As you start the new year, you’re probably thinking through decisions you have to make to set your business apart and reach your financial goals this year. Among your considerations may be whether or not you should outsource administrative support and what options are potentially available for you to partner with either a PEO and ASO or even an HRO.
Let’s start with the basics. PEO stands for Professional Employer Organization, while ASO stands for an Administrative Services Organization.
Businesses engage either a PEO or ASO when in need of outsourcing human resources or the administrative aspect of having employees, among other benefits of bundling services together. However, PEOs and ASOs have significantly different business models.
In this article, you will learn about:
- PEOs and how they work.
- ASOs and how they work.
- The basics of HROs.
- The difference between a PEO and an ASO.
- How MartinoWest can support your business.
Table of Contents
PEOs and How They Work
A PEO partners with businesses as an employer on record and takes up managing your employees and fulfilling HR-related regulatory requirements.
As the employer on record, the PEO assumes all risks and responsibilities of being a legal employer. These are some of the services offered by a PEO:
- Human resource administration, which includes managing the recruitment cycle and payroll administration, including filing taxes, meeting other compliance requirements, and employee benefits administration.
- Master coverage plans with benefits customized to your employees’ needs.
- Resources to benefit from SUTA (State Unemployment Tax Rate) rates.
- Competitive workers’ compensation coverage.
ASOs and How They Work
As the name suggests, working with an ASO means you outsource HR administrative functions, such as payroll processes and benefits administration. They will also support you in HR regulatory compliance.
However, unlike a PEO, an ASO doesn’t serve as a co-employer or an employer on record. These are some of the services offered by an ASO:
- Human resource administrative related functions, such as payroll administration and compliance, employee benefits administration, and recruitment.
An Introduction to HROs
Human resource outsourcing (HROs) are similar to PEOs and ASOs in that they also offer human resource administration services.
HROs, however, offer services based on their experience and expertise. Meaning that companies that opt to work with HROs have identified an HR-related skills gap within their organization and require specific aspects of HR support.
What’s the Difference Between a PEO and ASO?
The significant difference between a PEO and an ASO is the co-employment agreement. A co-employment agreement, usually signed between a PEO and a business, spells out each of the parties’ responsibilities as far as employee management is concerned.
Depending on the agreement, the PEO may willfully bear whole or partial responsibility for non-compliance liability with employment laws.
The co-employment agreement is also the basis of the difference between an ASO and a PEO. The following are some differences:
- Co-Employment: PEOs offer a unique service since they act as the employer on record for your employees. Employer on record means they take up managing your employees, managing payroll and complying with HR/payroll regulations, providing workers’ compensation and employee benefits coverage.
You, as the business owner, still handle the day-to-day management and functions of your business. Hiring, firing, wages, scheduling, that all remains in your hands. The PEO provides more of the back-end HR and legal assistance to make sure these actions are handled in compliance.
ASOs offer HR-related support. However, an ASO doesn’t become the employer on record; therefore, they are not liable for non-compliance even though they’ll take up compliance responsibilities.
- Workers’ Compensation – PEOs have a master workers’ compensation policy for their employees. Working with an ASO means the client takes up coverage for its employees or secures one through its employees’ support.
- Risk and Safety Management – ASOs do not have risk or claims management, nor do they administer safety programs for their clients. PEOs, as a co-employer on record, offer risk and safety management services as part of their service bundle.
- Regulatory Compliance: Both an ASO and a PEO offer regulatory compliance services, but only the PEO is liable for non-compliance.
What’s the Difference Between a PEO and ASO?
Choosing between an ASO or a PEO depends on your business objectives. You should opt to work with an ASO if your goals are:
- To outsource HR administration and still maintain 100% control over your employees.
- To offer competitive employee benefits on your own.
An ASO will serve as an HR department within your company. It’s a favorable choice for companies that wish to maintain their
You should consult with a PEO if:
- You wish to outsource all aspects of your HR requirements, cede autonomy over HR management, and not worry about HR regulatory compliance issues.
- You want the benefit of collective bargaining for health plans, workers’ compensation, and other employee benefits. Working with a PEO may mean that your employee benefits are as competitive as major corporations in your sector. Think large group rates at small group prices.
- You want to stop worrying about risk management and administration of safety programs.
A PEO will function as an outsourced HR department within your company. You will still have a say over your employees’ management, but you’ll always have to build concurrence with your PEO.
How MartinoWest Can Support Your Business
MartinoWest’s core mission is to support the success of your business. Our investment is to find the right solution for your business.
We work with PEOs to ensure you effectively provide robust employee benefits and workers’ compensation.
By partnering with MartinoWest, you get to free up valuable time and resources to focus on your business’ core.