Umbrella, PEO/GPP, or salaried EOR. Which is up 153% in 2026?

PEO usage among umbrella companies is up 153% this year — a number that the FCSA disclosed to a room of umbrella providers, me included, at its annual Forum in London on July 8th 2026.

Why moving to PEO is more than agencies just rebranding

Growth like that signals more than a tweak in contractor engagement models. It’s much more than a rebrand by a few agencies, too. Instead, it signals recruitment agencies actively moving hourly-paid and shift-based workers off the conventional umbrella PAYE model and onto something that pays, invoices and reports differently. And, for good measure, more than just one or two models are now doing the rounds in 2026/27.

Therefore, if you work in healthcare, education, logistics, driving or construction, there's a reasonable chance your payslip is about to change shape, writes Ashley Olliver, a director at Parasol.

At least, those are the five sectors nodding their head in agreement to the 153% rise in PEOs that last month’s FCSA annual event in London disclosed.

What this article covers

Here, exclusively for ContractorUK, I will look at what's actually changing in the PEO space, why now, and what contractors should check before they sign anything new. I’ll also ask the age-old question that has new-ish answers, “Is conventional umbrella the only way for contractors to get paid inside IR35?”

PEO: quick refresher

For first-timer contractors, what a Professional Employment Organisation (PEO) actually is has already been covered, so I won’t rehash the basics here — save to say that, like an umbrella company, a PEO is a simple PAYE model, and the PEO provider becomes your employer of record, taking care of RTW checks, issuing your contract and paying your tax to HMRC.

What’s new right now, as Q4 2026 fast approaches, is what nobody’s really named yet: that’s the Gross Plus Provisions (GPP) model — simply another way of describing the PEO model — and the salaried Employer of Record (EOR) model, which is an EOR, salaried, fixed-term paid-regardless-of-hours contract that, in some sectors, is now being seen by some as the 'third way' after a conventional umbrella and PEO.

Let’s define, demystify and drill down into some of these terms, plus a few others that contractors should know, before I come to why PEO models are in vogue with agencies in 2026/27.

Umbrella, Agency, PEO/GPP, EOR and Salaried EOR: contractor pay models explained

1. Conventional Umbrella: Your agency pays the umbrella one all-in rate. Everything — tax, NI, pension, the umbrella's margin, and your gross pay — comes out of that single figure.

For that reason, it’s sometimes referred to as the ‘Inclusive’ model.

Developed and refined in the early 2000s, the conventional umbrella or inclusive model is simple for the agency to administer, but it means the umbrella is absorbing employer-related risk (statutory sick pay, paid leave accruing during sickness) out of its own margin — and so has to set its margin at a level which will cover those risks.

2. Agency Payroll: the agency pays you directly, usually as a worker under a contract for services rather than an employee under a contract of employment. No umbrella company is involved.

Worker status carries fewer rights: no continuity of employment, and no protection from unfair dismissal.

3. PEO / Gross Plus Provisions (GPP): GPP is the commercial engine behind PEO. The agency pays your gross rate, plus the employment costs, plus a fee. The provider bills it for the actual costs each pay period, plus a fee. The total figure the agency pays the umbrella moves as sick pay and holiday fall due.

Contractors might increasingly see ‘PEO’, because the umbrella company market’s leading accreditation bodies are now offering their stamps of approval for this model.

4. Employer of Record (EOR) – the legal employer, as distinct from whoever directs your work day-to-day. Your PEO provider is simply your employer of record. Where there is an umbrella company involved, whatever the payment basis, that company will be the employer of record.  Confusingly, the same term is also sold as a separate service, for engaging workers in countries where a business has no local entity.

5. Salaried EOR: Instead of being paid for hours actually worked, you're on a fixed-term contract of employment at an agreed salary — paid by the agency/client whether or not you're on assignment that week, for as long as the contract runs.

It's not zero hours, and the agency/client deploys you across its own bookings as it sees fit.

Umbrella providers are building sector-specific versions for education and for social work and healthcare — obvious fits, given how those sectors combine irregular hours with a workforce agencies want to retain rather than re-source every term or rota.

Conventional Umbrella vs PEO: which number is fixed?

Under conventional umbrella, it's the rate (“assignment rate”) your agency pays in the umbrella that is fixed; under PEO, the agency agrees with you the rate you actually receive.

Furthermore, under conventional umbrella, your agency pays an assignment rate to the umbrella, from which employer's National Insurance, employer pension, the Growth and Skills Levy (which replaced the Apprenticeship Levy in April 2026), and the umbrella's margin are all deducted — what's left is your gross pay, holiday pay included.

Under PEO/GPP, your agency agrees the rate you actually receive for each hour worked, and the PEO provider invoices the agency separately for your gross pay plus the employment costs and its own fee;  the agency pays ‘gross plus provisions’, or GPP. You receive a standard gross-to-net payslip, and the employment costs never appear on it.

What changes on your payslip if you move from conventional umbrella to PEO

If your agency moves you from conventional umbrella to PEO, you can expect four differences.

1. The rate you’re quoted by the agency becomes the rate you’re actually paid, per hour, before tax. It will look lower than your old assignment rate (which was paid via the conventional umbrella/inclusive model). Your take-home shouldn’t drop, because the employment costs that used to be deducted from the assignment rate are now paid by the agency separately. However, make sure you check the numbers rather than assume.
2. Your payslip gets simpler. Gross pay, tax, National Insurance, pension. No margin, no employment costs, no reconciliation statement.
3. Holiday pay, sick pay, pension and continuous employment should stay with you, because you’re still employed under a contract of employment.
4. Expenses are a bit more restricted than they are under umbrella. Travel and subsistence relief for commuting is still denied where you’re under Supervision, Direction or Control (SDC), which covers most assignments in these sectors.  Expenses like inter-site mileage, work-from-home allowance, and workplace parking can only be reimbursed tax-free where the agency or client pays them separately.

