UK companies that need engineering capacity quickly usually end up choosing between three options: a UK contractor, an offshore engineer through a staff augmentation partner, or an overseas hire through an employer of record (EOR). They look similar on a spreadsheet. They behave very differently once IR35, notice periods and employment law come into it.

This is a practical comparison, not tax advice. Your accountant should confirm how any of it applies to your business.

Option 1: A UK contractor

A UK contractor working through their own limited company is the classic route, and it is where IR35 bites. Under the off-payroll working rules, a medium or large client has to decide whether the contractor would be an employee if they were hired directly, issue a status determination statement, and, if the answer is “inside IR35”, make sure tax and National Insurance are deducted. Getting it wrong leaves the client liable.

Small companies are exempt from making that decision, and the responsibility stays with the contractor’s own company. From April 2026 the thresholds for “small” rose: a company counts as small if it meets two of these three tests: turnover of £15 million or less, a balance sheet of £7.5 million or less, and 50 employees or fewer. More businesses now fall under the small company rules than before.

Good for: short, specialist work where on-site presence or UK-hours availability matters most.
Watch out for: status determinations, day rates that rise for “outside IR35” roles, and contractors leaving when a better rate comes along.

Option 2: Offshore staff augmentation

With staff augmentation, an engineer based abroad joins your team through a partner company. They attend your standups and work in your tools, but they are engaged by the partner in their own country. You pay a monthly invoice for a service.

Because the engineer lives and works outside the UK and is engaged through an overseas company, the off-payroll rules generally don’t come into play, and there is no UK payroll or status determination to run. You’d still want your accountant to confirm this for your setup, and to handle VAT on the invoice, which UK businesses usually account for under the reverse charge.

Good for: ongoing roles where you want flexibility to scale up or down monthly.
Watch out for: overlap hours, the quality of the partner’s vetting, and what happens if the engineer leaves. Ask about replacement terms before you sign.

Option 3: An employer of record

An EOR legally employs someone in their own country on your behalf. The person is a full employee under local law, with local payroll, benefits and notice periods, while working only for you. You pay their salary plus a monthly EOR fee.

An EOR suits a long-term hire you have already found and want to keep. It is less suited to finding people, since sourcing and vetting are usually your job, and to flexibility, since local employment law applies when you want to end the arrangement. In India, for example, that means statutory contributions and notice terms set by Indian law.

Good for: a specific person you want as a long-term, dedicated team member.
Watch out for: the total cost once the EOR fee and local benefits are added, and the extra steps involved in ending the employment.

A quick way to choose

Many teams end up using more than one. A common pattern is a UK lead plus augmented engineers abroad for the bulk of the build. Our page for UK and European teams covers working hours, VAT and GDPR in more detail, and the cost guide compares rates across regions.