The UK is one of the easiest places in the world to register a company. Incorporation through Companies House is online, quick, and inexpensive, and an Australian founder can have a UK limited company on paper within days.
So the decision Australian companies face is not really “can we set up in the UK?” but “should we employ our UK people through our own entity yet, or through an employer of record until the case is proven?” This article sets out an honest test. Sometimes the answer is your own entity. More often, for the first few hires, it is not.
What does employing someone in the UK actually involve?
The obligations start before the first salary is paid. A UK employer must register for PAYE with HM Revenue & Customs and deduct income tax and National Insurance through payroll. Employer National Insurance contributions currently run at 15% on earnings above the secondary threshold, which adds noticeably to the cost of every salary. The employer must carry employers’ liability insurance, check that each new hire has the right to work in the UK, and enrol eligible staff into a workplace pension with employer contributions.
Why 2026 is an unusual year to set up
The Employment Rights Act 2025 is changing UK employment law in stages through 2027, and the timetable published by Acas, the UK’s workplace advisory service, shows how much lands in the first 2 years of a new UK team.
The change that matters most to a foreign employer comes in January 2027. The qualifying period for unfair dismissal protection falls from 2 years to 6 months, the cap on unfair dismissal compensation is removed, and dismissing someone in order to rehire them on worse terms becomes automatically unfair in most cases. Later in 2027, employers will have to give reasons when they refuse a flexible working request, zero-hours workers gain rights to guaranteed hours, and bereavement leave becomes a statutory right.
The honest test: five questions
Work through these in order. The answers usually settle the decision.
How many people will you employ in the UK in the next two years?
One to five people is squarely employer of record territory. The fixed cost of running an entity, including payroll, accounting, statutory filings, and HR support, is spread across very few salaries. Once you are confidently heading past 10 to 15 people, your own entity starts to make financial sense.
How sure are you that the UK will work?
If the UK is a test market, an entity is a commitment you may need to unwind. Closing a UK company, making staff redundant properly, and filing final accounts is slower and costlier than ending an employer of record arrangement.
Do you need a UK legal presence for commercial reasons?
Who will run UK employment day to day?
If nobody in your business has run UK payroll, pensions auto-enrolment, or a UK dismissal, you will be buying that expertise either way: from accountants and employment lawyers around your own entity, or from an employer of record that already has it.
Are any of your UK workers currently contractors?
If so, check them now. UK off-payroll working rules, known as IR35, can shift tax responsibility onto the business engaging a contractor who works like an employee. Since April 2021, medium and large private sector businesses have had to decide the status of each contractor themselves and carry the tax consequences if they get it wrong. Small companies are currently exempt, but a growing Australian business can cross the size thresholds without noticing. Converting long-standing contractors to employees through an employer of record is often the cleanest fix.
What the numbers look like
For an early-stage UK team, the comparison is less about the provider’s fee than about the costs that sit on top of every salary in either model.
| Incorporation and registered office | Low one-off cost, plus ongoing company secretarial work | None |
| Employer National Insurance and pension contributions | Payable | Payable, passed through at cost |
| Payroll, accounting, and statutory filings | Outsourced or in-house, ongoing | Included |
| Employment law advice on contracts and dismissals | Paid separately as needed | Included for standard matters |
| Provider fee | None | Monthly fee per employee |
| Time to first hire | Weeks | Days |
The provider fee is easy to model because it scales in a straight line. At Safeguard Global’s published range of $499 USD to $800 USD per employee each month, 2 UK employees cost between $11,976 USD and $19,200 USD a year in fees, 5 employees between $29,940 USD and $48,000 USD, and 10 employees between $59,880 USD and $96,000 USD. The entity column does not scale that way. Its costs are largely fixed: the accountant, the payroll bureau, the statutory filings, the employment lawyer on retainer, and the time someone in your own team spends managing all of them. Those costs are much the same for 2 employees as for 10, which is why they weigh so heavily on a small team and so lightly on a large one.
When your own entity is the right answer
It would be a poor test that always came out the same way. There are clear cases for going straight to your own UK entity: a team of 15 or more planned within the first year, a regulated business that needs local authorisation anyway, or an acquisition that brings UK employees and infrastructure with it. In those situations, the fixed costs of an entity are justified from the start.
Why the route you choose now shapes the next step
The best reason to pick your employer of record carefully is that you may eventually leave it for your own entity. When that day comes, you want the move to be simple: the same people, the same terms, continuous service, and no gap in pay.
Lisa Farrar, who leads marketing at Safeguard Global, put the underlying idea simply on WRKdefined’s Heroes of HR podcast: expansion does not have to mean building everything yourself on day one.
A caution before you incorporate
Decide first how many people you will employ, how sure you are of the market, and who will manage employment day to day. If the answers are “a few”, “not yet”, and “nobody here”, Safeguard Global can have your first UK employee working compliantly within days, and your own entity can wait until the UK has earned it.