Your Guide to Outsourced HR Services: What to Know About PEOs and ASOs

Regardless of the size of your business, identifying the right HR solution for your needs can be challenging. While some employers find that staffing an in-house team is best for their business, many others see value in allocating their resources to an outsourced solution. For this, there are numerous options but two of the most common outsourced HR solutions include Professional Employer Organizations (PEOs) and Administrative Services Outsourcing (ASO).

In this article, we’ll discuss what PEOs and ASOs are, including how they differ and the value they add to small- and mid-sized businesses. Specifically, we’ll look at things like:

• How to assess whether a PEO or in-house HR team is right for your SMB
• The difference between a PEO and an ASO
• Key benefits of partnering with a PEO
• What to look for in an HR partner
• Best practices for maximizing the value of your outsourced administrative solutions

If you have questions about streamlining business tasks like HR, get in touch with our team at The OIS Group. We offer SMBs a full business review free of charge.

What is the Difference Between a PEO and an ASO?

Administrative Solutions Outsourcing (ASO) and Professional Employer Organizations (PEO) are two types of partnerships SMBs can consider when outsourcing their HR needs. While both models provide administrative services, they differ in key aspects. Below we’ll break down the differences and similarities between ASOs and PEOs so you can decide which solution is best for your business.

Key Differences Between ASOs and PEOs

The biggest difference between ASOs and PEOs is the nature of the relationship with the client business. PEOs establish a co-employment relationship with the client business meaning that the PEO becomes the employer of record for tax and insurance purposes and shares certain employer responsibilities with the client’s business. ASOs do not maintain a co-employment relationship.

Here are a few other areas where ASOs and PEOs differ:

• Economies of scale created by group purchasing power – The co-employment nature of PEOs means they can deliver robust HR solutions and Fortune-500-style benefits packages that are otherwise unattainable for SMBs.

• Risk management – PEOs assume a share of the employment-related risks and are therefore able to provide more comprehensive risk management services than that of an ASO. This includes assistance with workers’ compensation, liability and compliance.

• Flexibility – In terms of flexibility and business optimization, this is an area where both PEOs and ASOs shine. Because these HR solutions are customizable, businesses can choose which administrative functions they most need help with.

In summary, the primary difference between ASOs and PEOs is the co-employment relationship. PEOs establish a co-employment relationship with the business whereas ASOs do not. Because of this, PEOs are often able to provide a more comprehensive scope of services.

Is It Time to Consider a PEO?

As SMBs grow, managing human resources can become increasingly complex. From compliance with labor laws to providing competitive employee benefits, the demands on HR departments can be overwhelming. Many small businesses find themselves stretched thin as they juggle various HR tasks while trying to focus on core business activities.

If your SMB is starting to reach its breaking point, it may be time to consider turning to a Professional Employer Organization. The benefits of forming a co-employment relationship with a PEO provider are many.Chief among them include cost savings, reduced administrative burden and access to comprehensive benefits packages.

Should You Stay In-House or Leverage an Outsourced Solution?

The decision between using an in-house HR team and partnering with a PEO or ASO is a strategic one that depends on your business’s unique circumstances, goals and resources. Before making the choice, ask yourself these basic questions first.

• How big is your company?
• What are your growth projections?
• Do you have budget constraints?
• Are you concerned about compliance risk?
• Are your benefits packages as good as you’d like them to be?

While an in-house HR team can offer direct control over their human resources functions, including shaping and maintaining the company culture, you may face challenges as your business scales. Hiring and training additional HR staff can be resource-intensive if you need to do so because of the increased workload and complexities associated with a growing workforce.

On the flip side, PEOs are inherently scalable. This makes them an ideal choice for businesses experiencing growth or fluctuations in workforce size. Businesses also benefit from the economies of scale PEOs provide. This is especially true for things like benefits and insurance.

More Benefits of Engaging a PEO

• Access to comprehensive benefits: Due to the economies of scale generated through the co-employment relationship, PEOs can typically deliver a robust, fully integrated HR software and services solution while also providing unique, Fortune 500-style benefits otherwise unattainable for small and medium-sized businesses. This can make room for your organization to attract stronger talent, streamline processes and reduce much of the administrative burden and liability associated with human resources.

