When managing HR tasks, businesses often turn to external services to streamline operations and ensure compliance. Two popular options are a Professional Employer Organization (PEO) and an Administrative Services Organization (ASO). While both can provide support, they differ in their approaches and services. Here’s a look at the key differences, advantages, and drawbacks to help you determine which is best for your business.
What is a PEO?
A Professional Employer Organization (PEO) is a firm that provides HR services to small and medium-sized businesses through a co-employment arrangement. This means that the PEO becomes a co-employer of your employees, sharing certain legal responsibilities and liabilities.
Pros of a PEO
HR Services
PEOs offer a full suite of HR services, including payroll processing, benefits administration, compliance management, and risk management.
Access to Benefits
Small businesses can often access health insurance plans and other employee benefits typically available to larger companies through a PEO.
Compliance Support
PEOs stay up-to-date with changing employment laws and regulations, reducing the risk of non-compliance for your business.
Risk Mitigation
The co-employment model helps distribute certain liabilities, such as workers’ compensation and unemployment claims, between the business and the PEO.
Cons of a PEO
Cost
PEO services can be expensive. They typically charge a percentage of your payroll or a flat fee per employee. It’s difficult to itemize the true cost of PEO because all insurance and benefits are bundled together.
Loss of Control
Some business owners may feel uneasy about sharing employer responsibilities and decision-making authority with a third party. Companies lose management control over their workers since the PEO officially employs them.
Complexity
The co-employment arrangement can be complex, and some business owners may find it challenging to understand and manage. Employees may be confused by who truly is their employer; the PEO or the company they report to daily. Employees may not know who to turn to when they have concerns regarding compensation, benefits, and other aspects of their job.
What is an ASO?
An Administrative Services Organization (ASO) provides HR services without entering a co-employment relationship. Businesses retain full control and legal responsibility for their employees while outsourcing specific administrative tasks.
Pros of an ASO
Flexibility
ASOs offer more flexibility, allowing businesses to choose and pay for only the services they need. You can customize your administrative services based on your unique requirements. Whether it’s a one-time project or ongoing support, services can be tailored to your needs.
Retained Control
Businesses maintain full control over their employees and HR decisions, as no co-employment arrangement exists.
Cost-Effective
ASOs can be more cost-effective than PEOs, especially for businesses that do not require a comprehensive suite of HR services. You can scale services up or down as needed, avoiding unnecessary overhead costs.
Scalability
As your business grows, your administrative needs may change. ASO services can easily scale with your business, accommodating growth and changes in HR needs.
Cons of an ASO
No Risk Sharing
Businesses retain all legal responsibilities and liabilities for their employees, which can increase risk.
Possible Less Support with Compliance
While ASOs provide compliance support, some organizations may want additional protection and guidance.
Why Companies Leave PEOs
Conceptually, PEOs are not designed to become a permanent part of a business. Your company’s HR and employee benefits strategies and processes will change as your business grows. This could diminish the advantages of a PEO partnership, so it may be time to exit. Regarding HR and benefits administration, PEOs are a one-size-fits-all model, so a PEO may have difficulty handling your need for customized aspects in this area. Different industries have unique HR and benefits requirements, so a more tailored approach may be what you need.
ASOs provide a lifeline for businesses seeking to optimize their operations while concentrating on their core competencies. The benefits of solutions tailored to your specific needs cannot be overstated, as they empower you to harness the full potential of your organization. By embracing an ASO, you can save time, reduce costs, and ensure that your business is equipped to navigate the challenges of today’s competitive landscape.
How GTM Can Help Transition from a PEO to Our ASO
GTM has the resources, expertise, and knowledge to assist with unwinding from a costly PEO, saving you money and increasing the quality of your human capital management (HCM) system. We will create a timeline and checklist to seamlessly transition from the PEO model to our ASO model.
Our secure, cloud-based payroll and HCM platform, isolved, provides all HR functions in one database. All employee data is accessible 24/7 from any device with a single login. Enter new data or make changes once, and it flows throughout the system, with multiple access levels, so the information gets to the right people every time. The system integrates your payroll with recruiting, onboarding, benefits enrollment, timekeeping, learning management, rewards and recognition, and all other HR capabilities.
Our experienced HR consultants can take over the PEO’s HR services, such as talent acquisition, employee handbooks, compliance with state and federal labor laws, leave management, performance management, and more. Through the GTM Insurance Agency, we can customize an optimal employee benefits package for your company.
Smaller businesses will save time and reduce risk by outsourcing their payroll, insurance, employee benefits, and HR to GTM. For larger companies, a GTM-dedicated human resource professional will work with you to provide proactive solutions. The HR professional will engage with GTM’s payroll and tax service team and insurance agency to utilize the HCM platform to deliver an integrated payroll management and HCM solution.
Ready to leave your PEO? Request more information and a GTM representative will contact you to get started.
SOURCE: https://gtm.com/business/peo-vs-aso/ https://gtm.com/business/
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