The difference between a PEO vs ASO

What’s an ASO?

An ASO is an Administrative Services Organization. The term was created in the 1990s to help potential clients differentiate between ASOs and PEOs, professional employment organizations. ASOs provide many of the same services as PEOs, but they don’t alleviate your business from the risk associated with taxes, HR Compliance, and workers ‘compensation.

When working with an ASO the client/business remains the employer of record. ASOs often provide assistance when it comes to finding benefits. They may file payroll taxes under your FEIN, and they may guide you when it comes to issues of compliance. However, your business is still legally responsible for all the above. ASOs have a fiduciary responsibility to you as a client but you’re ultimately on the hook for their performance.

The Cost of an ASO?

The cost of an ASO will vary depending on the number of employees and services offered and selected. Most of the times the cost will be a flat rate per employee. This differs from a PEO, PEOs often charged a percentage of the payroll wages as their admin fee. Comparing apples to apples would be challenging, you’d need to evaluate your needs and the risk you’re willing to take on vs the cost of a PEO or ASO.

Now what’s the difference between a PEO and ASO?

What’s a PEO?

A PEO is a Professional Employer Organization. PEOs rose to popularity in the 1980s, they were created to help businesses save time and money when it comes to employment payroll, and business solutions: such as workers’ compensation and employee benefits. They are popular because PEOs become the employer of record and reduces your liability.

This means that if you sign an agreement to work with a PEO your employees become their employees through what is known as co employment.
- You continue running your business as you have been.
- When it comes to the payroll taxes, the payroll taxes are paid under the PEOs FEIN.
- The PEO is also responsible for paying your employees.
  - You receive an invoice showing the total payroll amounts, taxes, and fees.
    - The PEO then handles the taxes and payroll with the funds from your invoice.

PEOs like ours, offer a variety of solutions from one place. Businesses are able to cut down on vendors and 3^rd parties which saves time, improve customer service and can lower cost. Unlike most ASOs, you can get workers’ compensation as well as your payroll completed. All of your services are paid on one invoice, making your accounting easier as well.

Traditionally PEOs supply an array of business solutions, that the PEO is able to offer to its clients at scale, by being on the PEOs master policy, such as health insurance, workers’ compensation, and 401k solutions. The scale allows clients to save money opposed to getting the services themselves.

Many modern PEOs, like Atlantic Payroll Partners allow clients to shop or bring their own health insurance, 401K plans and other benefits or use solutions that we provide. When then work with that third party to ensure that your employees are accurately compensated for such benefits.

What’s the cost of a PEO?

Typically, and at Atlantic Payroll Partners, PEOs are priced as a percentage of the payroll that is ran. The price you are paying is the admin fee for the services that are provided such as unemployment claims and hearings, new hire reporting, tax lien deductions, child support deductions, and workers’ compensation fraud investigations. Want to learn more about PEO pricing and see a sample quote? Read The Cost of Working with a PEO.

What’s the short answer to the difference between a PEO vs ASO?

The primary things to consider is what amount of risk do you want to expose your business and potentially yourself to. How many vendors or third parties do you want to work. Finally, what do you want to pay? Many of the solutions are the same, it’s the structure of the business that will impact your business the most. For more information on working with a PEO feel free to reach out to us here or give us a call.

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The Difference between a PEO vs ASO