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What is the difference between a PEO and an ASO?

As a business owner who is considering outsourcing their human resources administration, it is important that you understand your options. A Professional Employer Organization (PEO) or an Administrative Services Organization (ASO) can each be beneficial in their own way for outsourced HR operations.

Professional Employer Organization (PEO)

A PEO is sometimes referred to as a co-employer because a PEO will basically share the risks and responsibilities of employment with you, their client. A PEO will become the employer of record for your business's employees. Because of this shared liability, A PEO generally will be more expensive than an ASO.

What is a PEO Broker?

A trained eye will be able to help you process the offerings and identify the best values. A PEO broker is a company that essentially does the legwork in finding the right PEO for your business.

Administrative Services Organization (ASO)

Unlike a PEO, an Administrative Services Organization does not "co-employ" your workers. An ASO merely performs the specific HR services delegated to it. Since an ASO does not share the liability of employment, an ASO generally will be cheaper than an ASO.

Which one is right for your business?

The PEO and ASO share some of the same functions. Both PEOs and ASOs involve taking on HR functions like payroll administration, payroll tax compliance, health care and retirement benefits administration, and worker's compensation and unemployment claims. Each option will allow you to unload the burden of HR administration to a third party so that you can focus on growing your business.

The Differences

Under a PEO, you can benefit from a wider range of carrier options in terms of health care and benefits packages. Because a PEO is considered a co-employer, it can group together the employees from several of it's client businesses for better rates and options. A larger group of employees could mean less risk for insurance and benefits carriers. If you have employees in several states, a PEO is more likely to be able to maintain coverage through a single carrier. If a PEO's overall employee group is riskier (files more claims) than your business's individual group, this could be a disadvantage. With an ASO, your coverage options would be based solely on the individual group of employees at your business.

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