Why are agencies moving to PEO now?

Three things converged this year, and none of them are PEO-specific — yet they're why PEO (and salaried EOR) have become popular, often preferred ways of contractor engagement.

First, the National Living Wage increased to £12.71 on April 1st 2026.

Second, employer NI, holiday pay and pension rose with it, lifting the minimum blended rate an umbrella arrangement can absorb — and teaching assistant, care and warehouse bookings often sit below that line. Statutory sick pay changed for 2026/27 too: the lower earnings limit requirement was scrapped, so workers on small numbers of hours qualify from day one, which is a real and unpredictable cost across a rota of shift workers.

Third, there's HMRC’s Joint and Several Liability legislation, in force since April 6th 2026, which makes the agency closest to the end-client liable for PAYE and NI if an umbrella in the chain fails to pay the correct amounts — something we've flagged shouldn't be viewed in isolation from the wider Employment Rights Act reforms. It’s thanks to JSL that pay arrangements inherited from legacy PSLs are now under renewed scrutiny. 

How is cash flow pushing agencies toward PEO?

Because PEO lets an agency pay the actual employment costs as they're incurred, rather than incorporating them into a ‘guesstimate’ made months in advance. A cancelled shift or a worker's sick leave gets invoiced when it happens, and the risks of that aren’t baked into a rate set at the start of the contract. That means the agency only pays the true and actual cost per hour.

What does 2027 hold for contractor recruitment agencies?

Shift notice and cancellation rights for agency workers, guaranteed hours, and the reduction of the unfair dismissal qualifying period to just six months are all coming in 2027.

And there’s even more. The Fair Work Agency, operational since April 7th 2026, takes on umbrella company regulation next year too.

Does GPP or Salaried EOR reduce your agency's JSL risk?

No, not on their own. The tax liability position doesn't move between these models; what does move is the employment cost risk. That's because the law defined 'umbrella company' for the first time this year, and the definition covers any business that employs workers and supplies them to someone else — which is what a PEO provider does.

So switching model changes nothing about the agency's liability under HMRC’s JSL rules.

For agencies, one route does remove the joint liability: with payroll run in-house, there's no umbrella in the chain for a liability to attach to. The trade-off, though, is carrying the employment obligations itself, including those that the Employment Rights Act is phasing in for agency workers through 2027.

What does move is employment cost risk: sick pay, holiday accrual, pension and the cost of a cancelled shift all shift from a provider's margin onto the agency's invoice.

So what actually changes — and does it protect you?

What changes is who funds your entitlements, not the entitlements themselves. As a contractor, you're entitled to them either way. And yes, the protection is real: a contract of employment with a compliant umbrella provider may give you more than worker status under agency payroll does, particularly on sick pay, pension and continuity of service.

My view is that this visibility is overdue. An agency that knows precisely what its workers receive per hour, and what employing them costs, is better placed to price a contract — and to answer any inquiry from the Fair Work Agency.

And the one route that removes your agency's joint liability typically puts you on worker status. The liability question is your agency's problem, rather than yours, so if a switch is presented to you as a compliance improvement, it's worth asking what is being improved.

What to check if your agency moves you to PEO?

Three things are worth establishing, ideally in writing, before you sign anything new: your hourly rate under the new model versus what you were being paid before; whether your continuous employment carries over (which it generally will) or starts again; and who employs you, on what contract (employee, or worker) and payment basis (conventional umbrella,—PEO/GPP, or salaried EOR).

That last answer tells you most of what you need to know about where the risk will sit in the future.

Two things to bear in mind along the way: you'll probably be 'told' rather than 'asked', and the switch from umbrella to PEO will require a new contract.

PEO/GPP and salaried EOR: your questions answered

What does GPP stand for? GPP means "Gross Plus Provisions" — the agency pays the umbrella your actual gross rate, plus holiday pay and other employment costs, plus the provider's fee, all invoiced separately rather than bundled into one all-inclusive rate.

Is a PEO the same as an employer of record? Where you work through an umbrella company, that company will be your employer of record in the sense that it's your legal employer — but “employer of record” is also sold as a separate international-hiring service, and, increasingly, as a UK salaried fixed-term contract distinct from PEO's pay-per-hour model (‘Salaried EOR). They aren't interchangeable terms.

Why are agencies moving contractors to PEO/GPP or Salaried EOR in 2026? Mainly the National Living Wage rise, changes to statutory sick pay eligibility, and Joint and Several Liability from April 2026 — plus a cash-flow motive, since visible per-worker costs beat costs buried in an umbrella's margin.

Does switching to PEO/GPP remove my agency's joint liability risk? No. The statutory definition of an umbrella company covers PEO providers too, so the liability position under HMRC’s April 6th 2026 rules is unchanged. What changes is how employment-related costs are funded as between agency and umbrella company, not who's on the hook for PAYE compliance.

The takeaway: Is conventional umbrella the only way for contractors to get paid inside IR35?

No, at least, that's our resounding answer to the question agencies often ask us. There are three engagement models to consider — conventional umbrella, PEO/GPP and Salaried EOR — even though the UK umbrella contractor market has produced a fair amount of terminology around what is actually a fairly small number of ideas and concepts: PEO, GPP, EOR, Salaried EOR.

Conventional Umbrella/Inclusive remains the right model for most professional contractors operating inside IR35. But for hourly-paid and shift-based work, a PEO can often serve both the worker and the agency better. Legislative changes in 2026 are prompting many agencies to shift from conventional umbrella to PEO, and we don't think the genie can now be put back in the bottle, especially with more regulatory changes and challenges primed for 2027.