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HRO PEO and ASO Payroll Services Defined

Services & FeaturesPEOASOPayroll Only
Employer of Record Responsible for EE's, Payroll Taxes & W2'sPEO FEINClient FEINClient FEIN
Workers' Compensation InsurancePEO Master policy, or PEO as PolicyholderClient's Own Policy – ASO may pay premiumNo Involvement
Safety & Risk ManagementClaims & programs managed by PEOASO manages claims on client behalfNo Involvement
Health, Dental & Vision Planss PEO Master or client policy w/ PEO as agentClient policy only – ASO may be agent of record (AOR)No Involvement
Supplemental Benefits & Retirement PlansPEO Master policy, 401(k) MEPClient policy in client's name – ASO may be AORNo Involvement
Section 125 (FSA's)PEO is plan sponsor – administration, testingClient is plan sponsor – ASO does Admin & Testing
additional cost
No Involvement
(additional cost)
Human ResourcesMajority of HR services – part of contract w/clientMultitude of services offered a-la-cart or bundled pricingMultitude of services offered a-la-cart or bundled pricing
Regulatory ComplianceProvided by PEOClient's responsibility – ASO can adviseNo involvement unless HR services are purchased
PayrollYesYesYes
Payroll Tax FilingYesYesYes
Electronic ReportsYesYesYes
Employee AccessYesYesYes
New Hire ReportingYesYesYes
Delivery of PayrollYesYesYes
Poster ComplianceYesYesOnly w/ upgraded & additional fees
General Ledger InterfaceIf RequestedIf RequestedNot usually – w/ extra fees & special arrangement
Garnishment Payment ServiceYesYes – Charge to EEYes – Charge to EE
EPLI Coverage (coverages differ)Included – Sometimes a small additional costNot included, you must purchase your own coverageNot included, you must purchase your own coverage
State Unemployment Insurance & Claims ManagementYesYesOnly w/ upgrade & additional fees
Workers Compensation Insurance & Claims ManagementYesNoNo Involvement

Definition of a Human Resource Organization

Human Resources Outsourcing (HRO) program, employers consolidate all human resources services under one umbrella, For example, if you already have the following:

  • An outside payroll company
  • A third-party administrator working on your benefits structure
  • An outside company administering your worker's compensation policy
  • A 401(k) program in place for your employees

Imagine consolidating all your buying dollars for these functions under one umbrella. One phone call will secure you and your employees' answers to any questions regarding payroll, benefits, workers compensation, etc. You won't have to worry about the HRO replacing any of your in-house personnel. If anything, using an HRO will only make it easier for your employees to get the answers they need, allowing them more time to focus on the strategic human resources issues (Employee Relations, Compensation Structures, Training, etc.) and core business functions.

Definition of a Professional Employer Organization

A Professional Employer Organization (PEO) is defined as an organization that provides an integrate and cost-effective approach to the management and administration of the human resources and employer risk of its clients, by contractually assuming substantial employer responsibilities and risk through the establishment of a Co-employer relationship with the client's employees. The client company piggy-backs on the PEO's FEIN which usually creates a Co-employment agreement for purposes of this example.

More specifically, a PEO establishes a contractual relationship with its clients whereby the PEO:

  • Pays wages and employment taxes of the employee out of the PEO's own accounts
  • Reports collect and deposits employment taxes with state and federal authorities
  • Assumes responsibility as an employer for specified purposes of the workers assigned to the client locations.
  • Shares the responsibility of Co-employees wages and safety with the client
  • Is responsible for providing and maintaining workers compensation coverage for clients employees under the Co-employment agreement through the PEO's master policy. (State Specific)

Businesses today need help managing increasingly complex employee related matters such as: human resources, personnel management, compliance, health benefits, workers' compensation claims, payroll, payroll tax compliance and unemployment claims/insurance management to name just a few. Businesses contract with a PEO to assume these responsibilities, which then allows the client to concentrate on the revenue-producing side of it's operations. A PEO provides integrated services which more cost-effectively manage critical human resource responsibilities and employer risks for clients. PEOs deliver these as well as other services which help support the client's operations as a back office/off-site Co-employer through the PEO agreement. Since all PEO's are not created equally, you may find some differences in service offerings but the basics remain the same.

Definition of an Administrative Services Organization

An ASO organization provides the same services described above in the HRO definition without the Co-employment aspect of the relationship as described in the PEO definition. The client retains its own employer liability and all processing remains under the client FEIN.

 

Why Choose PEO Source?

Greg Yakoumis Owner, Founder

We’re all about making the right connection, and we believe you deserve a custom solution to all the payroll, workers comp, liability and compliance issues you face.

At PEO Source, we work with you to assess your unique situation and find a vendor whose strengths fit your needs. To us, you’re more than a client.

We believe in sharing ideas via good, old-fashioned conversation and use that to determine if we’re the right fit for your needs.