Highlights
- Choosing between a PEO and an ASO depends on your business size, in-house HR capabilities, and specific needs.
- PEOs offer a co-employment model with comprehensive HR services, while ASOs provide administrative support for specific HR tasks.
- At WorkLogic HR, we provide flexible HR solutions tailored to your business needs. Contact us today for a consultation.
As your business expands, HR tasks become more demanding, taking up valuable time and resources. Outsourcing HR can be a smart solution — but should you choose a PEO or ASO?
In this article, we’ll break down the differences between these two HR outsourcing models, helping you decide which one best fits your business needs.
Let’s get started!
What is a PEO?
A Professional Employer Organization (PEO) is a firm that provides HR services to small and medium-sized businesses. When you partner with a PEO you enter a co-employment relationship, where they become the employer of record for tax and insurance purposes.
Under this model, the PEO takes responsibility for various HR functions, including payroll administration, employee benefits management, workers’ compensation coverage, compliance with labor laws and regulations, and workplace safety programs. By outsourcing these time-consuming and complex tasks, your internal team can have more time to focus on core operations and growth strategies.
What is an ASO?
An Administrative Services Organization (ASO) is an outsourcing model that provides businesses with HR and administrative services without the co-employment relationship of a PEO arrangement.
ASOs offer a more limited scope of services, mainly focusing on payroll administration, benefits management, and compliance support. They can easily accommodate business growth or downsizing, adjusting their services as you need.
PEO vs ASO: What are the Differences?
| PEO | ASO | |
| Employment relationship | Co-employment model. The PEO is the employer of record for tax and insurance purposes. Your business manages day-to-day operations and supervises employees. | Non-co-employment model. Your company remains the sole employer of record, and the ASO acts as a third-party service provider. |
| Services and support offered | Payroll processing Tax administration Employee benefits management Workers’ compensation Regulatory compliance. | Payroll processing Tax administration Benefits administration Compliance support |
| Pricing models | Fee-based pricing model. Your company pays a percentage of your total payroll costs, which can range from 2% to 12%. | Flat fee or per-employee fee. The fees can vary based on the specific services included in the package. |
| Risk management and compliance | As co-employers, they share the legal responsibilities and liabilities with your business. | They provide compliance guidance and resources but don’t engage in co-employment. |
| Employee benefits | PEOs provide access to large-group employee benefits at competitive rates. They also handle benefits administration and compliance. | ASOs help administer your existing benefits plans. While they may provide guidance on HR compliance and regulations, your business remains responsible for ensuring benefits compliance. |
Choosing the Right Model for Your Business
There’s no right or wrong when choosing between a PEO and an ASO. It all comes down to your business’s unique needs and goals.
Here are a few factors to consider when making a decision:
- Business size and growth stage: For small to medium-sized businesses with no dedicated resources or expertise, a PEO might be a better fit. Besides, as your business grows, a PEO can provide scalable HR support. ASOs, on the other hand, might be more suitable for larger organizations with HR departments that require assistance with specific functions.
- In-house HR capabilities: If your business has either a small team or no in-house HR staff, a PEO can handle all of your HR functions, freeing up your time and resources to focus on core business operations. However, if you already have an established HR team, an ASO can complement their efforts by handling specific tasks like payroll or benefits administration.
- Compliance and risk management: PEOs offer compliance support and risk management services. This can be helpful if your business operates in heavily regulated industries or has a distributed workforce. ASOs can also provide compliance assistance, but the level of support may vary.
- Employee benefits: PEOs often provide access to a wide range of employee benefits, including health insurance, retirement plans, and other perks, at a competitive rate. This might be particularly valuable for attracting and retaining top talent. ASOs only take care of the administration side of benefits.
- Budget considerations: While PEOs have higher overall costs, they often provide cost savings through economies of scale and negotiated rates for benefits and insurance. ASOs may have lower upfront costs but may require additional investments in separate HR services or resources.
Worklogic HR: Flexible HR Outsourcing Solutions for Your Business
Outsourcing HR gives you access to a team of HR experts and saves you valuable time spent on routine, administrative tasks. That way, you can focus on more strategic initiatives.
Choosing between a PEO partnership and hiring ASO services can be difficult, but it doesn’t need to be. At WorkLogic HR, we provide flexible HR solutions for businesses. We can discuss your specific needs and find the best approach for you, ensuring compliance, cost-effectiveness, and a smooth transition to the model of your choice.
Investing in the right HR outsourcing model is an investment in your business’s success. Contact us today to schedule a personalized consultation.
