Employee Leasing, HR Outsourcing, PEO, ASO – Demystifying the Acronym Craze

Are you currently buying or working with an employee leasing company? Perhaps you are looking for a professional employers’ organization? Surely you have heard about the benefits of HR Outsourcing…

If you said “yes” just once, keep reading, this article will help you understand the similarities and differences between each of these terms.

Employee leasing, Professional Employer Organization, and PEO all mean the exact same thing. In particular, they all refer to a HR outsourcing company that is involved in working together with its clients, which essentially means two companies employing the same employee base and splitting the responsibilities of managing them properly.

HR outsourcing is a broad definition that refers to a wide range of businesses and services that have one thing in common; they help companies offload some of the responsibilities necessary to manage their workforce. The simplest and most common is a payroll processing company like ADP, the most comprehensive and least known would be Administaff, which is considered a PEO. PEOs provide a variety of services including payroll processing, workers’ compensation insurance, employee benefits packages, HR support, and even 401(k)s.

An Administrative Services Organization or ASO can be considered a human resources outsourcing company, but since ASOs do not collaborate with their clients, they are not a PEO. ASOs typically provide payroll processing, HR support, and may manage workers’ compensation insurance, employee benefit packages, and 401(k)s. Notice the difference here in the word “manage” as opposed to “provide” which was when referring to PEOs. This is due to the fact that PEOs offer clients their own benefit plans and workers’ compensation insurance through co-employment, while ASOs only help manage policies you can get through a regular broker.

PEOs typically cater to small businesses with 5-200 employees, with the true sweet spot being 10-50 employees. PEOs often save businesses from purchasing health insurance and also help them comply with the rapidly expanding regulatory base weighing on small businesses.

ASOs generally work well with larger companies, anywhere from 100 employees to thousands. Companies that use ASOs, or HROs, generally have a need to offload the administrative burden of human resources, but are large enough to qualify for a better benefits program than smaller companies.

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