What is PEO and Why it’s a good option for UK Temporary Recruitment After April 2026

From April 2026, UK recruitment agencies engaging temporary workers will need to navigate significant changes under the Employment Rights Act, including a new set of day-one rights, such as statutory sick pay.

For many agencies, this creates operational challenges: more complex payroll, pensions, and compliance obligations. One solution that is rapidly gaining traction is the PEO model

What Is a PEO?

A Professional Employer Organisation (PEO) provides fully outsourced employment for temporary workers and becomes the legal employer of record.

• The recruitment agency continues to source and manage placements.
• The PEO takes responsibility for employment, payroll, pensions, and HMRC compliance.

This means agencies can focus on building their business, while the PEO handles the complex and time-consuming employment obligations.

PEO vs Umbrella Model

While both PEOs and Umbrella Model are both fully employed models, the practical benefits of a PEO are significant:

• Workers are paid PAYE without the need to uplift rates to cover employment costs and company margins.
• Agencies can pay workers any rate, including the National Minimum Wage, as employment costs are included in the PEO fee.

In short, a PEO simplifies payments and compliance without impacting the worker’s pay rate.

How Agencies Are Charged for PEO Services