Whenever I order tea in a restaurant the server inquires, “Hot or cold” What was I actually getting, as a value proposition? Which was the better value, and why?
The same thoughts may be applied to ASO vs PEO as a value proposition analysis. Seemingly, they are the same. Only the temperatures are different. But are they really the same? After many years in the industry and having provided both ASO and PEO to my clients I have come to the following conclusions; Both PEO and ASO effectively enable employers to outsource the administration of payroll, payroll taxes, human resources and benefits to a third party as a means to save money, time and risk. But only a PEO relationship provides true and safer employee outsourcing. An ASO can only administer client payroll, taxes, benefits and insurance programs.
When you order your tea hot, it is pure, while iced tea is mixed with ice. In effect, it is diluted and not strong tea. A PEO relationship, comparatively, is also undiluted. It is an outsourcing of risk and responsibility whereas an ASO is diluted upon inspection. A PEO through a co-employment contract allows its customers to remove much of its liabilities entirely to the PEO such as, IRS 941 filings and audits, 940 audits, W-2 and W-3 filings, State Unemployment filings and Unemployment hearings and audits. Further, all state and local withholding filings and audits are the responsibility of the PEO. The client will never be subject to any of the expensive, time consuming and nerve-wracking situations because all of the liability is actually shifted to the PEO. An ASO agreement allows the ASO to process all the same work for its clients but under the client ID numbers which means when the IRS, State Unemployment etc. people come looking for an audit, guess which office door they will knock on. Yes, the clients, because that’s whose ID number is on the tax return, insurance policy, etc.
Both PEOs and ASOs provide HR, payroll, and administrative services for their clients. The main difference between ASOs and PEOs is the question of co-employment. PEOs become a co-employer of their client company’s employees and assume some of the liabilities and responsibilities that come with employing personnel; ASOs do not become a co-employer and file all tax and insurance forms under their client’s company name.
National PEO provides both ASO and PEO to its clients and many times the client because of its situation, demands an ASO service. The PEO is a much safer and purer relationship, which allows the client to receive true peace of mind. When Iced Tea sits for very long it turns watery and unpalatable. The same can be said for an ASO proposition. A PEO remains “pure” as time passes and beyond. If there is an audit, it stays with the PEO and you get what will serve you best, not a watered down solution.