In the US, HR outsourcing is valued at $9.7 billion. Outsourcing your company’s HR function can be valuable and enable many companies to scale. Small to medium-sized businesses can benefit greatly from an outsourced HR service provider.
You’ve likely heard of PEOs, HROs, and ASOs…but do you know what each means? Or how each of these types of services can benefit your organization?
Many businesses don’t understand how a service provider can help lighten administrative tasks. These types of services are usually very cost-effective for businesses of all sizes.
Keep reading to learn more about the differences between PEO, HRO, and ASO services.
What Are the Differences Between Services Offered by HRO, PEO, and ASO?
There are several differences between the three types of providers. Ultimately, each company can help an organization manage HR functions and maintain compliance. The legal structure is different for each, however.
What Are ASO Services in HR?
An administrative service organization (ASO) offers outsourced human resources and administrative services. Unlike a PEO provider, an ASO provider does not take on any liability for your workers. ASO providers advise on employee benefits but do not directly administer anything for workers.
So, what services does ASO offer, then? Here is a shortlist of services you can get from an ASO:
- Payroll support
- Tax filings
- Administrative tasks
- Employee information management
- Unemployment claims
When you use an ASO, your business is still the employer of record. Working with an ASO can give you access to more benefits options, but you won’t have the ability to customize packages. Businesses with more than 40 but less than 100 employees are optimal clients for an ASO.
Benefits of Using an ASO
You don’t have to work in a co-employment model if you work with an ASO. You gain the HR expertise and guidance that the other providers give without having to use another company as the employer of record.
An ASO provider is available to assist with any legal questions. ASOs guide unemployment, changing employment laws, or regulations.
Hiring an internal HR team to manage these duties can be a costly endeavor. Outsourcing to a team of experts improves compliance and efficiency.
What Are PEO Services?
A professional employer organization (PEO) is a lot like an ASO provider. When you work with a PEO, you form a co-employment relationship. This means that when new employees are hired, the PEO is the employer on record for them.
A PEO offers a wider variety of services, including:
- Tax filing
- Workers’ compensation
- Benefits administration
- Larger health insurance policies
- Risk management
- Alternative dispute resolution
Businesses with 20 or fewer employees work with a PEO. The experts who manage PEO services typically have several accounts simultaneously.
So, it isn’t a great option for a company with rapid growth because they may not be able to keep up. However, a PEO can help companies to position themselves for growth with tools, processes, and automation.
Benefits of PEO Services
The main benefit of using a PEO is that the liability of taxes, compliance, and employment laws falls on another company. Since PEOs help many small businesses, they have a large number of employees under their tax ID. A larger employee base means access to the most cost-effective benefits plans.
Of course, outsourcing so many tasks to a third-party means you save your company tons of time. You’ll also see cost savings because completing all the above functions in-house is much more costly than outsourcing.
You’ll also see better compliance with employment laws when working with a PEO. They are experts and remain updated on changing legislation so you don’t have to. With less stress about HR functions, you can focus your efforts on core business operations.
Employees are also happier with an outsourced provider. Many PEOs offer an exceptional employee experience. Your employees remain happy and loyal to your organization.
What Are HRO Services?
Human resource outsourcing services, or high-reliability organizations, offer extensive HR services. Working with an HRO is a great option for businesses facing challenging business situations or companies with a lot of risks. An HRO offers a full suite of HR services, including:
- Taxes and reporting
- Employment laws
- Hiring and training
- Performance management
- Employee relations
- Background checks
Most HROs specialize in one specific area. This is to help businesses with those specific challenges. Businesses with 75-6,000 employees can benefit from an HRO.
Working with an HRO enables businesses to access processes and tools to streamline HR functions. You can expect to have a dedicated account manager and the use of HR technologies to improve your operations with an HRO.
Benefits of HRO Services
HROs are great for businesses facing unique or highly regulated situations. Since HROs have specialties, you must research the providers and ensure they offer what you need. If you have complicated HR strategies or need help for an overworked HR department, an HRO is a great choice.
You’ll also have an HR expert available to guide decision-making. You’ll see improvements across your HR department and probably the entire organization.
When working with an HRO, you remain the legal employer of your team. You have all the liability, but also the tax benefits, of hiring and managing employees.
HRO vs. PEO Services: The Differences
You may be wondering what the difference is between an HRO and PEO. The legal structure of each is vastly different but both providers off similar services. Many organizations can benefit from these services, it just depends on what your company needs most.
With an HRO, your company remains the employer of record. All liabilities fall on your organization for your team. The HRO only provides guidance and advice.
