The Difference between ASO and PEO
Professional Employer Organization (PEO) and Administrative Services Organization (ASO) are human resource services that both offer advantages to growing and established companies. Read on to find out how these two types of HR outsourcing differ and which one is perfect for various companies.
What is ASO?
An ASO manages daily HR functions like hiring employees, providing wages and compensation, and perform administrative duties as well.
With an ASO system all payroll, benefits, and employee taxes are filed under your Federal Employee Identification Number (FEIN). Co-employment does not exist, and you retain control of all HR functions and strategies. Many companies prefer this setup because they can access HR experts, without hiring new staff.
One downside to ASO is that it does not provide for your workers’ compensation, benefits, and legal assistance to employment issues as these remain your responsibility.
What is PEO?
The best PEO companies are usually small and medium enterprises that outsource their HR services to third-party, offshore providers. These services include but are not limited to payroll and benefits management, HSE management, administrative services, and more.
A PEO or professional employer organization is also known as a co-employer because you essentially transfer your payroll processing and tax compliance to a different company. It’s responsible for complying with employment laws such as minimum wage, civil rights, and other labor laws.
A PEO has a share in the decision-making, but only on HR functions and strategies. An agreement is typically in effect to limit the amount of control the PEO has. This set-up can free up time that you could spend improving the business and other revenue-generating activities.
Many small-to-medium enterprises choose this setup because it allows them to streamline their business processes without creating their HR department. At no extra cost, you get to take advantage of the expertise of a PEO and focus on what matters in your company.
These HR models can both help your business by giving you the human resource capability of a large corporation without the extra cost. Start-ups and smaller companies prefer PEOs because they offer a cost-effective solution to HR management. On the other hand, larger companies that can afford their HR typically go for ASOs or other HR models.