When do you graduate from an EOR to your own UK entity?

Here’s the underlying calculation. Teamed’s UK EOR fee is £479 per employee per month, flat. Your own UK Ltd has a roughly fixed monthly overhead, payroll, accounting, statutory filings, registered address, of £3,200–£4,500/month, then per-employee compliance on top.

The crossover compresses faster at higher salaries because Employer NIC and pension contributions scale with salary, but only NIC has no upper threshold. At £60k salaries the crossover is ~8 employees. At £100k+ salaries it’s closer to 5–6 because the NIC line dominates.

The lines also move depending on benefits programme complexity and share scheme administration. EMI share options especially require a UK trading company, they’re a structural reason to hold your own entity once senior hires expect options as part of comp.

A UK Ltd is one of the cheapest entities in Europe to incorporate, but “cheap” is misleading because the headline incorporation fee (£12 at Companies House) excludes the operational setup that actually matters.

The cost variance comes from two main drivers: how much you outsource (DIY vs corporate-services firm vs full GEMO) and how much substance you need for tax-treaty or regulatory purposes.

Why the bank account is the hidden bottleneck

UK bank accounts for foreign-parented companies have tightened sharply since 2024. Expect 3–8 weeks from application to opened account with most high-street banks, longer if the directors aren’t UK-resident. This is usually the gating step that turns a 4-week incorporation into a 10-week operational entity.

The cost band widens above 15 employees as you need dedicated UK HR capacity, formal payroll processing rather than a bureau, and often a UK-based finance function.

Most cost comparisons skip the director-liability dimension because it’s hard to quantify. It’s worth flagging explicitly.

Personal director duties

Under the Companies Act 2006, every UK director must promote the success of the company, exercise reasonable care and skill, declare personal interests, and avoid conflicts. These duties apply personally, they can’t be delegated to advisors. A finance director who signs accounts they haven’t read is personally on the hook for any misstatement.

Statutory filings, the compliance treadmill

• Confirmation statement, annually, with £13–£40 filing fee. Late = automatic late-filing penalty.
• Statutory accounts, within 9 months of year-end for small companies. Late = £150–£1,500 penalty escalating with delay.
• Corporation Tax return (CT600), within 12 months of year-end. Penalty regime is severe for repeat offences.
• PSC register updates, within 14 days of any change in “people with significant control”.
• PAYE Real-Time Information, on or before each payday.
• Pension regulator declarations, every 3 years.

Each filing is small. Stacked, they consume meaningful management attention. An EOR carries all of these for you on the EOR’s own entity.

• Under 5 UK employees on average salaries: EOR is cheaper and faster every month.
• Market validation phase: you’re hiring 1–2 people to test commercial fit, with an option to scale back if the bet doesn’t pan out. Entity setup is sticky; EOR is reversible.
• Project-based hires: 6–12 month engagements where the upfront entity cost won’t amortise.
• No EMI options needed yet: senior hires aren’t expecting share options, or you’re still pre-Series-A. Entity becomes valuable once options become a comp lever.
• Acquired team you may divest: post-acquisition holding patterns where you don’t want to add an entity that will need wind-up later.

• Sustained headcount above 8 UK employees on average salaries: the entity overhead amortises across enough people that per-head cost drops below EOR.
• EMI share option scheme: the Enterprise Management Incentive scheme requires a UK trading company. EOR can’t issue EMI options on your behalf, the options need to be in your own entity. This is the single biggest structural pull toward incorporation for venture-backed UK businesses.
• Substance for tax treaty purposes: a few cross-border tax structures need actual UK substance (employees, address, banking). EOR doesn’t count as your own substance.
• Customer or investor expectation: enterprise UK customers occasionally prefer contracting with a UK-incorporated supplier. Worth flagging early if relevant.

The technical mechanic is contract novation: the employment contract transfers from Teamed Ltd to your new entity on a specified date. All terms, salary, pension, holiday entitlement, continuous service date, carry over. The employee experiences a payslip with a different employer name in the header. Nothing else changes.

What we do operationally:

• Stand up your UK entity through GEMO (~6 weeks in parallel with continued EOR running)
• Open the entity’s PAYE scheme and qualifying pension scheme
• Novate every active employment contract on a single effective date
• Migrate ongoing benefits without lapse
• File the final EOR-period RTI submissions, open new RTI on the entity from the novation date
• Provide the same People Ops specialist as the post-graduation primary contact

The Graduation Model exists because every other EOR makes graduation a re-onboarding event, employees re-sign, lose continuous service, lose accrued holiday. We treat the EOR-to-entity transition as a stage of the employment lifecycle, not the end of a vendor relationship.