PEO/ Joint Employment
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The agency and the umbrella company become the joint employer of the workers. The workers sign an employment contract that clearly specifies two employers: Agency and Umbrella.
Under this arrangement, the Umbrella can invoice the Agency for all the employment costs without VAT. Money is then transferred to the Umbrella without VAT, for processing salary payments. This is because, for the purpose of payroll, the two entities are deemed to be one.
Under JEM, workers can be paid under “Standard PAYE” or “Umbrella PAYE”.
Agency pays Umbrella all employment costs that includes Timesheet earning, Employer NI, Employer Pension, Holiday Pay and Apprentice levy. The worker gets paid just like a normal employee without incurring any reduction from the Timesheet rate. Umbrella charges Agency a payroll processing fee.
Agency pays Umbrella only the Timesheet earning. The worker bears the cost of employment costs such as Employer NI, Employer Pension, Holiday Pay and Apprentice levy etc. Umbrella charges the agency a payroll processing fee subject to VAT.