Are you looking for an HR partner? A resource to free up your time, let you focus on core responsibilities, and alleviate stress around compliance and administration?
You’re not alone. With HR seeming to grow in complexity by the day, demanding more attention and expertise, business owners like you are looking for solutions. And fast.
Two of the most popular options are Administrative Services Organizations (ASOs) and Professional Employer Organizations (PEOs). While both ASOs and PEOs offer HR support and services, there are significant differences between the two, especially when it comes to the level of employment liability they take on.
Let’s take a closer look.
What is the difference between an ASO and a PEO?
An ASO is an outsourced service provider that offers administrative support to businesses. This support can include HR functions such as payroll processing, benefits administration, and tax compliance.
Sounds similar to a PEO, right?
Close, but here’s where the key difference lies: an ASO does not become the “employer of record.” That means that their support ends with the specific services they offer, and they assume zero responsibility beyond that point. It’s all on you as the business owner.
A PEO, on the other hand, is an outsourced service provider that does assume the role of employer of record for all employees. This provides you with access to a more comprehensive suite of services, only available through a PEO, while also allowing you to tap into the larger group benefits available to members.
ASO
an outsourced service provider that offers administrative support to businesses
PEO
an outsourced service provider that does assume the role of employer of record for all employees
Which employment liabilities does your PEO help you manage?
When you partner with a PEO, you’re gaining access to their expertise and mitigating risk by putting key tasks in the hands of professionals. These tasks can include:
Let’s camp out on that last point for a minute.
It’s important to factor in your specific employment model when determining who is responsible for your employment taxes:
Common-law employees are hired, supervised, and managed by the client company (that’s you), while “leased employees” are hired and managed by a staffing firm.
If your employee is classified as a common-law employee, then you are responsible for paying the employment taxes. If they’re classified as temporary staff, however, the staffing firm is responsible for paying those taxes.
As a third variable, if you have common-law employees, shared with your PEO in a co-employment arrangement, the PEO is responsible for filing employment taxes correctly and avoiding any potential complications with State and Federal agencies.
When you work with a PEO, you can be assured that all your bases are covered, minimizing the risk of wrong calculations or inaccurate information.
What is the difference between hiring temporary employees through a staffing agency and co-employment with a PEO?
When you hire a temporary employee, it means that a staffing agency provides employees to you on an as-needed basis, while co-employment is a specific arrangement in which you retain full control over your workforce and hiring, but share certain key responsibilities with a PEO.
Which is right for you: an ASO or PEO?
When deciding between an ASO and a PEO, you need to consider a couple of factors in particular:
Both provide administrative help, but if you’re looking for a more comprehensive solution that includes HR management, risk management, and legal compliance, a PEO may be a better fit for your business.
What’s your takeaway?
PEOs can absolutely help with your employment liabilities, layering in a lot of additional value. Just be certain that you choose the right PEO for your business and needs, and one with a proven track record for offering personalized service.
FAQs
What is the responsibility of a PEO for paying unemployment taxes?
PEOs are responsible for filing unemployment taxes on behalf of their clients, but the client is still responsible for paying the taxes. This includes collecting and remitting state and federal unemployment taxes, as well as ensuring that employees are classified correctly for tax purposes.
How can a PEO help me stay compliant?
One of the key benefits of working with a PEO is that they can help you stay on top of ever-changing employment laws and regulations, while also managing your filings.
Lean on their team and specialized expertise to mitigate the risk of compliance issues and liabilities.
How can a business ensure that their PEO is filing unemployment taxes correctly?
Businesses can verify that their PEO is filing unemployment taxes correctly by reviewing their payroll reports and tax filings.
And again, choose a PEO with a proven reputation and commitment to compliance.