Deciding Between a PEO and an ASO
You’re on the fence about hiring a PEO or an ASO, and you aren’t sure which makes the most sense for your company. That’s an understandable situation. To help you make a choice, let’s dive deep into the differences between these two entities to make your decision easier.
What is a PEO?
A PEO is a unique business entity that works as a co-employer for your organization. In essence, you’re outsourcing your HR functions, such as payroll, training, and benefits. This approach helps you stick to your state’s employment laws and makes it easier for you to focus on your business.
For example, a PEO can handle your benefits administration, take care of basic HR needs, disperse your payroll, assess your company’s risks, provide tax assistance, and even help with workers’ compensation. They’ll work directly with the IRS and file your taxes for you.
In this way, a PEO lets you focus on your business’ growth and change rather than worrying about the small and niggling facts of finance management. Often, businesses with less than 150 employees benefit from these professionals the most because they provide HR support on a small scale.
Note that a PEO doesn’t control your business or make operational decisions. Furthermore, they’re not a replacement for internal HR. Instead, they’re designed to complement your current operation and make them better. When run properly, they streamline your operation significantly.
The Nature of an ASO
An ASO (Administrative Services Only) team is similar to a PEO in many ways. They help companies handle various insurance needs, often employee benefit programs or workers’ compensation coverage. Note that they aren’t considered a co-employer, nor do they sponsor insurance.
Furthermore, they don’t negotiate policies or try to find better coverage. Instead, they simply handle the administrative tasks required to get insurance. That’s their only purpose: they don’t make administrative decisions or process, remit, or report payroll taxes for your firm.
When examining PEO vs ASO, it may seem obvious that a PEO is a better choice. Generally, it does provide a broader and more extensive range of services for your firm. Furthermore, it can help handle tax preparation and other unique support. That said, they do cost more than an ASO.
In fact, an ASO might help smaller businesses that are just getting started more effectively than a PEO. They can handle frustrating insurance shopping and make this process easier for you. That said, a PEO is likely the better overall choice once your business starts operating smoothly.
Making a Choice
Here are a few other points to consider when deciding between a PEO or an ASO for your corporation:
- Employee Benefits: A PEO may provide large group benefits through a master plan that saves an employer money. An ASO typically doesn’t offer the same savings or even new plans for the employer; they just buy what policy you want.
- Employer of Record: When you work with a PEO, they can act as your power of attorney when handling various tax-related issues and even submit them for you. By contrast, an ASO does not provide this service, and you must submit taxes yourself.
- HR Support: While both of these organization types handle HR support, an ASO typically provides less comprehensive help. For example, they won’t hire, fire, or handle HR decisions for you but simply provide some assistance in execution.
- Other Services: A PEO will provide far more extensive services than an ASO, including handling payroll tax liability, regulatory compliance, risk and safety management, state unemployment taxes, unemployment claims, and workers’ compensation claims.
Clearly, both a PEO and an ASO provide many benefits worth considering. When it comes right down to the nitty-gritty, though, a PEO is a far better choice. They’ll take care of more of your services and provide the long-term support necessary to keep your business running smoothly.
If you’re still confused about the differences between a PEO and an ASO, it’s important to reach out to a trusted professional who can help you. By understanding your options here, you can get the long-term results that make sense for you and ensure you get the support necessary to thrive.