PEO vs. ASO
When considering an outside resource for your human resources, there are two common outsourcing options that companies consider: a PEO or an ASO.
- A Professional Employer Organization (PEO) is a firm that partners with employers in a contractual co-employment relationship that involves shared responsibility for managing employees. A PEO becomes the “employer of record” for your employees which includes terminating your employees, rehiring them as employees of the PEO, and moving them over to the PEO’s federal employer identification number (FEIN). Since the PEO is now the employer, the service provider chooses the benefits for you, provides you with the employee handbook and policies it requires you to use, and can often make decisions on how you hire and terminate employees.
- An Administrative Services Organization (ASO) is a firm that provides similar services offered by PEOs but does not “own” your employees. The most important difference between an ASO and a PEO is that an ASO does not establish a co-employment relationship with your employees. Under an ASO agreement, your employees remain solely under your control. The ASO will handle your company’s payroll and tax filings, but the paperwork is filed under your company’s FEIN number. An ASO does not assume risk.
PEOs make a good fit for small- to mid-sized businesses that can’t support an internal HR staff or that need the expertise of an external provider for regulatory and legal issues. By freeing up internal resources, PEOs help smaller businesses focus on their core competencies, giving them freedom to grow.
If you are looking for ways to reduce costs and improve efficiency and productivity for your company, contact CCPEO Consulting at 817-233-4551 or [email protected].