Administrative Services Organization (ASO)
An Administrative Services Organization (ASO) is a type of outsourcing partner that provides administrative and human resources (HR) services to businesses, similar to a PEO, but with a crucial difference in the employment relationship and liability.
INDUSTRIES WE HAVE HELPED
MEDICAL OFFICES
ASSISTED LIVING
OFFICES
Restaurants
STAFFING COMPANIES
How ASOs Work
Unlike a PEO, an ASO does not enter into a co-employment relationship with your business. This means:
- Your company remains the sole employer of record for tax and legal purposes.
- Your company retains all employment-related risks and liabilities.
- Payroll is processed under your company’s federal Employer Identification Number (EIN).
- Benefits plans are sponsored by your company, not the ASO.
Essentially, an ASO acts as an extension of your internal HR department, handling administrative tasks while your business maintains full control and responsibility for its workforce.
Services ASOs Typically Provide
ASOs offer a flexible “a la carte” approach to HR services, allowing businesses to choose the specific administrative tasks they need support with. Common services include:
- Payroll Administration: Processing payroll, managing deductions, and handling federal, state, and local payroll tax filings and remittances.
- Benefits Administration: Administering your company’s existing employee benefits plans (e.g., health, dental, vision, retirement plans). This includes managing enrollment, claims processing, and employee communication, but the ASO does not sponsor the plans or negotiate rates on your behalf in the way a PEO would.
- HR Support: Providing guidance on HR best practices, compliance with employment laws (though ultimate responsibility remains with your company), developing employee handbooks, and assisting with HR-related inquiries.
- Compliance Support: Helping ensure your business adheres to relevant labor laws and regulations, often by providing guidance and resources for compliance.
- Time and Attendance Tracking: Managing systems for tracking employee work hours and leave.
- Workers’ Compensation: While an ASO does not provide workers’ compensation coverage, they can often help administer your existing policy, including managing claims and providing reporting.
Benefits of Using an ASO
Businesses opt for ASOs for several key reasons:
- Full Control: The primary advantage is maintaining complete control over your employees, HR policies, and benefits plans. There’s no co-employment model, so your company remains the sole employer.
- Flexibility and Customization: ASOs offer a highly customizable approach. You can pick and choose the specific services you need, allowing you to tailor the support to your existing internal HR capabilities.
- Cost Efficiency: ASOs can be a more cost-effective option than PEOs, especially if your business has an in-house HR team that just needs administrative support, or if you prefer to source your own benefits. Fees are often structured on a per-employee per-month basis or a fixed fee for specific services.
- Access to Expertise: You gain access to HR professionals and their expertise for complex administrative tasks, compliance guidance, and best practices.
- Reduced Administrative Burden: ASOs take over time-consuming administrative tasks, freeing up your internal staff (or yourself, as a business owner) to focus on more strategic initiatives and core business functions.
- Streamlined Processes: ASOs often utilize integrated HR technology systems that can streamline payroll, benefits administration, and other HR processes.
Differences Between PEO and ASO
The following PEO vs. ASO comparison chart offers a high-level look at how these HR outsourcing options compare.
| Professional Employer Organization (PEO) | Administrative Services Organization (ASO) | |
|---|---|---|
| Employment Model | PEO enters a co-employment relationship, becoming the employer of record for administrative purposes. | Client company remains the sole employer of record. No co-employment. |
| Liability/Risk | PEO shares certain employment-related risks and liabilities with the client company. | Client company retains all employment-related risks and liabilities. |
| EIN Used | PEO’s EIN for payroll and tax filings. | Client company’s EIN for payroll and tax filings. |
| Benefits | PEO sponsors benefits plans under its master policy, leveraging aggregated buying power. | Client company sponsors its own benefits plans. ASO administers them. |
| Workers’ Comp | PEO typically provides workers’ compensation coverage under its policy. | Client company provides its own workers’ compensation. ASO may help administer. |
| Control | Client company maintains operational control; PEO has administrative control due to co-employment. | Client company maintains full control over all HR decisions and policies. |
| Services | Typically offers a comprehensive, bundled suite of HR services. | Often “a la carte” or customizable, focusing on administrative tasks. |
| Cost | Generally more expensive, reflecting shared liability and broader services, but often provides better benefits rates. | Generally less expensive than PEOs due to less shared liability and more limited scope. |
When to Consider an ASO
An ASO is often a good fit for businesses that:
- Have an existing HR department or HR professional who needs administrative support rather than a full HR outsourcing solution.
- Prefer to maintain complete control over their HR policies, benefits plans, and employee relationships.
- Have already secured competitive benefits packages and just need administrative support for them.
- Are larger small businesses or mid-sized companies that have a good understanding of employment law and compliance but want to offload routine administrative tasks.
- Are looking for cost-effective ways to streamline specific HR functions without changing their employer status.
In essence, an ASO is a powerful tool for businesses that want to simplify HR administration and gain access to expert support while retaining maximum control and responsibility for their workforce.