As your company grows, managing every aspect of operations on your own becomes challenging, especially when it comes to human resources (HR) tasks. This is why many companies prefer to outsource their HR operations, which can lead to up to 91% savings compared to maintaining an in-house team.
However, deciding to outsource is only the first step. You must research providers that suit your business needs, budget, and expectations. There are two types of providers: administrative services organization (ASO) and professional employer organization (PEO), which manage your company's HR, payroll, and benefits.
One of the trusted names in the HR industry is Rippling HR. Surprisingly, the software offers both ASO and PEO features that can be tailored to businesses of different sizes and industries, but their approaches vary significantly.
This guide will explore the key differences between Rippling ASO and Rippling PEO, helping you determine which option best aligns with your business needs.
ASO is a business outsourcing service specializing in HR functions, such as payroll and benefits administration. When you work with an ASO, it means that you are outsourcing your HR to a third party or partner. They will provide HR services for your business but will not share any legal responsibilities and liabilities of your employees.
While most ASOs do not offer workers’ compensation services, they provide limited HR risk management. These providers remain valuable for small businesses looking for professional HR support.
PEO is a business outsourcing service that offers comprehensive HR services to small companies under the co-employment model. This means they will share some legal responsibilities while your business retains ownership and your employees remain under management.
Simply put, a PEO operates like an HR partner, offering high-quality services without additional overhead. A dedicated representative handles essential HR tasks through this model, including payroll, benefits administration, compliance, and risk management on your behalf. This allows you to focus on daily operations without getting bogged down by administrative complexities.
We know there might be confusion regarding ASO and PEO since they sound similar. While ASO and PEO offer HR outsourcing services, there is a difference between them. The primary difference between an ASO and a PEO lies in the employment model, industry restrictions, access to benefits, and workers’ compensation offerings. Below is a detailed comparison:
| ASO | PEO |
Employment Model | No co-employment | Co-employment model and shared responsibilities |
Eligibility Requirements | No minimum requirements, and it is accessible to all businesses | Minimum number of employees required |
Payroll Tax Account Management | Business manages tax accounts, ASO assists with compliance | Manages tax accounts and filings |
Access To Benefits | Supports existing benefits structure, works with brokers | Manages and sponsors benefits for employees |
Workers’ Compensation | Does not provide directly but can arrange through third parties | Includes workers’ compensation as part of co-employment |
Compliance Support | Provides administrative support, oversees compliance | Shares compliance responsibility and risk |
Industry Restrictions | No restrictions, and it is flexible across industries | May have industry-specific restrictions |
Employment Model
One of the major differences between ASO and PEO lies in their employment models. With a PEO, businesses operate under a co-employment agreement, where responsibilities such as payroll, tax filing, and compliance are shared. The PEO handles administrative HR tasks, while the business owner remains the worksite employer, overseeing daily operations, managing employees, and driving business growth.
In contrast, an ASO lacks co-employment. The business retains full employer status, outsourcing HR functions without sharing legal responsibilities.
HR Services
Both ASOs and PEOs provide HR services, but their scope differs. ASO handles payroll, regulatory compliance, and state and local taxes. However, they focus on administrative oversight, ensuring day-to-day HR tasks run smoothly.
On the other hand, a PEO offers a more comprehensive service, including paying employment taxes on behalf of the business and managing employee benefits.
Access To Benefits
When it comes to benefits, the ASO does not provide direct access but supports your existing benefits structure. Mostly, businesses rely on brokers to manage benefits plans. PEO is responsible for choosing, arranging access, and sponsoring health and other employee benefits plans.
Workers’ Compensation
An ASO does not provide workers’ compensation benefits but can help arrange coverage through third-party providers. In contrast, a PEO includes workers’ compensation as part of its co-employment model, ensuring coverage is directly managed within its service offering.
Industry Restrictions
ASO offers a flexible HR solution with no industry-specific restrictions, making them suitable for businesses across all sectors. Conversely, PEO can have limitations based on industry type, requiring businesses to meet specific eligibility criteria before partnering with them.
Eligibility Requirements
ASO has no minimum eligibility requirements, making it accessible to companies of all sizes, including startups and small businesses. For PEO, a minimum number of employees must be qualified for their services. Additionally, a specific percentage of employees may need to enroll in health benefits arranged by the PEO.
Compliance Assistance
Both ASO and PEO manage compliance, but only PEO shares legal risk through co-employment. ASO offers guidance, leaving full liability to the business. Choose ASO for control with support or PEO to offload some compliance risks and liability.
Cost
An ASO is generally more cost-effective than a PEO because it charges a flat fee per employee. PEO has a pricing model can be either a flat fee or a variable fee based on a percentage of your payroll.
Risk
As a co-employer, the PEO will assume some risks you incur while running a business. This can be great news for small businesses, who are concerned about the amount of risk they are taking and nervous about the possibilities of high legal fees and costly claims. ASOs don’t take any risk since they don’t operate under the co-employment model.
Deciding between Rippling’s ASO and PEO is a decision that should be tailored to meet the business's unique needs and priorities. Paying attention to factors such as the size of your business, budget constraints, and the level of compliance management your company requires helps guide you in selecting the model that aligns with your goals.
- Company Size: If you have a large company with an in-house HR team, you may prefer outsourcing some processes to ASO for administrative support. In case you have a small business, you can get more HR coverage with PEO
- Cost Vs Benefit: While PEOs tend to be more expensive, they offer comprehensive services, making them an ideal choice for small businesses that need more HR support. ASOs offer a more cost-effective solution but provide a narrower scope of services
- Control And Flexibility: If maintaining control over HR practices is important, an ASO allows greater autonomy. However, if convenience and cost savings are priorities, a PEO’s all-in-one service might be worth the trade-off in control
- Regulatory Environment: For businesses in highly regulated industries, a PEO may be the better choice due to its compliance support and shared legal responsibilities. On the other hand, an ASO can be ideal for those who need more direct oversight over their staff and HR operations
Ultimately, choosing between Rippling ASO and Rippling PEO depends on your business needs and preferences. Rippling ASO is ideal for companies that want to retain control over their HR functions and benefits while automating administrative tasks.
On the other hand, Rippling PEO offers a comprehensive, full-service solution with premium benefits, expert HR support, and advanced compliance automation. It is ideal for businesses seeking a hands-off approach to HR and payroll.
Both solutions provide flexibility and powerful automation, but Rippling PEO’s co-employment model and benefits may offer more value to rapidly growing businesses. You can contact us to get a demo to understand how does Rippling work to find the best fit for your company.