As your business grows, so too does the complexity of managing HR, payroll, benefits, and compliance — which is where outsourced HR solutions come into play. But choosing the right model can be overwhelming.
Two common solutions are administrative services organizations (ASOs), and professional employer organizations (PEOs). These two models often appear similar on the surface, but the differences between them can significantly impact how you manage your workforce. Whether you're scaling rapidly or just starting to outsource HR functions, understanding the differences between PEOs and ASOs is crucial.
In this guide, we'll explore the key differences, similarities, pros and cons, and how to choose the right solution for your business. So let’s jump straight in.
As mentioned, ASO stands for administrative services organization. It’s a type of third-party provider that helps your business manage HR tasks, without becoming a co-employer (more on that below).
ASOs typically offer:
It’s important to note that, with an ASO, you retain full legal responsibility for your employees. The ASO provides support — not shared liability.
PEO stands for professional employer organization, and is also a type of third-party HR services provider. However, unlike ASOs, PEOs operate on a co-employment relationship with your business, meaning it shares certain legal responsibilities for your employees.
Learn more: What is a PEO and what does it do?
PEOs typically offer:
It’s important to note that PEOs are not the same as an employer of record (EOR). A PEO never becomes the sole legal employer of your workforce, nor can it hire employees on your behalf in other countries. We will discuss this in more detail further in the article.
| ASO | PEO | |
| Legal employer |
You |
Shared (co-employment) |
| Payroll tax filing |
Filed under your tax code |
Filed under PEO’s tax code |
| Benefits access |
Standard group plans |
Large-group rates and plans |
| HR liability |
Solely yours |
Shared with the PEO |
| Compliance support |
Advisory only |
Advisory and shared risk |
When choosing whether to work with a PEO or an ASO, there are several factors you need to consider, such as your company size, your internal resources, your risk tolerance, and your growth plans.
A PEO may be a better fit if:
Alternatively, an ASO may be more suitable if:
Let’s say that your business is a 20-person startup with no HR department. Based in the US, you’re planning to expand into multiple states, and need immediate help with compliance, benefits, and hiring. In this scenario, a PEO likely makes more sense, as you get a co-employment partner to manage the expansion risk and offer robust benefits from day one.
Conversely, imagine that you’re a 120-person company with two HR managers. These managers want help with payroll and compliance audits, but they don’t want to hand over employer responsibilities. An ASO gives them that flexibility.
Another potential option is to use an employer of record (EOR). EORs are often confused with PEOs, but there are some key differences and they typically suit different scenarios.
The biggest difference is that EORs legally hire your team member(s) on your behalf — there is no co-employment arrangement. This means that the EOR assumes full legal responsibility for your team member(s).
See also: What is an EOR, and how does it work?
The biggest benefit of this is, if you’re hiring (or planning to hire) abroad, you don’t need to set up a legal entity in those locations. You hire them through the EOR’s entity, which can save you significant amounts of time and money.
Like PEOs, EORs handle:
It’s usually more advisable to use an EOR if:
Learn more: Does your business need a PEO or an EOR?
Understanding the difference between PEO, ASO, and EOR models is essential when deciding how to scale your HR operations. There’s no one-size-fits-all answer — but making the right choice depends on:
Whatever your needs, Remote has you covered. We provide a fully-fledged PEO service in the US, as well as dedicated payroll and HR management services around the globe. We also offer full entity-owned EOR services in 80+ countries, enabling you to focus on expansion without worrying about costly, time-consuming administration and compliance issues.
If you’re unsure which approach is the right one for your business and you want to learn more — including how Remote can help — speak to one of our friendly experts today.