Are There Different Types of PEOs?
Author : Emily Clarke | Published On : 08 May 2021
When it comes to employee onboarding, legal compliance, payroll, workers comp, and managing other benefits, small and mid-sized businesses often rely on professional employer organizations, or "PEOs," to streamline the operations. These third-party organizations take the pressure off growing companies by freeing up their resources and managing tedious HR tasks. Not all PEOs are the same, though, and understanding the different types allows you to align the products and services each provides to your business's specific needs.
In general, there are three different types of PEOs
- Traditional PEOs
- Administrative Services Organization (ASO)
- Human Resources Outsourcing Organization (HRO)
The first type, the traditional PEO, is your full-service option to take on the burden of all HR responsibilities. This standard option will include PEO payroll management and PEO tax filing with shared liability. This means that your PEO is a co-employer since they assume or share the liabilities associated with filing taxes. In addition to PEO payroll and tax filing assistance, a traditional PEO will also provide your company with access to lower rates across almost every benefit category. This diversity of advantages makes traditional PEOs the most versatile option of the three.
The only significant difference with ASOs is that they do not share any liabilities that traditional PEOs will. ASOs, however, will still help your company file its taxes; they'll just do so using your company's Employer Identification Number. Your company will retain all rights as a result of accepting all liabilities. Other than this crucial distinction, ASOs can provide your company with many of the same HR needs that a traditional PEO can.
HROs are beneficial because they cover everything from typical to niche HR needs. We've seen that PEO payroll and tax filing assistance are pretty standard, which hasn't changed when it comes to HROs. But if you're looking for specific functionalities such as attendance tracking or organizing open enrollment, an HRO could be for you. While some traditional PEOs can facilitate these services, you're better off consulting an HRO. HROs help companies reduce their bottom-line expenditure by allowing them to outsource several jobs that would otherwise require them to pay several in-house professionals a salary.
PEOs are a great way to streamline operations, reduce expenses, and make your life easier. But finding the best requires you to align your company's needs to the various types and services provided by the PEOs we've discussed today.