Many businesses now seek third party support to manage their employment and administrative functions. Professional Employer Organizations (“PEOs”) and Administrative Service Organizations (“ASOs”) have become increasingly prevalent in addressing these needs. The relationship of the parties and the allocation of obligations and risks vary between these two models.
AN ASO is a third-party provider of administrative services for a company. Typically, an ASO handles payroll and tax filing for a company, with the paperwork filed under the company’s federal employer’s identification number. Questions about regulatory compliance may also be handled by the ASO. Further, it is common for an ASO to handle day-to-day administrative matters relating to human resources: all staffing matters and the corollary issues are bundled services in a contract with an ASO. However, the ultimate responsibility for insurance coverage, legal and regulatory matters, and safety management remain the client company’s responsibility.
By contrast, a PEO offers more comprehensive services to a company. A PEO assumes all aspects related to staffing for a company. All legal responsibility for staffing (handling HR paperwork, tax paperwork, workers compensation matters) is handled by the PEO. Additionally, employee benefits, health insurance plans, and regulatory compliance are handled by a PEO. In general, a PEO’s discharges these obligations under the PEO’s name; the client company is not involved with these matters (though a 401K policy may be offered in the client company’s name). Basically, the PEO takes on all the challenges of administrative functions in addition to the responsibility for the correct implementation of these functions.
The Staffing Group at Becker helps clients navigate the legal and business issues related to creating and operating PEOs and ASOs as well as assisting businesses with the selection and engagement of these types of service providers. We are well versed in the contractual and HR issues related to PEOs and ASOs.
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