With a PEO, you form a co-employment model. The liabilities of your team fall on the PEO and they are the employer of record. The PEO, for legal and tax purposes, is the company that hired your employees.
Securing a PEO typically means they take over all related HR functions. Some PEOs do allow clients to choose which services they want, but you generally have to choose a package with outlined tasks provided.
This is not true with an HRO, however, with them, you can choose which services you want to outsource. Interested in learning more? Check out our services page and contact us today.
PEO vs. ASO Services: The Differences
Both PEOs and ASOs take on administrative tasks for a company. The main difference is that a PEO takes on legal liability where an ASO does not. A PEO is a co-employer, meaning you form more of a partnership than you would with an ASO.
Since PEOs absorb so much risk, they tend to cost quite a bit more than an ASO. A PEO will offer your team benefits while an ASO will help you coordinate the benefits to offer them. ASOs tend to be more flexible than PEOs.
When working with an ASO, you retain all decision-making responsibilities. On the other hand, a PEO is the “official” employer on record, so you have to hand over a lot of decision-making to them.
Benefits of Outsourcing
There are many benefits to outsourcing your company’s HR function. For one, it saves you a lot of time. HR tasks tend to be time-consuming and use a lot of resources, but outsourcing eliminates that.
It will also decrease costs for your company. Most outsourced services cost less than hiring one new employee. Now imagine how much money will be saved when you outsource the entire department!
You’ll also see more efficiency across your organization. Working with a third-party provider gives access to lower insurance premiums, another form of cost savings. Recent studies show that companies with outsourced HR functions are 50% less likely to fail.
Disadvantages of Outsourcing
Naturally, there are also a few disadvantages to outsourcing your HR. First, some employees may feel like the HR team is disconnected and impersonal. A big part of employee relations is building relationships and that’s tougher when the HR team isn’t located on-site.
Second, hiring may be more difficult if it comes from an outsourced company. Since they don’t work in your company, they don’t understand the culture. This can sometimes lead to new hires not fitting in with the organization.
And finally, there may be delays in getting problems solved. Payroll issues happen on occasion and are usually an easy fix. However, if the third-party company is the one processing payroll, it may take longer to process the change than it would if you did it yourself.
How to Choose a Provider
Before choosing a provider, you must decide which service is the best fit for your company. To make this determination, you should consider:
- How many employees do you have?
- What is your budget?
- Do you have an internal team already?
- What areas do you need help with?
- Do you have a challenging situation?
- Is there a lot of risks involved?
- Do you want a co-employer?
- How is your organization structured?
Answering each of these truthfully is the first step in choosing an HR service provider.
Once you have a clear picture of your organization and what exactly you need, you can start researching providers. It’s important to be clear about what you want from the provider before you start researching. There are several things to consider when researching providers:
- What services do they offer?
- What technologies do they use?
- What kind of benefits can they offer your team?
- What kind of employee experience will your team receive?
- Will you have a dedicated person to work with?
- Have they had any compliance issues?
- What are the company’s core values?
Choosing an outsourcing partner shouldn’t be taken lightly. The company you choose should understand your culture and business objectives so they can help you meet them.
When researching companies, look for reviews from current or past employees. This will tell you a lot about how the company engages with its clients. If there are many bad reviews about lack of contact or poor customer service, you’ll know to keep looking.
Book a Demo or Consult
A lot of HR service providers will schedule a free demonstration or consultation. This will give you a look into the platforms and technologies they use for their clients. It will also allow you to speak directly with a representative to ask questions about what they do.
Before you schedule anything, make sure you have any questions you haven’t found answers to written down. This will ensure you don’t forget them once the meeting begins. If you have a unique or challenging situation, discuss it on the consult and ask how they could help!
Most bad situations or dishonest companies will have red flags. Be sure you watch carefully for them and don’t be afraid to speak up if something doesn’t seem right. Go with your gut if something is off.
You are choosing a service provider to help your organization maintain legal compliance. It’s acceptable to ask questions or walk away.
Get Started With ASO Services Today
Now that you understand the differences in HRO, PEO, and ASO services, you can make a better decision for your organization. Are you still unsure? We can help!
At National Workman’s Comp Solutions, we provide a variety of HRO, PEO, and ASO services to help your business. Our professionals have over 25 years of combined experience and the ability to deliver legal and compliant HR functions. We strive to find the best solutions for your business.
We’ve helped more than 1,000 businesses with their HR needs. Whether your company has one employee or thousands, we can help. We have the knowledge to put strategies in place to reduce costs and streamline operations.
Are you ready to get started? Contact us for an instant quote!