The main difference between a Professional Employer Organization (PEO) and an Administrative Services Organization (ASO) lies in the employment relationship and the level of risk sharing.
A PEO operates under a co-employment model, where it becomes the employer of record for tax and compliance purposes. This means the PEO shares management responsibilities and assumes legal liability for areas such as workers’ compensation and employment regulations. Because of this shared risk, PEOs typically offer comprehensive compliance support and access to premium employee benefits through pooled rates.
In contrast, an ASO provides administrative support for tasks like payroll and benefits administration without establishing co-employment. Under an ASO model, the client remains the sole employer and retains full legal liability for all employment-related risks. While ASOs offer more employer control and generally have lower service-only fees, they do not provide the same level of risk mitigation or regulatory relief as a PEO.
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