PEO vs. ASO

We so often hear the question, “What is the difference between a PEO and an ASO?” The short answer is fairly simple; a PEO, or Professional Employer Organization, is fully responsible for the client’s employees from a tax, risk and compliance standpoint. With an ASO, or Administrative Services Organization, the employee tax and insurance filings are done under the client’s EIN.

A more in-depth explanation is that a PEO becomes co-employer of the client’s employees and manages a variety of labor intensive services such as: healthcare benefits, risk/workers’ compensation, payroll processing, tax preparation and remittance, and W-2 issuance to name a few. It is truly a full service employee management solution.

An ASO can offer many of the same services as a PEO, but the key differentiator is that the client company is the sole employer of record. ASO solutions are ideal for mid to large-sized companies looking to grow their businesses, but already have some in-house employee-related services in place, such as payroll or healthcare benefits. In an ASO scenario, companies can choose the services they need to fill in the gaps with employee management. An ASO can be more of a business augmentation solution, keeping the tax, risk and compliance under the client’s control.

PEOs really shine for small to mid-sized companies. In a PEO scenario, a client may have personnel with limited experience in regards to the necessary and varied nuances in compliance, payroll, healthcare and general day-to-day HR tasks. The PEO is made up of experienced staff members whose collective craft is honed each and every day and are experts and leaders in their skillsets. The most obvious benefit is, while a PEO does charge a fee for services, the depth and breadth of qualified staff responsible for maintaining the client’s employees is profound. The PEO fees pale in comparison to equivalent salaries, benefits and tax burdens charged to the client for an in-house staff of the same expertise level.

In the end, an ASO is a business augmentation solution, while a PEO lets clients focus on building their businesses and takes away all the stress and risk associated with managing employees.

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