PEO or ASO: Choosing the Right Service

Written by Blake Odom

President & COO

Applied Business Solutions

July 11, 2018

PEO & ASO Outsourcing can take many different forms, from using an outside ASO firm for help with pick-and-choose tasks to entering a co-employer partnership with a PEO.  The approach you take depends on the needs of your company and your reasons for outsourcing.

What is an ASO?

An Administrative Service Organization (ASO) can manage administrative HR tasks, process payroll, administer benefits and help with regulatory compliance on an à la carte services basis; but the liability of risk management and the responsibility of compliance is the solely the responsibility of the business.

What is a PEO?

A Professional Employer Organization (PEO) carries the “burden” by handling your full range of HR tasks and processes, including payroll, compliance, safety, risk management, recruiting, training and more. They can assist with onboarding, answering employee questions about benefits and withholdings and manage workers’ comp claims, while you still retain decision-making power and responsibility for the operation of your business.

When a business owner partners with a PEO, they enter into a unique relationship which allows the PEO to assume many of the risks and responsibilities including:

  • Federal, State and Industry Compliance
  • Employee Health and Welfare Benefits Administration
  • Workers’ Compensation and Risk Management
  • Human Resources Management (Administrative and Strategy)
  • Managing Vendor Interactions
  • Tax Filing, Compliance and Risk Management
Key Differences and Similarities When Looking at PEO vs. ASO

Here’s the Big Difference: A PEO becomes the employer of record. An ASO doesn’t.

When you partner with a PEO, they essentially become your co-employer. They will file taxes under their Tax ID number (EIN), assume responsibility for compliance and share the burden of risk. In many cases, they can also offer better insurance rates and benefit plans based on economy of scale.

PEOs make a good fit for small to mid-sized businesses they often cannot support an internal HR staff or they need the expertise of an external provider for regulatory and legal issues. By freeing up internal resources, PEOs help smaller businesses focus on their core competencies, giving them the freedom they need to grow as they reinvest their time and energies into their business.  Determining which model is ultimately best suited for your business depends on a number of variables that are unique to your business.  The best way to decided which model best suits your business, is to speak to one of our professionals.

Is a PEO Right for You?

If you’re a small business struggling, consider working with a Professional Employer Organization.  Not sure if a PEO is right for your business model? Contact us at (855) 792-2808. We’re available to answer your questions and help you learn more about how a PEO can benefit your company.

What is Human Capital Management?

Human capital management (HCM) provides an overall strategy to hiring the right talent, managing performance and optimizing productivity.

Have a question? Our leadership team is here to help. Contact us today.

Recommended for you

Applied Business Solutions has 75+ years of combined Payroll, Insurance and Human Resources experience with companies ranging from 1 to 2,500 employees.