PEO vs. ASO: Which Model Is Right for Your Business?

As your business grows, managing payroll, benefits, and HR compliance can take valuable time away from running your company. Outsourcing HR functions can help but not all outsourcing models are the same. Two of the most common are Professional Employer Organizations (PEOs) and Administrative Services Organizations (ASOs).

Understanding the difference between a PEO and an ASO can help you choose the right level of support, cost structure, and compliance protection for your organization.

What Is a PEO?

A Professional Employer Organization partners with your business through a co-employment relationship. That means both you and the PEO share certain employer responsibilities.

• Your employees remain under your day-to-day control, but the PEO becomes the employer of record for tax and benefits purposes.

• The PEO handles payroll, benefits administration, tax filings, and compliance under its federal employer identification number (FEIN).

• This structure allows small and mid-sized businesses to access large-group benefits, including health insurance, retirement plans, and workers’ compensation coverage often at better rates than they could obtain independently.

PEO Pros

• Access to comprehensive benefits: Join the PEO’s master health and retirement plans for competitive rates and coverage.

• Reduced administrative burden: Payroll, taxes, benefits, and compliance are managed for you.

• Compliance protection: The PEO stays up-to-date on HR laws and regulations, helping reduce risk.

• Scalable solution: Ideal for growing businesses that need turnkey HR infrastructure.

PEO Cons

• Less flexibility: Benefit plan options and carriers are determined by the PEO.

• Shared employer relationship: Some business owners prefer to keep all employer responsibilities internal.

• Cost structure: PEOs charge administrative fees, sometimes as a percentage of payroll, that may be higher than ASO models depending on your needs.

What Is an ASO?

An Administrative Services Organization provides many of the same HR, payroll, and compliance services as a PEO without entering a co-employment relationship.

• Your business remains the sole employer of record, maintaining full control and responsibility for taxes, benefits, and compliance.

• The ASO acts as a service provider, administering your HR functions using your company’s FEIN.

• This model offers greater customization for organizations that already have established benefits programs but want expert support managing them efficiently.

ASO Pros

• Full employer control: You maintain ownership of your benefits, insurance policies, and compliance decisions.

• Flexible services: Choose the HR and payroll functions that best fit your needs.

• Ideal for larger or established companies: Those with existing infrastructure benefit from administrative support without giving up control.

• Transparent pricing: Typically fee-based per employee or per service, often more predictable than a PEO percentage-based model.

ASO Cons

• No pooled benefits: You must source and manage your own benefit plans.

• Greater compliance responsibility: The ASO can advise, but ultimate legal responsibility remains with you.

• Limited risk sharing: You retain more of the liability for HR compliance and employee issues.

PEO vs. ASO: Which Is Best for You?

The Bottom Line

If your business wants turnkey HR, payroll, benefits, and compliance support under one umbrella, a PEO may be the right choice. You’ll gain access to large-group benefits and risk protection with minimal administrative work.

If you prefer to retain full control over your HR policies and benefits while leveraging expert administrative support, an ASO offers the flexibility and transparency you need.

Whether you’re looking for the shared strength of a PEO or the independence of an ASO, GTM Payroll & HR provides both models so you can scale confidently with the right level of support for your organization.

Request a complimentary quote today.