What is a PEO?
PEO stands for Professional Employment Organisation; a type of business in the US, but generally used as a payroll product name here in the UK. It’s one of a handful of payroll options available to recruitment agencies to outsource their payroll function. Based on PAYE, and providing a partnership approach to employing workers, there are plenty of benefits for all parties.
Origins
The model originated in the USA to offer cheap healthcare cover for smaller employers. Small companies found it hard to get cheap life and medical cover for their employees, so a PEO combined all the small companies together to assimilate a large group organisation and hence gain life and medical cover at corporate rates.
People Group has led the way in the sector, bringing the model over to the UK and innovating and modifying it to create a solution that is perfect for the UK market.
Protect your business
Reduce
costs
Offer
better service
Preferred by contractors
HMRC
reviewed
Professional Passport approved
How does it work?
There is no rocket science. To fully understand the inner workings of PEO, we recommend downloading our guide to PEO using the form above.
However, put simply it’s outsourced PAYE with some advantageous elements for both recruitment agencies and contractors.
When using People PEO payroll the contractor gets access to a wide range of benefits and a much clearer pay slip helping to maintain trust and minimise queries right from the start. And for recruitment agencies, they reap the benefits of hassle free payroll, cash flow and cost efficiencies and a positive increase in brand perception.
The benefits of PEO
How does PEO compare?
PEO versus ‘in-house’ PAYE
In recent years we’ve seen recruitment businesses and risk averse end clients shift away from Umbrella payroll to ‘in-house’ PAYE, particularly following 2017 Public Sector Off-payroll. While this approach does remove some of the risk, it doesn’t necessarily represent the best option when it comes to efficiencies and administration. And for some end clients in particular the need to cap headcount can sometimes leave this option redundant.
When you delve deep into all of the costs associated with running in-house payroll you begin to understand the merits of partnering with a PEO payroll expert like People Group. On average ‘in-house’ PAYE costs 2% more than People Group’s outsourced PEO option.
PEO Versus Umbrella payroll
There’s plenty of similarities with PEO and Umbrella payroll. Both are based on the Pay As You Earn (PAYE) system. Both provide access to our additional benefits package. And both provide a totally compliant payroll option. However, PEO is fundamentally different when it comes to transparency.
Contractors have clear and simple pay slips with deductions only for PAYE tax, employee National Insurance and an employee pension contribution. That’s it. No ENI, Apprenticeship Levy, or Employer pension. Keeping it simple right from the start.
When you factor in the potential cash flow and efficiency savings and consider the reputational damage we’ve seen with some Umbrella schemes, PEO payroll is a winner every time.
