PEO payroll services for recruitment agencies
A simpler PAYE employment model for your temporary workforce
Sapphire’s PEO service gives recruitment agencies a straightforward way to employ and pay temporary workers without managing employment and payroll in-house.
Your workers receive a clear PAYE rate, while Sapphire employs them and manages payroll, employment administration and statutory obligations. Your agency gets a simpler payroll model, transparent employment costs and less administration behind every placement.
PEO payroll and employment managed by Sapphire
PAYE employment and payroll
Sapphire employs your temporary workers and runs PAYE payroll on your behalf, taking care of the employment and payroll administration behind each placement.
Clear PAYE rates for workers
Workers are offered a standard PAYE rate rather than an umbrella assignment rate, making it easier for them to understand what they will earn before personal tax deductions.
Transparent employment costs
Employer National Insurance, Apprenticeship Levy, holiday pay and employer pension contributions are calculated separately from the worker’s PAYE rate, giving your agency a clear view of the full cost of each placement.
Holiday pay and pension contributions
We manage the statutory employment obligations that sit behind your workforce, including holiday pay and workplace pension contributions.
Self-billing and invoicing
PEO can operate on a full self-billing basis, reducing invoicing administration and giving your back-office team a simpler process to manage.
Connected timesheets, Pay & Bill and invoicing
Quartz, our operational technology platform, can connect timesheets, payroll and invoicing, reducing manual processing and helping your back office work more efficiently.
Dedicated worker and agency support
Workers can come directly to Sapphire with payroll and employment queries, while your agency has a dedicated contact who understands your account. That means fewer queries landing with your consultants and faster answers when you need them.
A straightforward alternative to umbrella payroll
With umbrella payroll, the assignment rate includes the costs associated with employing the worker as well as their gross pay. This can make rates more difficult for workers to understand and explain.
PEO works differently. Your agency agrees to a standard PAYE rate with the worker and Sapphire employs them and processes their pay, while the additional costs of employment are calculated separately and charged to your agency as part of the overall PEO cost.
The result is a clearer proposition for your workers and a fully managed employment and payroll process for your agency.

PEO or umbrella: which is right for your agency?
Both PEO and umbrella provide PAYE employment through Sapphire, but the way the worker’s rate and employment costs are structured is different.
| Who employs the worker? | Sapphire |
|---|---|
| How is the worker’s rate presented? | Standard PAYE rate |
| How are employment costs handled? | Calculated separately from the worker’s PAYE rate |
| Worker deductions | Personal PAYE deductions from gross pay |
| Why agencies use it | A straightforward PAYE employment and payroll model |
| Who employs the worker? | Sapphire |
|---|---|
| How is the worker’s rate presented? | Umbrella assignment rate |
| How are employment costs handled? | Accounted for from the assignment rate before gross taxable pay is established |
| Worker deductions | Personal PAYE deductions apply once gross taxable pay is established |
| Why agencies use it | A traditional umbrella employment model |
Contractor payroll backed by technology
PEO isn’t just about processing a payslip. Sapphire combines specialist payroll expertise with technology designed around the way recruitment agencies operate.
Through Quartz, we can connect the processes behind your contractor workforce, from timesheets and approvals through to Pay & Bill and invoicing.
That means less manual processing for your team, clearer information across your operation and a payroll infrastructure that can scale as contractor volumes grow.
Support that works for your agency and your workers
Getting payroll right matters to the people you place as much as it does to your back office. Our team works directly with agencies and workers to keep payments moving, queries resolved and everyone informed.
We've shared more than £1m with our contractors
Sapphire has been employee-owned since 2021. As part of that model, qualifying longstanding umbrella contractors can share directly in our success through our contractor bonus programme.
More than £1m has already been shared with contractors.
It’s another reason for contractors to choose Sapphire, and another reason for agencies to feel confident recommending us.
paid directly to contractors since 2024
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Frequently asked questions
What is a PEO, and how does it work?
A PEO, or Professional Employer Organisation, is a third-party service that takes on the employment of contractors on behalf of a recruitment agency. The PEO becomes the legal employer of record, managing payroll, tax compliance and employment obligations while the contractor continues working with the end client as normal.
For agencies, this means you can place contractors without additional admin burdens or employer responsibilities./p>
How does a PEO work for recruitment agencies specifically?
When a recruitment agency uses a PEO, the PEO employs the contractor directly and handles all the associated employer responsibilities. The agency retains the commercial relationship with the contractor and the end client, and the PEO manages everything behind the scenes: payroll processing, tax filings, employment contracts and statutory contributions.
This arrangement lets agencies focus on placing contractors rather than administering them. It’s particularly useful when margins are tight and operational capacity is limited.
When should a recruitment agency use a PEO instead of another contractor model?
Choose a PEO when you want to provide contractors with compliant, simple PAYE payroll, but without taking on employment responsibilities. Outsourced PAYE removes the employment burden from your business entirely: the PEO becomes the legal employer, handling contracts, tax, and statutory obligations on your behalf.
For your contractors, this means straightforward PAYE payroll and clear, accurate payslips every time. For you, it means no employment risk, no local compliance headaches, and no administrative load beyond placing the contractor. It’s one of the fastest, lowest-risk ways to pay contractors.
What's the difference between a PEO and an umbrella company?
Where a PEO and an umbrella company differ is in what they take off your plate. An umbrella company essentially acts an employer, processing payroll, employing the contractor and managing their tax directly
PEO is an employment intermediary, structured as a straightforward outsourced payroll arrangement and removing any employment burden from your agency. For your business, this means no direct employment risk and no added administrative load, just simple, compliant PAYE payroll handled on your behalf.
What responsibilities does a PEO take on?
A PEO takes on the legal and administrative responsibilities of employment in the contractor’s country of work. This typically includes:
- Issuing employment contracts that comply with local law
- Running payroll and managing tax and social security contributions
- Handling statutory benefits and leave entitlements
The recruitment agency retains responsibility for sourcing, placing and managing the commercial relationship with the contractor and client. Sapphire’s PEO service is built to make that division of responsibility clear and straightforward to operate.
Is using a PEO compliant with IR35?
Yes. If contractors are employed through Sapphire’s UK-based PEO on a PAYE basis, IR35 does not apply in the same way it would with a personal service company (PSC) arrangement.
That’s because IR35 is designed for off-payroll working through an intermediary, usually a PSC. Under a PEO model, the contractor is employed directly and paid through PAYE, with tax and National Insurance handled at source. For an agency, that means a simpler, compliant route to engagement.
Sapphire has held FCSA accreditation for eight consecutive years, which reflects an independently verified standard of compliance. If you have questions about how PEO applies to a specific contractor situation, it’s worth discussing the detail directly with the Sapphire team before making a decision.
How quickly can Sapphire set up a PEO arrangement for a new contractor placement?
Setup times vary depending on the complexity of the placement, but Sapphire’s PEO service is designed to get contractors compliant and paid without unnecessary delays. In most cases, that can be completed the same day.
If you have a placement that needs to move quickly, contact Sapphire directly with the details. The team can give you a realistic timeline based on the specific contractor circumstances.