How Do PEO Companies Stack Up Vs. Four Alternatives?


Depositphotos_136288134_l-2015Human resources deal with a lot of the responsibilities of running a company on a daily basis. So when it comes to outsourcing HR, you’ll most likely hear about Professional Employer Organizations (PEOs). But those aren’t your only options, there are other alternative human resource services that we’ll go over in order to understand how they compare to PEO companies. 

PEOs can provide comprehensive HR solutions for businesses including payroll, benefits, tax administration, and regulatory compliance assistance. Partnering with a PEO allows businesses to outsource these human resource functions, and is an extension of your business when it comes to addressing employee related matters. Now that we understand what a PEO is, let’s see how they compare to other human resource services out there.

PEO vs. ASO

ASO stands for administrative service offering, which businesses can use to outsource administrative functions such as payroll, employee benefits, workers compensation, safety programs and HR management. Though it sounds very similar to a PEO, there are a few differences between the two in how they function, such as:

  • PEOs choose third-party partners that best fit the collective group of clients, and offer them to you; ASOs manage the third-party partners you choose.
  • ASOs don’t get volume pricing for benefits; but PEOs do.
  • Both manage insurance partners, but in different ways.

PEO vs. HRO

Human resources outsourcing (HRO) deals with the process of sub-contracting HR functions to an external supplier. HRO can also be referred to as BPO, or business process outsourcing. This model is seen being used for mid-size markets, but has traditionally been available only to larger organizations in the past.

HR outsourcing can be viewed as an entire function in this case, and the differences between the two are similar to those of ASO vs. PEO. ASO and HRO deal with HR management and the benefit options you choose on your own. Companies who partner with a PEO typically don’t also need to hire an ASO or HRO.

PEO vs. Employee Leasing

If you hear the term “employee leasing” it’s just a different way of saying PEO. They actually mean the same thing, employee leasing just isn’t as commonly used anymore, as it’s a bit confusing in context. PEO more accurately conveys the message outsourcing companies are trying to send to their customers.  

PEO vs. Staffing Companies

Staffing companies, or staffing agencies, assist businesses find and hire employees. Their job is to recruit possible candidates interested in open positions, so that employers can efficiently handle the interview process. Unlike a PEO, they do not take on responsibilities such as payroll or employee benefits. Once a company finishes their hiring process, all of the other logistics involving employee benefits get handled by a PEO.

A business may have both a staffing company and PEO, they just function as two separate entities of the business in terms of servicing potential and current employees.

Analyze Your Options

So now that we know how a PEO differs from other HR outsourcing alternatives, if you’re in the market for an outsourcing provider, here are a few things to consider:

  • Identify the functions you want help with. This will help you organize what it is your company can handle on the inside, and what you need outside assistance for so that you can choose the right provider for you.
  • Make a credible choice. You may want to do some research before bringing a provider onto your team. Check if they have any certifications, and find reviews other clients have left about them.
  • Do they have experience servicing other clients in your line of work? If you’re going to bring on a partner, you want to be sure they can understand the environment of your company and are willing to meet your needs. Determine how long they’ve been around and their turnover rates.

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