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ASO vs. PEO Comparison - Which one is right for your business?

The Professional Employer Organization (PEO) and Administrative Services Organization (ASO) model both enable employers to cost-effectively outsource the administration of payroll, human resources, employee benefits, and workers' compensation to a third party allowing them to focus on running their business.

Professional Employer Organization (PEO)

The Professional Employer Organization (PEO) concept was started over 20 years ago and is also known as “co-employment” or “employee leasing”. The Professional Employer Orginization (PEO) model typically offers the following:

  • Ability to outsource business processes such as payroll and tax compliance, human resources functions, employee benefits and administration, workers' compensation and administration, and retirement services
  • Customized benefits to fit your company, typically through a single carrier which could be an advantage or disadvantage based on the health of your individual group
  • Ability to fall under the PEO's SUTA rate which could be an advantage or disadvantage based the PEO's SUTA rate compared to yours
  • Ability to utilize the PEO's workers' compensation policy which could be an advantage or disadvantage based on the PEO's claims history and experience modification rate

There are some possible disadvantages to the PEO model (see also PEO Disadvantages). First, under the co-employment relationship, the PEO becomes employer of record giving the PEO greater control over your employees. Second, since the PEO is employer of record they have a shared liability and thus are typically more expensive compared to the ASO model. See also ASO / PEO Cost Comparison.

Administrative Services Organization (ASO)

The major distinction between a PEO vs. ASO, under the Administrative Services Organization (ASO) arrangement there is no employment relationship between the ASO and your employees. The ASO model typically 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 SUTA rate which could be an advantage if you have a competitive SUTA rate currently
  • Ability to retain your own workers' compensation policy or have the provider quote, implement and manage on your behalf

The Administrative Services Organization (ASO) model being comparable to services offered through the PEO offers a few distinct differences. First, under the ASO you remain employer of record and do not give up control of your employees. Second, under the ASO arrangment you also have more flexibility as to choosing Workers' Compensation and Group Health Insurance carriers. Third, administrative fees per employee per year are typically significantly less under the ASO arrangement versus the PEO arrangement. See also ASO / PEO Cost Comparison.

If you are currently in a Professional Employer Organization (PEO) relationship and would like to learn more about the Advantage Smart ASO solution provided by Solid Business Solutions, please contact us here.

If you are interested in learning more about Professional Employer Organizations (PEOs) and the PEO Broker Services provided by Solid Business Solutions, please contact us here.