IR35 and the PEO model

What a PEO arrangement is

Under a Professional Employer Organisation model the worker is genuinely employed, and the employment costs are met by the hirer rather than deducted from the worker’s assignment rate.

That single difference is what separates it from an umbrella arrangement, and it is the reason a PEO payslip reads more like a conventional employment payslip.

Why IR35 stops being the question

• The worker is employed, so there is no intermediary for IR35 to reach.
• PAYE and National Insurance are operated on ordinary employment, not on a deemed payment.
• Status determinations are not required for the engagement.
• Employment rights — holiday, sick pay, pension, parental leave — apply from the start.

How the duties divide

The PEO holds the employment contract and owns payroll, filings, pension enrolment and the statutory insurances. The hirer keeps day-to-day direction of the work and the commercial relationship.

The division should be written down. Most disputes in this model come from an unstated assumption about who owns a duty, not from the duty itself.

Who it suits

It suits hirers who want the compliance question closed rather than managed, and workers who want employment rights without giving up contract work.