What is a PEO?A PEO is a Professional Employer Organization. A PEO positions small and medium-sized businesses to improve productivity and profitability, focus on their core mission and grow.
Win3 was developed to handle all your company’s back-end support and administrative needs, including payroll, benefits, workers’ compensation and HR, so you can be laser-focused on your products, services, and customers.
PEO’s provide a full range of Human Resources support to their clients under a “co-employment” arrangement in which both PEO and Client share responsibility and liability. Under this type of structure, the employees of the company are paid and are reported under the FEIN (Federal Employer Identification Number) of the PEO, Win3. The PEO is responsible for all payroll taxes, state and federal unemployment taxes, and compliance reporting while the Client maintains responsibility for day to day supervision of their employees. The PEO is also the sponsor of employee benefit plans and workers’ compensation insurance provided to the work-site employees.
Clients who choose to work with a PEO can also offer a greater range of benefits and services for their employees to choose from including robust technology and first-in-class Human Resource support. A PEO is not just available to handle the day-to-day tactical and administrative functions of Human Resources but more strategic and complex matters as well such as compliance, safety, risk management, recruiting, training, and more. Win3 can assist with on-boarding, answer employee questions about benefits and withholding’s, and manage workers’ compensation claims. You retain decision-making power and responsibility for the operation of your business.
To summarize, a PEO:
- Manages your total Human Resource function — both administrative and strategically
- Sponsors benefit and workers’ compensation
- Assumes responsibility for tax filing, compliance, and risk management
- Shares the risk
What is an ASO?An ASO is an Administrative Services Organization. There is no shared liability/co-employment structure. Therefore, the client’s employees are paid and reported under the FEIN (Federal Employer Identification Number) of the client’s company.
An ASO can provide all the same services as a PEO, but the client has the option of selecting which services they wish to engage via a la carte options – hence only paying for what they need. If a client chooses to have an ASO manage their payroll, the ASO will administer all payroll taxes and state and federal unemployment taxes under the SUTA and FUTA accounts of the client company.
Employee benefit plans and workers’ compensation insurance are provided through the “open market”, allowing the client to choose from insurance carriers of their choice or remain with those currently in place. Under an ASO, the client retains full ownership while the ASO manages day-to-day administrative tasks. The ASO can assist with legal questions on compliance. However, the actions and outcomes of the situation remain the sole responsibility of the client.
Under an ASO model, clients can choose a single element of the HR process.
Pros of the ASO Model:
- Offers à la carte services so you pay only for the services you need
- Client retains functional control over Human Resources processes
- Provides administrative and back-office support
- Expertise in areas like HR compliance, tax filing and benefits
Cons of the ASO Model:
- Does not sponsor benefits coverage
- Does not provide workers’ compensation coverage
- The ASO does not assume the risk
Deciding Between a PEO or ASO
Whether you are an organization who currently has an existing Human Resources Department or you’re an organization that currently has no Human Resources presence, deciding between a PEO or an ASO can feel like an overwhelming and daunting task.
As you work through the possible options, weighing the pros and cons of each solution will give you a clearer understanding of how each one can help you manage the Human Resource functions for your organization.
What is the Difference:
- The PEO becomes the employer of record. An ASO does not.
- When you partner with a PEO, they essentially become your co-employer. An ASO does not.
- The PEO will assume responsibility for your compliance and shares the burden of risk. An ASO does not.
- In many cases, the PEO can also offer better insurance rates based on economies of scale.
- PEOs bring a clear benefit to small and mid-sized businesses, enhancing internal Human Resources Teams with the expertise of an external partner for regulatory and legal issues. PEOs help reallocate internal resources allowing the Client to focus on their core competencies, giving them the freedom to grow their business.
PEO vs. ASO: Which is best for you?
The world of PEO and ASO can be confusing. Could you use help deciding which option may be the best fit for your organization? Win3 can help you take a deeper dive into your needs and answer any questions that you may have. In the interim, we have developed this short quiz to help you get started.Take the Quiz