• Expert HR management: The best use of everyone’s time is when we all focus on tasks in our wheelhouse. When you outsource services like HR, not only are you streamlining operations, but you are also gaining access to a team of experts who specialize in helping businesses navigate complex employment laws, regulations and compliance requirements.

• Cost savings: Another benefit resulting from economies of scale is that PEOs can often negotiate better rates on benefits and insurance. Those savings are then passed on to your SMB. Moreover, outsourcing HR tasks reduces the need for an in-house HR team thereby saving on staffing costs as well.

• Improved efficiency and technology: PEOs leverage advanced HR technology to streamline human capital management processes such as payroll, time and attendance tracking, employee onboarding, performance management and others.

In addition to these benefits, working with a PEO enables SMBs to redirect their time, energy and focus toward other core business functions and prioritize growth initiatives without the burden of managing HR tasks.

What to Look for in an HR Partner

When choosing an outsourced HR partner, it’s imperative to remember that it’s not one-size-fits-all. Providers vary in their scope of services, so it’s crucial to choose one that aligns with your business’s specific needs. For more about what a PEO is (and isn’t), be sure to read this post.

How to Pick the Perfect PEO Partner

Here’s where to start when evaluating potential PEO partners for your SMB.

• Industry expertise: Look for a PEO with experience and expertise in your industry. Familiarity with the specific challenges and regulations of your business sector enhances the PEO’s ability to provide tailored solutions. Compliance is a critical factor for any business, so you’ll want to also verify the PEO’s commitment to compliance.

• Service offerings: Evaluate the range of services offered by the PEO. Ensure that their offerings align with your business needs.

• Workforce Technology: Assess the PEO’s technology infrastructure. A modern, user-friendly platform that integrates seamlessly with your existing systems can streamline HR processes and enhance overall efficiency.

• Employee benefits offerings: One of the prime advantages of leveraging a PEO is the benefits your employees will have access to. Assess the quality and variety of employee benefits the PEO can provide. Competitive health insurance, retirement plans, and other perks contribute to attracting and retaining top talent within your organization.

• Customer support and communication: Evaluate the level of customer support provided by the PEO. Prompt and effective communication is crucial for addressing concerns, resolving issues and maintaining a positive co-working relationship.

• Client reviews: Request client references and read reviews from businesses similar to yours. Insights from current or past clients can offer valuable perspectives on the PEO’s performance, reliability and customer service.

Taking the time to find the right fit for your business can improve your collaboration and the success of your SMB.

Best Practices for Maximizing the Value of Your Outsourced Administrative Solution

Outsourcing administrative processes is a strategic way to maximize your resources. For one, it enables you to tap into a full team of experts while simultaneously freeing up your capacity to focus on strategic initiatives. And there are a host of other benefits as well including solutions that offer the flexibility to scale with your SMB or those that can provide enhanced benefits packages to your employees.

Entering into an outsourced partnership can be an effective way to optimize your business processes, but doing so without a plan will benefit no one. Below are some prime examples on how you can get the most out of your outsourced HR solution.

Maximizing the Value of Your PEO or ASO Partnership

To get the most value out of your ASO or PEO partnership, there are some best practices you should consider. 

• First, define your objectives – Finding the right partner hinges on your ability to clearly define your goals, objectives and expectations. Spend some time identifying your pain points and priorities. This will help your PEO broker ensure you find the right fit.

• Research Providers – Take the time to thoroughly vet potential ASO and PEO providers. Consider their industry expertise, client testimonials and the breadth of services offered. A provider with a track record of success and a comprehensive service offering is more likely to meet your business’s unique needs and fulfill your defined objectives.

• Seek customized solutions – You’ve identified your needs and researched providers. Now it’s time to customize solutions to align with your objectives. Whether it’s payroll processing, benefits administration, or compliance management, to get the most value out of your partnership, you need to tailor the scope of services, so you only pay for the support you truly need.

• Regularly review and assess performance – The best way to track if a solution is working for you is to implement a regular review process to assess the performance of your ASO or PEO provider – and its impact on your operations. Regular evaluations allow you to identify areas of improvement, address any issues promptly and ensure that the partnership continues to align with your business goals.

 

Maximizing the value of your outsourced administrative solutions requires a strategic and collaborative approach. To find the best partner for your SMB, give us a call at The OIS Group. We’ll conduct a complimentary full review to help you identify areas of opportunity.