Employee Leasing, HR Outsourcing, PEO, ASO - Demystifying Acronym Madness

Are you currently shopping or working with an employee leasing company? Perhaps you are looking into a Professional Employer Organization? Surely you have heard about the benefits of HR Outsourcing...

If you said "yes" just once then read on, this article will help you to understand the similarities and differences between each of these terms.

Employee Leasing, Professional Employer Organization, and PEO, all mean the same exact thing. Particularly, they all refer to an HR Outsourcing company that partakes in coemployment with its clients, which fundamentally means two companies employing the same employee base and splitting the responsibilities of properly managing them.

HR Outsourcing is a broad definition that refers to a wide range of companies and services that all have one thing in common; they help companies offload some part of the responsibilities necessary to manage their workforce. The simplest and most common is a payroll processing company such as ADP, the most comprehensive and less known would be Administaff, which is considered to be a PEO. PEOs provide an array of services including payroll processing, workers comp insurance, employee benefit packages, HR support, and even 401(k).

An Administrative Service Organization or, ASO, can be considered as an HR Outsourcing firm, but since ASOs do not coemploy with their clients, they are not a PEO. ASOs usually provide payroll processing, HR support, and can administer workers comp insurance, employee benefit packages, and 401(k). Notice the difference here in the word "administer", as opposed to "provide" which was when referring to PEOs. This is due to the fact that PEOs offer clients their own benefit plans and workers comp insurance through coemployment, whereas ASOs only help administer policies that you can attain through a normal broker.

PEOs usually cater to small businesses with employees from 5-200 employees, with the true sweetspot being 10-50 employees. PEOs often save companies on purchasing health insurance and to also help keep them in compliance with the rapidly expanding base of regulations that weigh on small businesses.

ASOs usually work well with bigger companies, from 100 employees into the thousands. Companies that use ASOs, or HROs, usually have the need to offload the administrative burden of human resources, but are large enough to qualify for a better benefit program than smaller businesses.