Many agencies and end-hirers are looking for different ways to manage contractor payroll. Naturally, some agencies are looking to simply adopt an umbrella solution, but several options are available. One solution is the use of Professional Employer Organisations (PEO). PEO is one of the many options available to agencies and end hirers and could be a solution for you.
What is an umbrella company?
An umbrella company employs contractors working on temporary assignments or contracts. This means that the contractor becomes an employee of the umbrella company. This gives them many of the same employment rights as any other permanent employee.
What is PEO?
A PEO is an employment intermediary that provides a complete outsourced employment solution for recruitment agencies and other businesses. The PEO employs the workers, and therefore the PEO acts as their employer.
What are the benefits of using a PEO?
If you are part of a PEO, you become an employee with full employment rights, holiday, pension, and statutory holiday payments.
In a PEO arrangement, the recruitment agency offers the worker a standard ‘PAYE’ rate. This means the rate offered is what the worker will receive for each and every hour worked and would only have personal tax deductions. The additional employment costs, such as employer National Insurance, Apprenticeship Levy, holiday pay and employer auto-enrolment contributions are charged back to the recruitment agency; in addition to the rate to give the all-in charge rate. The PEO’s fee for facilitating the arrangement can also be charged back to the recruitment company within the all-in charge rate, or built within the ‘Charge to PAYE’ calculations. VAT charges would then appear on the full invoice sent to the recruiter. There’s also the option to offer PEO on a full Self-Billing basis; to remove even more administration for the recruitment agency and further simplifying the process.
As the rate offered to the worker is without the employment costs, this helps remove the misunderstandings and complexities of pay rates that can arise by using umbrella companies, as well as providing a simple PAYE payslip to the worker.
This offering isn’t just a better option for contractors either. If you’re acting as a hiring agency and want to operate as a PEO, it’s a simpler solution for everyone.
How Sapphire can help
We understand the life of a contractor, and where they can benefit from different solutions, so we can help you decide whether PEO would work for you, or whether you should stick with an umbrella company. Contact us today to find out how we can help you.
