Professional Employment Organisations (PEOs)

Businesses who offer an Umbrella Employment Solution and abide by the FCSA code of compliance are known as Professional Employment Organisations (PEOs). Below is our guide to how PEOs can benefit employees.

How does an Umbrella provider become a PEO?

Only Umbrella Companies that comply with the FCSA code of conduct can call themselves PEOs.

What is the difference between a PEO and an Umbrella Company?

They both professionally employ workers during and between different assignments but there will be some changes to the expectations placed on them regarding the services they offer.

Both Umbrella companies and PEOs are expected to;

  • Offer balanced advice to prospective employees, with a full picture of the benefits and drawbacks of working for a PEO
  • Never market services as a means of saving money on tax
  • Comply with legislation such as the Agency Workers Regulations and the Pensions Act 2012
  • Conduct the appropriate right to work and identity checks on employees
  • Fulfil all of its obligations as a ‘reasonable’ employer under the law
  • Pay and tax all monies as UK employment income;
  • Maintain clear, transparent documentation communications and processes
  • Offer employees a choice of pension options
  • Have sound processes to ensure all employees are treated fairly, including appropriate disciplinary and grievance procedures.

However, PEOs are expected to:

  • Make sure that all employees enjoy their statutory rights in between assignments
  • Help employees to find their next assignment if they have not yet done so themselves
  • Offer employees a choice of flexible holiday pay arrangements to suit their circumstances
  • Implement minimum pay for employees who are available to work but do not have an assignment
  • Proactively implement the minimum working hours stipulated in employee contracts.

How will PEOs have to handle expenses?

Although a significant amount of expenses will no longer qualify for tax relief, PEOs will still be expected to have an appropriate and reasonable expenses policy for qualifying expenses, which is compliant with all HMRC regulations and guidance. In practice, this means they will need a thorough validation process to make sure every claim is legitimate before payment is authorised - and every claim must be receipted. On top of this, five per cent of expense claims will undergo another audit for the purpose of quality control.

What’s in it for employees?

PEOs will still allow employees to work on projects of their own choice, while ensuring they have all the same rights as an employee.

As well as getting help to secure extensions or new assignments, employees will also enjoy support when they’re not earning. In between assignments PEOs will be obliged to pay at least seven hours national minimum wage a week to an available worker, while they also have to guarantee 336 hours of paid work per year, providing the employee fulfills certain conditions. Other employment benefits such as holiday pay, sick pay and parental leave rights are all respected.

Will PEOs still be held to high professional standards?

PEOs will be expected to adhere to the stringent FCSA code of compliance, which exists to ensure that best practice is followed throughout the contractor services industry.

The code has been developed alongside HMRC, the Association of Professional Staffing Companies and the Recruitment and Employment Confederation, to make sure that PEOs are working in ways which benefit employees while remaining legally sound.


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