The human resources outsourcing (HRO) industry is expected to be worth $45.8 billion by 2027. Instead of doing human resources internally, many small businesses are learning the benefit of outsourcing some or all of their HR services. Outsourcing HR services are a cost-effective solution for small businesses instead of hiring a full-time employee to manage it themselves.
There are a few different models for HRO: ASO and PEO. It can be challenging to understand the differences between the two and the various acronyms thrown around.
This guide will discuss the differences between an HRO, PEO, and ASO. Make educated decisions for your company as you look for ways to reduce your costs while streamlining your HR activities.
What Do PEO Companies Do?
With a professional employer organization (PEO), that company becomes the employer of record for your company if you form a partnership. PEOs provide a wide variety of HR services, including:
- Employee benefits
- Payroll administration
- Compliance regulation
- Risk management
One caveat of hiring a PEO is that your company will have to adopt the business processes of that company. Typically, businesses that have fewer than 20 employees partner with a PEO.
A PEO isn’t the same as a temp agency. The services offered might appear similar, but at their core they’re different.
A temp agency will hire employees and assign them to various businesses on a short-term basis. These employees will help with special projects or when a business is overloaded.
PEOs are co-employers of a business. They take on different HR-related tasks and services that a company needs. However, permanent, in-house employees handle the tasks.
What Is a PEO Insurance Policy?
One of the great features of working with a PEO is access to health insurance policies. All of your employees can access health plans that are offered to large-sized businesses. These health insurance plans are typically ones that would be too costly for small to mid-sized businesses to offer.
What Is the Benefit of a PEO?
One advantage of hiring a PEO is that you transfer employer-related responsibilities and liabilities to the PEO. You’ll also free up your time as a business owner so you can focus on the core activities of your company. Another company will handle the necessary, but not revenue-generating tasks.
Is a PEO a Good Idea?
PEOs are a great way for business owners to lower their costs as an employer. Keep in mind that the pricing for a PEO is subjective. The pricing is typically based on the types of services you use.
PEOs are good fits for small businesses that don’t have a lot of employees. Business owners can keep their focus on growing their business and increasing their customer base. They also don’t have to hire a full-time HR employee, which can be costly.
A PEO is also a good idea if you’re looking for immediate, ready-to-go solutions for your business. You don’t have to pick and choose what services you need. The PEO handles everything, from top to bottom.
What Is the Difference Between a PEO and ASO?
There are a few different meanings for the acronym ASO. Some of the most commonly used ones are:
- Administrative services only
- Administrative services organization
- Administrative services outsourcing
An ASO provides the same types of benefits that a PEO does. The main difference between the two is the relationship between your company and the ASO.
With an ASO, you’ll remain the employer of record. That means that all of your taxes are filed using your unique tax ID number. Even though you retain employer liabilities and responsibilities, ASOs are designed to minimize your risk.
One reason you might opt for an ASO instead of a PEO is that you maintain control of your employees. You can still experience all of the same benefits as a PEO and decrease the time you spend on HR-related tasks.
Since ASOs and PEOs are so similar, some PEO companies offer an ASO option. They’ll provide you with the same services, but you remain the employer of record.
What Are the Differences Between the Services Offered by an HRO, ASO, and PEO?
As we discussed earlier, the HRO meaning is human resources outsourcing. It’s typically viewed as à la carte options instead of an entire suite of services.
Some of the services an HRO typically offers includes:
- Employee development and training
- Tax and payroll administration
- Workplace safety policy creation and implementation
- Risk and compliance management
- Onboarding and recruitment
Larger companies tend to opt for HRO instead of a PEO or an ASO. That’s because they likely have internal staff members already that can manage the majority of responsibilities and tasks that an ASO or PEO would handle.
Businesses typically choose an HRO because there are so many different employer-related regulations and laws to keep track of. Managing all of these tasks can be challenging and takes a lot of expertise and time.
With an HRO, companies can also offer their employees better benefits than they could without one. Better benefits enable companies to attract higher-qualified candidates for job postings. It also decreases employee turnover.
By outsourcing payroll services, businesses can take advantage of better technology and processes. They won’t have to invest in an entire in-house team when they hire an HRO company.
What is ASO in HR?
An ASO provides necessary HR services for a business. Businesses can remain the employer of record for a company while receiving comprehensive HR services from an outside agency.
Increase Your Productivity by Outsourcing Your HR Activities
Whether you’re looking for an HRO in Atlanta or an HRO in Portland, hiring an HRO company is essential for running a small business. Spend less time doing tedious HR-related tasks. Hire an ASO, PEO, or HRO to handle them for you.
Contact us today to request a free customized quote.