ASO vs. PEO: HR Administration Options

September 15, 2012 in , ,

It’s time to think about human resources…the cornerstone of your growing business. You are considering an outside resource and know that you have some options. Two such outsourcing options to consider for your HR administration are the professional employer organization (PEO) and administrative services organization (ASO).

PEOs and ASOs offer similar services with one partner, such as the outsourcing of payroll, human resources, and benefits administration. Both offer opportunities to:

  • reduce HR paperwork,
  • obtain assistance with HR tasks,
  • assist with compliance to help reduce liability risk, and
  • increase the competitiveness of your employee benefits package.

As similar as PEOs and ASOs are, there are also significant differences that can benefit your business depending upon what works better for you. A PEO, for instance, is a co-employment model wherein employees from other PEO clients are grouped together in order to provide more comprehensive, cost-effective benefit options. Third-party providers often have customizable options for PEOs and ASOs and will work with you to determine which solution works for your business.

Integrated ASO Solutions
An ASO model may offer employers administrative efficiencies, economical HR expertise, and competitive employee benefits, while retaining sole control of managing their workforce. There are several outside providers that offer integration through payroll, and in some cases, an HR specialist to help you manage your HR needs.

PEO Providers
The PEO co-employment model provides an integrated solution for small- to medium-sized companies to better manage many employee-related tasks like human resource and employee benefits administration and safety issues. With a PEO, the provider also handles processing payroll, payroll taxes (and in most cases SUI), employee benefits, and workers’ compensation administration while you retain control over managing your workforce and daily operations*.

ASO vs. PEO: Comparing Human Resource Administration Options



Both PEO and ASO


Co-employment relationship between business and PEO

Traditional employer-employee relationship


Certain responsibilities may be shared between the employer and the PEO in accordance with applicable statutes and regulations

Employee relations compliance is the sole responsibility of the ASO employer


Health Care Requirements

Can group larger number of employees in a plan, offering greater long-term stability and broader choices

Based upon company and employee needs


Benefit from pre-established carrier options and network



More carrier choices, depending on geographic availability



May simplify administration when employees are in multiple states

May require several carriers if employees are in more than one state


State Unemployment Insurance

Where allowed by state law, may group employees together for rate stability.

Coverage based solely on the company’s rating and experience, an advantage for companies generating few claims

Assistance with hiring and retention practices to help limit unemployment exposure is available in both models

Workers’ Compensation

May provide coverage

Coverage under employer’s policy is only option

Assistance with improving safety practices can help stabilize loss ratio


Businesses not negatively affected by other companies’ claims/losses


Claims, Safety, and Loss

Assumption of some responsibility and liability for insurance claims, safety, and loss

Employer responsible and liable for insurance claims, safety, and loss




Federal payroll taxes remitted under PEO’s federal employer identification number. PEO may be allowed to report and remit state payroll taxes, however certain state restrictions apply.

Federal and state payroll taxes filed and remitted under company’s federal employer identification number/SUI employer identification number

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