EOR vs subsidiary for visa sponsorship

Many companies consider using their Employer of Record to sponsor their employees’ visas, particularly in countries like the UK and the Netherlands, where the employer needs to obtain a visa sponsor license before being able to provide the required Certificate of Sponsorship. 

There are risks associated with using your Employer of Record to issue the Certificate of Sponsorship versus establishing your own subsidiary and applying for your own visa sponsor license. However, there are also costs and timelines that need to be considered. 

EOR vs UK subsidiary: Comparison table

Hiring through an EOR

Benefits

• Speed and simplicity: An EOR enables you to hire in the UK quickly without setting up a legal entity. Payroll, contracts, and local employment compliance are handled for you.
• Low upfront commitment: No need for UK incorporation, bank accounts, or internal HR processes. This is attractive for early market testing or short-term headcount needs.
• Operational offload: Administrative burden (payroll, benefits, local filings) sits with the EOR, reducing internal workload.

Risks

• Visa sponsorship risk: Using an EOR to sponsor UK work visas is legally fragile. UK immigration rules restrict sponsors from supplying sponsored workers to third parties. If workers are effectively managed by your business (common in tech roles), this can trigger non-compliance risks, including licence revocation for the EOR and visa curtailment for employees.
• Limited managerial and IP control: Because the EOR is the legal employer, day-to-day control, disciplinary action, and IP protections can be less clean, especially problematic for engineers, product leaders, and senior sales roles.
• Poor scalability: EORs work best at 1–2 hires. Per employee fees stack up quickly, and the model becomes inefficient and risky as headcount grows.
• Credibility constraints: Larger customers, investors, and regulators often expect a real UK operating entity, especially when revenue, data, or regulated activity is involved. Employees can find it a challenge to secure loans or mortgages due to the unclear nature of their employment or the implied limitations of terms required by some EOR contracts. 

Best suited for

Hiring through your own UK subsidiary

Benefits

• Full legal and immigration control: With your own UK entity and sponsor licence, you can sponsor Skilled Worker visas cleanly and compliantly. This is the gold standard structure for long-term UK hiring.
• Better talent access: You can recruit globally, not just candidates who already have UK work rights, critical for specialist tech, AI, and life sciences roles.
• Scalability and cost efficiency: Once set up, the marginal cost per hire is materially lower than that of an EOR. The model scales cleanly from a handful of hires to dozens.
• Governance, IP, and data clarity: Employment contracts, IP assignment, data protection, and senior management authority all sit clearly within your corporate group.
• Market and investor credibility: A UK subsidiary signals commitment to the market and is often expected by enterprise customers, partners, and institutional investors.

Risks

• Slower setup: Incorporation, payroll registration, bank accounts, and sponsor licence approval require planning and sequencing.
• Compliance responsibility: You must maintain HR systems, right to work checks, and sponsor licence compliance. This is manageable but non-optional.
• Upfront advisory cost: Legal, tax, and payroll setup costs are higher initially, though typically recouped quickly at scale.

Best suited for

Practical guidance (what most successful US firms do)

A common, lower-risk path is phased expansion:

• use an EOR briefly for non-sponsored hires or initial market validation
• incorporate a UK subsidiary early (often within 6–12 months)
• apply for a UK sponsor licence
• transition to direct employment before scaling headcount.

EORs optimise for speed; UK subsidiaries optimise for control, compliance, and scale. For any role requiring visa sponsorship or forming part of your core business, a UK subsidiary with its own sponsor licence is the safer, more durable choice.

If you would like to discuss further, please do not hesitate to get in touch with your usual Crowe contact.