Outsourcing the HR responsibilities has become a norm today! More and more industry leaders are leveraging this as a tool to achieve their core business objectives, that too, at a minimal cost. The increase in the cost of in-house HR operations and advancement in technology are the topmost factors that made outsourcing a common business practice.

But who should you choose to partner with? Who would be a better HR services provider, a PEO or an ASO? As a business owner, if you have been scratching your head over these questions, we will tell you the difference between a PEO and an ASO. This way, you will be in a position to make an informed choice between the two. Let’s get started!

PEO: Professional Employer Organization

A PEO or professional employer organization handles all the HR tasks, including compliance, recruitment, management, payroll, and more! They can also help you with onboarding, managing vendor interactions, sponsoring the benefits and workers’ comp, and more.

ASO: Administrative Services Organization

An ASO helps you manage many of the HR tasks, processes, and administrative operations that a PEO does. Their services don’t include workers’ compensation or benefits coverage. They can help you to secure coverage through some additional fees.

What Are The Similarities Between The Two?

The two HR outsourcing options provide similar services; however, they use a different business model. Some of the services both these professionals offer to help you meet your business’s HR challenges include-

  • Risk management
  • Recruitment
  • Payroll
  • Workers’ compensation
  • Onboarding
  • Taxes

Based on your business needs and your company’s business model, you can choose to outsource HR entirely to a PEO or an ASO. Or, you can also use them along with your in-house HR team.

PEO vs ASO: How Are They Different?

A PEO does everything that an ASO does, combined with many other tasks. Thus, the biggest difference between the two is that a PEO goes beyond what an ASO offers.

When you partner with an experienced PEO Michigan, you sign a co-employment agreement. In other words, a PEO becomes your co-employer. So, another big difference between the two is in the way they handle your employees.

With an ASO, only you are the employer of record. Though they can help you manage your team and HR policies, they aren’t your employers. An ASO may or may not manage the unemployment claims. Furthermore, you are liable for payroll tax. In a nutshell, you have to deal with the risk of employing the wrong workers for your business.

On the other hand, PEO is your co-employer. This means both you and your PEO are the employers. They assume some share of risk with you. A PEO can manage safety programs, claims, pay taxes, or administer benefits, alongside compliance management, payroll, unemployment claim, etc.

A PEO offers coverage to the clients under their policy. They may even coordinate their policy with yours. But an ASO can’t provide workers’ compensation insurance. This means a PEO will enable you to provide your employees with:

  • Retirement savings options
  • Health insurance
  • Wellness incentive programs

Which One Should You Choose?

Well, both PEOs and ASOs offer support when it comes to HR administrative services. But, PEOs provide you with more comprehensive HR solutions and act as your employer when your business lacks good HR practices. Thus, if your business lacks well-established HR practices, you need help manage the unemployment claims or workers’ compensation program, a PEO is a right choice.

If you offer good benefits to the employees and great workers’ compensation coverage but need help with payroll, consider partnering with an ASO. When small businesses partner with a PEO, it allows them to offer more to their employees. It also offers scalability and value to your company.

Thus, the answer to ‘Which one should you choose depends on what you need. If you think that a PEO can ease your HR burden, look for a PEO expert with years of experience in the HR processes. Call the PEO in Michigan now to get a quote!