Professional Employer Organization (PEO) – also known as “Co-employment” or sometimes called “Employee Leasing” – where the Business Owner handles certain functions “on-site”, the PEO is “employer of record” and “back office support” for your business. The two entities share employer responsibilities through a contractual relationship called a Client Services Agreement (CSA).

Payroll taxes, workers compensation coverage, group health coverage, retirement plans and many more employee benefits are tied to the PEO’s Federal Tax Identification Number (FEIN).

Depending in the state, you actually get to piggyback on the PEO’s State Unemployment rate (SUTA) which in most cases could be better than yours!

In general, expect a PEO to:

• Pay wages and employment taxes out of the PEO accounts
• Report, collect and deposit employment taxes with state and federal authorities
• Assume responsibility as the “employer of record” for specified purposes
• Share the responsibilities of wages and employee safety with the client business
• Be responsible for workers compensation coverage for employees under the Co-employment agreement
• Offer and provide assistance in the areas of Human Resources
• Aid in compliance with State and Federal regulations.

However, a PEO is not a one-size-fits-all solution. PEO’s vary from state to state and according to their individual business models, the technology platform that they use and services that they actually offer as well as how it’s rolled out to their clients. Only a careful inspection of the CSA will reveal whether or not a PEO provider is the right one for you.

Administrative Services Organization (ASO)
– also known as Human Resources Outsourcing (HRO) program that allows companies to hand off HR administrative functions to an outside party. For example:

• Payroll processing
• Employee benefits package
• Workers comp coverage and claims
• 401(k) retirement investments

An ASO handles all human resources admin without the Co-employment aspect that a PEO carries. The client company retains its identity as employer, and all taxation is tied to the business FEIN.

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