Most businesses today utilize some form of HR outsourcing. An Administrative Services Organization (ASO) provides a combination of several business processes outsourced to a single provider. Typical business processes outsourced in an ASO arrangement include payroll processing, Human Resources, employee benefits administration and retirement plan services.
A similar arrangement to the ASO model is the Professional Employer Organization or (PEO) arrangement. A PEO offers a co-employment arrangement in which they manage your business processes including payroll and tax compliance, Human Resources compliance, risk and safety management, and employee benefits and administration.
The major distinction between a PEO vs. ASO arrangement is that no employment relationship between the ASO and your employees exists. The ASO model offers the following:
- Ability to outsource business processes such as payroll and tax compliance, human resources functions, employee benefits administration, workers' compensation administration, and retirement services
- Ability to retain your own employee benefits or have the provider quote, implement and manage benefits on your behalf
- Ability to retain your own workers' compensation policy or have the provider quote, implement and manage on your behalf
ASO vs. PEO Comparison | PEO Solution | ASO Solution |
---|---|---|
Who is the employer of record? | Co-employment relationship between client and PEO. PEO is employer of record | Client – traditional employer-employee relationship |
Who is liable for payroll taxes? | Employer and employee taxes reported and deposited under the PEO’s FEIN | Employer and employee taxes reported and deposited under the Client’s FEIN by ASO |
Which state unemployment tax (SUTA) rate is used? | PEO's SUTA rate dependent upon state | Client's SUTA rate |
Who manages unemployment claims? | PEO manages unemployment claims | Client or ASO – could be additional cost |
Who is responsible for workers' compensation coverage? | Coverage provided under PEO’s master policy | Coverage provided by client's own policy or can be obtained through ASO |
Who is responsible for risk and safety management? | Claims management and safety programs compliance administered by PEO | Claims management and safety compliance provided by ASO or W/C carrier – could be additional cost |
Who is responsible for employee benefits? | Coverage can be offered under PEO master policy or client may choose to use own policy | Coverage obtained by client or obtained and may be administered through ASO |
Who is responsible for human resources? | Human resource responsibilities managed by PEO | Human resource responsibilities managed by ASO as part of service agreement |
Who is responsible for regulatory compliance? | PEO manages responsibilities related to regulatory compliance | Regulatory compliance managed by ASO as part of service agreement |