries have their own certificate route via form CA9107; for most other destinations UK NI continues for the first 52 weeks of the posting.

Can a UK company employ someone who lives abroad without any local presence?

Not directly as a local employee. The person needs a legal employer in their own country, which is either an entity you open there or an employer of record that employs them for you and charges a monthly fee. Long-term contractor arrangements that look like employment carry reclassification risk.

At what point is a local entity better than an EOR?

When the country's headcount makes the fixed costs worthwhile. EOR fees scale per employee per month; an entity carries incorporation and ongoing compliance costs that do not grow with each hire. Several vendors publish both models, and the trade-off is visible in the verified pricing on this site.

Coverage by country

• Employer of record vendors covering Singapore
• Employer of record vendors covering Mexico
• Employer of record vendors covering Spain
• Employer of record vendors covering Colombia
• Employer of record vendors covering United Kingdom
• Employer of record vendors covering France
• Employer of record vendors covering Hungary
• Employer of record vendors covering New Zealand