Being in the PEO industry, I often run into the question, “What is the difference between PEO vs. ASO?” To tackle this question, let’s start by defining the initialisms we are looking at here…
PEO – stands for Professional Employer Organization.
ASO – stands for Administrative Services Organization.
Alright, now that we’ve got that out of the way, let’s look at what these actually mean and what the real differences between these two service models are.
Both PEO and ASO are great options for businesses needing to outsource their human resource and administrative duties related to having employees. Both also support the employer’s ever-changing compliance burden. BUT there are some differences, and before we look at these differences let’s get a basic understanding of each service.
What is a PEO?
A Professional Employer Organization (PEO) carries the “weight” of employment for business owners and supports them in the ever changing world of compliance. A PEO will take on the administrative functions of an HR department to manage employment related tasks.
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 related to being an employer. In doing so, it offers some unique benefits to the employer.
A PEO helps business owners by outsourcing administrative duties related to the following areas:
- Employee Health and Welfare Benefits Administration
- Payroll and Tax Services
- Workers’ Compensation and Risk Management
- Human Resources Management
- Alternate Dispute Resolution
What is an ASO?
On the other hand, an Administrative Service Organization (ASO) is similar in that it is also an option to outsource your administrative HR tasks, process payroll, administer benefits, and help with regulatory compliance.
What is co-employment?
Co-employment is the unique partnership between a PEO and the employer. It means we take care of your troubles because they’re our troubles too. It provides employers and employees an umbrella of safety that is typically impossible for the average business to attain without the partnership. This shared liability when you’re running a business can be a life saver, but some businesses find that an ASO model just makes more sense for them.
This Table Outlines the Key Differences and Similarities When Looking at PEO vs. ASO
|PEO vs. ASO Comparison||ASO||PEO|
|Workers’ Compensation Coverage||Coverage provided by client’s own policy.||Coverage provided under PEO’s master policy or coordinated master polices (some states allow worksite co-employer to carry client level WC program).|
|Risk and Safety Management||Employers Resource provides safety program support to all ASO clients, but cannot provide claims management as ASO.||Claims management and safety programs compliance administered by PEO.|
|Who is the Employer of Record?||Client is the employer of record.||PEO is the Federal and most states employer of record. Certain states require client level reporting and PEO has power of attorney to pay.|
|Human Resources Administration||Human resource responsibilities are supported by ASO, but worksite employer responsible to follow proper HR policies compliant with laws and regulations.||Human resource responsibilities are supported by PEO , but worksite employer responsible to follow proper HR policies compliant with laws and regulations.|
|Regulatory Compliance||ASO manages responsibilities related to regulatory compliance.||PEO manages responsibilities related to regulatory compliance.|
|Employee Benefits and Administration||Coverage obtained by client or obtained through ASO.||Coverage can be offered under PEO master policies or client may choose to use own policy. PEO may also administer the plans.|
|Payroll Tax Liability||The employer is liable.||The PEO is liable for federal taxes. State rules vary.|
|State Unemployment Tax (SUTA) Rate||Client’s SUTA rate is used.||The PEOs SUTA rate is used (there are some states that require worksite employer level policies).|
|Unemployment Claims||Client or ASO manages unemployment claims.||PEO manages unemployment claims.|
Did you know our ADR program is available to both our ASO and PEO clients? Learn more about ADR here.
PEO vs. ASO, Which Is Better for Your Business?
Both models provide great administrative support, compliance help, safety programs, and alternate dispute resolution programs with Employers Resource as your partner. Determining which service model is ultimately best suited for your business depends on a large number of variables that are unique to each business.
The best way to decide is to submit a request for a proposal and find out which model your business is best suited for. We’d be happy to walk you through the advantages each model offers your business to help you decide.