When it comes to managing your human resources, business owners have a few options. Two of the most popular are professional employer organizations (PEOs) and administrative services organizations (ASOs). These outsourced HR models provide businesses with a way to streamline their processes.
They can also access expert guidance without having to hire an in-house team. However, there are some key differences between PEO vs. ASO. Which venture owners need to understand before choosing the right one for their company.
In this article, we will discuss what are those and their differences. Read on.
What is a PEO?
A professional employer organization (PEO) is a third-party provider that offers comprehensive services to businesses. It can include payroll processing and benefits administration. It also includes compliance management and risk management.
It acts as an external department for your company. They handle the day-to-day tasks of managing employees while also providing strategic guidance and support.
What is an ASO?
An administrative services organization (ASO) is also a third-party provider that offers outsourced HR to businesses. These organizations do not operate on a co-employment arrangement with their clients. Instead, they provide support in an à la carte manner.
This allows businesses to choose which assistance they need. They typically offer support such as payroll administration, benefits administration, recruiting, and consulting.
However, the client venture remains the legal employer of record for their employees. This means that the company is responsible for all HR-related tasks and liabilities.
Understanding the Differences
While both PEOs and ASOs offer similar assistance, there are some key differences between the two that enterprise owners should consider when choosing which model is right for their company. Here are the factors to consider between ASO vs PEO.
Co-Employment
As mentioned earlier, PEOs operate on a co-employment arrangement with their clients, while service organizations do not. This means that with an employer group, the employees are technically employed by both the client enterprise and the institution.
With administrative service outsourcing, the client remains the sole employer of record for their employees. This can impact how certain tasks and liabilities are handled.
Control Over HR Tasks
With a PEO, the external provider takes on many of the day-to-day tasks involved in managing employees. This means that they have more control over things like payroll, benefits administration, and compliance. With an administrative organization, the client maintains control over these tasks and can pick which assistance they want to outsource.
Access to Benefits
Organizations often have access to better benefits packages for their clients due to economies of scale. Since they operate as a larger entity, they can negotiate lower rates on things like health insurance and retirement plans. However, with an ASO, the client organization may have more control over their benefits offerings and can pick which providers they want to work with.
Here are the statistics from the research done on several reasons why small businesses look for outsourcing services. The biggest reason for outsourcing came from the cost. Followed by difficulty in communicating, failure to meet deadlines, and other reasons that the in-house team fails.
Knowing the Difference Between PEO vs ASO
Regardless of which model you pick, both PEOs and ASOs can offer valuable support to businesses of all sizes. By outsourcing your recruitment tasks, you can free up time and resources to focus on growing. This is while also ensuring compliance and providing top-notch benefits for your employees.
Consider the unique needs of your venture and explore both options to determine which one is the best fit for you. So, it’s essential to carefully weigh the pros and cons of each model before making a decision. So, take the time to understand the differences between PEO vs. ASO and make an informed decision for your business.
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