ASO vs PEO: Is There a Difference?

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ASO vs PEO: Is There a Difference?

12/05/2022  |  georgev Categories: Blog

In 2021, 70% of HR team members said that that was the most challenging year of their HR career. 

If your company is also struggling, you can help them by hiring an ASO or PEO company. But what are the differences between ASO and PEO?

Choosing the right one could help your company succeed and grow while also taking care of your HR team. Keep reading to learn about the differences.

What Is a PEO?

A Professional Employer Organization (PEO) helps a professional employer with outsourced HR services. They can handle tasks like state unemployment insurance, employment law compliance assistance, and worker’s compensation. 

A PEO will share the tax ID with their client for this to happen. This is also a model known as co-employment or joint employment. Through this, the PEO can handle many employer responsibilities so that the business can focus on managing its employees and their day-to-day activities. 

For tax purposes, the PEO is known as the Employer of Record. They will also be known as this for state and federal employment laws. If there are any legal problems related to HR, the PEO will also take on some of that risk. 

The company and the PEO will have to meet and determine how they will divide the responsibilities. Some PEOs will also sponsor different employee programs, like retirement plans, health coverage, and other benefits. 

In some cases, your business could save money by spreading the risk across different clients. It can also help if you’re a small business working with a larger PEO.  

How a PEO Works

A PEO will act as another employer that your business uses. The PEO will allocate some of the responsibilities of the clients to their own business for your best interest. 

When you find a PEO that you want to partner with, you’ll meet with them and develop a service agreement. When you set this up, ensure that you read through all of the contracts to ensure that you’re getting what you want. 

When you finish the arrangement, your business will have its relationship with its employees, and the PEO will also be a co-manager. 

Some businesses think that a company that uses a PEO will lose control of the workforce, but that isn’t true. You’ll still have complete control of your employees and daily operations. 

You’ll still be able to make decisions around: 

  • Promotions
  • Pay
  • Health insurance
  • Hiring
  • Recruiting
  • Discipline
  • Demotions
  • Firing

However, when you make your decisions and act on them, the PEO can step in and offer expertise and ensure that you’re following all legal processes and being compliant. 

What Is an ASO?

On the other hand, the ASO is the Administrative Services Organization. They’re similar to PEOs because they provide outsourced HR services, but they also offer specific services that a PEO doesn’t. 

There is no joint employee arrangement between an ASO and a company. The ASO doesn’t act as a co-employer for your employees. You can outsource specific tasks, but you’ll still have to retain all of its liability. 

The ASO can handle insurance and tax filings, but they do it under your tax ID rather than using a shared one. Many ASOs can also help you with legal questions and ensure that your complaint, but the responsibility is still on your business. 

An ASO also won’t sponsor any employee benefits, and you’ll have to handle all of that. 

How It Works

This solution works by overseeing daily administrative tasks for your company’s HR. This will still free up your HR team’s time to focus on other aspects for your employees. 

If you need help with benefits and health coverage, the ASO can help, but you’ll still be in charge of maintaining and running it. 

What Are the Differences?

The main difference between the ASO and PEO is the delivery model. An ASO provides many similar services that a PEO does, but they are not also an employer of your employees. 

An ASO usually is cheaper, but you won’t have as many benefits as you would get with a PEO. Plus, an ASO is not liable for any mistakes they make while outsourcing your HR services. 

Which One Should You Choose?

When you are trying to decide between the two, it’ll vary between each vendor, so make sure you contact them and learn about the different services. 

There are many differences in the cost, and the cost is usually related to the State Unemployment Tax Act. The only way to get an accurate price is to ask for personalized quotes. 

Typically, the main deciding factor will be how much an employer wants another company to handle its HR tasks. Do they want someone to choose health benefits? 

A PEO would be the best. But if the company still wants to maintain all liability and control, then an ASO may be better.

Many companies who don’t want to deal with any part of HR will choose a PEO. These companies usually want to reduce their liability and risk while still enjoying all the benefits of having an entire HR team. 

However, if companies still want to keep some of their internal HR staff, you should choose an ASO. This will act as an extension of your internal department, and they can be helpful if you need to fill in some of the skills gaps. 

Discover More About ASO vs PEO

These are only a few differences between an ASO vs PEO, but there are many more that you should consider before choosing one. 

If you’re leaning more towards a PEO, you should make sure that you choose a global PEO.

Thankfully, we have services that can quickly partner with your business, so make sure you check out our services today.