The Differences Between a PEO and an ASO

If you’re on the hunt for a service provider to manage the administration of payroll, human resources, benefits and workers compensation you’ve likely stumbled upon two options: a PEO and an ASO.

At first glance, they appear to have the same business model – so what’s the difference?

PEO:

A relationship with a Professional Employer Organization (PEO) is a co-employment relationship, meaning that your PEO will become the employer on record for tax-related purposes. Because many companies may be utilizing the same PEO that you are, the PEO on paper probably has many more employees than you do, which provides you with stronger purchasing power when shopping for health benefits, retirement options, and other employee-related benefits.

Liability is shared through the co-employment relationship as well – which is a very attractive benefit for business owners continually concerned with payroll, workers compensation, risk management and EPLI. PEOs work harder to keep your organization within compliance standards, because at the end of the day any issue is their issue too!

ASO:

An Administrative Services Organization (ASO) is a very similar organization in that many of them offer the administration of payroll, HR, benefits, workers comp and more. However, there’s one major difference: a relationship with an ASO is NOT a co-employment relationship. Employees remain your employees.

Because employees are not employees of the ASO, employers have the ability to retain their own employee benefits, or have their ASO shop out and manage options for them. Without the purchasing power of a large organization with lots of employees on your side, you may have higher rates on services such as payroll, benefits, and workers compensation.

While ASOs lack some of the attractive benefits associated with PEOs, they tend to have administrative fees (per employee, per year) that are significantly less than PEOs – because the employer is only paying for the outsourced support of various employee management functions and the ASO is not assuming much liability.

Ultimately, selecting the right organization comes down to what your particular organizational needs are. Not every company is a good fit for a PEO, and not every company is a good fit for an ASO. At Employer Solutions Plus we represent vendors within both categories. After an evaluation of your company’s wants and needs, we then present the options that will work best for you.

To learn more, contact our team.