Updated November 2026
To hire employees in the UK as a foreign startup, you either set up a UK company and run PAYE payroll yourself, employ through an employer of record (EOR) provider, or engage a contractor while you test the market. Whichever route you take, you must complete a right-to-work check before the person starts, and if you use a contractor you need a clear view on IR35. Because EMI share options usually need a UK entity, the entity or EOR decision also shapes how you can grant equity.
For overseas founders, the trouble rarely comes from payroll. It comes from two checks and one equity decision, all before day one.
A UK limited company is quick to register at Companies House. Owning one means registering as an employer with HMRC, running PAYE payroll, enrolling eligible staff into a workplace pension and holding employer's liability insurance, which most UK employers must have. An EOR employs the person for you and handles all of that while you direct the work.
UK rules change and depend on your situation, so confirm your plan with a UK employment lawyer, an accountant or your EOR provider before the offer goes out.
Every UK employer must check that a new hire has the right to work in the UK before employment starts, British citizens included. Depending on the person's status, you check original documents or use the Home Office online service, and keep a dated record.
A correct check gives you a statutory excuse if problems surface later, and the penalties without one are serious.
IR35, the off-payroll working rules, decides whether a contractor working through their own limited company should be taxed like an employee. Who decides depends on your size. Medium and large businesses must assess status themselves, while for small companies the responsibility generally sits with the contractor's own company.
Tax is only half of it. A person working full time, to your quota, under your manager and with no real right to send a substitute looks like an employee, and employment rights can follow whatever the contract says. That describes most quota-carrying sales roles, so first account executives are usually better hired as employees. More in contractor or full-time for a first hire.
Enterprise Management Incentives (EMI) is a widely used, tax-favoured UK share option scheme that candidates often ask about by name. In general the company needs a UK presence and the option holder must be employed by the company or its group. An EOR hire is the EOR's employee, so EMI is usually off the table.
You can still grant options from your home company, but they are generally taxed less favourably, and a strong candidate may be holding an EMI offer from a UK startup. If equity is central to your pitch, ask your accountant whether a UK subsidiary changes the maths.
Illustrative. Maya runs a US seed-stage B2B software company with a handful of UK customers won from New York, and wants a first account executive in London.
She ruled out a contractor, because an AE carrying her quota would look like an employee. With one UK hire planned this year she chose an EOR, and told candidates at first interview that options would come from the US parent rather than EMI, so nobody was surprised at offer stage.
The longest stage was the candidate's notice period, which in the UK is commonly longer than US founders expect. Maya had pencilled in a start date from US habits and had to move her pipeline plan back. The hiring timeline estimator would have flagged it.
The AE started with the check done and a clear equity story. With a second UK hire now planned, Maya is asking her accountant about a UK subsidiary so future grants can use EMI.
We are a fixed-fee recruiting partner for funded startups across North America, Europe and APAC, and since 2019 we've helped 500+ startups from Seed to Series D. We run the search and your EOR or UK entity handles the employment. Our London recruiting guide covers the talent side.
One dedicated recruiter runs each search end to end, with first screened candidates within 7 days and 33 days on average from kick-off to hire. We agree a low fixed fee upfront, averaging 6 to 9% of salary against the 20 to 25% typical of contingency recruiters. If Maya's AE base salary sat in our up to $110,000 band, the fee would be $7,500. Part is an advance at the start, the balance on offer acceptance, and if we don't deliver a shortlist of at least 3 qualified candidates within 30 days, you can claim the advance back in full. Details are on our pricing page.
No. A foreign startup can employ someone in the UK through an employer of record (EOR) provider, which becomes the legal employer. Your own UK entity makes more sense once you plan several UK hires or want to offer EMI options, which usually require one.
Before the person starts work, for every new hire, British citizens included. Keep a dated record, and if you hire through an EOR, get written confirmation before day one.
It can. For small companies, the contractor's own limited company generally decides status, while medium and large businesses decide it themselves. A contractor who works like an employee may also have employment rights.
Usually not, because EMI generally requires the option holder to be employed by the company or its group, and the EOR is the legal employer. Options from your home company are possible but generally taxed less favourably, so check with a UK accountant.
Worth a brief chat about your next hire? Book a free call.