PEO or ASO? Which One Fits Your Company in 2007?
The Battle Over HR Outsourcing
In the hotly-contested battle between the old PEO guard and the new kid on the block, the ASO service, executives searching for outsourcing alternatives need help. What is the difference between the two, and which one is right for their company?
Forged out of necessity of the tribulations of the PEO industry, service providers needed a balance between what clients wanted and what they could deliver. Facing a great deal of employer liability and disenfranchised insurance carriers, many PEO's began unbundling their services from the traditional co-employment relationship.
POOF! Out came the Administrative Service Organization.
Getting and understanding of both service models is critical in determining your initial steps in outsourcing your human resources. Lets take a look at the details.
What is a Professional Employer Organization (PEO or Co-employer)?
Professional employer organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEO clients focus on their core competencies to maintain and grow their bottom line.
Businesses today need help managing increasingly complex employee related matters such as health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims. They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the PEO client to concentrate on the operational and revenue-producing side of its operations. Client may vary in size, but the national average is a company with about 15 employees.
A PEO provides integrated services to effectively manage critical human resource responsibilities and employer risks for clients. A PEO delivers these services by establishing and maintaining an employer relationship with the employees at the client's worksite and by contractually assuming certain employer rights, responsibilities, and risk.
Businesses across America have discovered the incredible value of PEOs because they provide:
- Relief from the burden of employment administration.
- A wide range of personnel management solutions through a team of professionals.
- Improved employment practices, compliance and risk management to reduce liabilities.
- Access to a comprehensive employee benefits package, allowing clients to be competitive in the labor market.
- Assistance to improve productivity and profitability.
What is an Administrative Services Organization (ASO)?
Much like its predecessor, the Professional Employer Organization(PEO), an ASO provides a comprehensive approach to oursourcing many of the critical human resources functions for employers. Yet without the co-employment relationship, ASO clients retain exclusive employment status. ASO clients are typically larger than the average PEO client by three or four times.
An ASO provides its business clients with common PEO services such as payroll and the associated tax services, benefit administration, human resources assistance and may even be a licensed insurance broker. Providing all services under one roof gives clients the convenience of a one-stop shop along with help for the associated work to administer such plans and policies.
Clients who have found the convenience and protection from a PEO relationship may commonly seek an ASO relationship for:
- Sole or exclusive employer status
- Flexibility in insurance and benefits procurement
- Cost effectiveness (seen in companies of 100 or more employees)
When considering a switch to an ASO relationship, employers must consider:
- Increase in employment practices liability
- The effect of taxable wage base limitations on federal and state taxes (When employees change employers)
- Level of support and service that they will receive under the new ASO relationship
Which Arrangement is Right for Your Company?
Choosing the appropriate service structure when considering outsourcing human resources is critical. Weigh the cost to benefit relationship specifically on the critical areas of need of your firm. What are your top 3 key factors in selecting the right program for your employees?
Click here for a comprehensive comparison of the two service models. For a free consultation on which service may be right for you, contact Emplicity at 877 HRMADEZ or 877-476-2339.
Source: National Association of Professional Employer Organizations
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