Businesses in high-risk industries today face numerous challenges — managing compliance with shifting employment laws, tackling the rising costs of benefits, and addressing workers’ compensation issues, all while striving to stay competitive. For many, the burden of human resources (HR) responsibilities can pull focus away from what they do best: growing their core operations.
In this environment, professional employer organizations (PEOs) and administrative services organizations (ASOs) can be invaluable. These two HR outsourcing models provide tailored solutions to help businesses navigate these challenges. For insurance agents, understanding the nuances of PEOs and ASOs is a vital skill for advising clients on the most effective strategies to meet their workforce needs.
What Is a PEO?
A PEO enters into a co-employment relationship with a client company, sharing employer responsibilities. This partnership allows businesses to outsource various HR tasks, including payroll processing, benefits administration, and compliance management.
By pooling employees from multiple companies, PEOs can negotiate better benefits and insurance rates. This arrangement provides small to medium-sized businesses with access to resources typically available to larger corporations.
For instance, a PEO can handle workers’ compensation insurance, ensuring compliance with state regulations and managing claims efficiently. With a PEO handling HR complexities behind the scenes, business owners can focus on core operations.
For instance, a PEO can handle workers’ compensation insurance, ensuring compliance with state regulations and managing claims efficiently. With a PEO handling HR complexities behind the scenes, business owners can focus on core operations.
What Is an ASO?
An ASO offers HR services without entering a co-employment relationship. In this model, the client company retains full employer status and control over HR policies, while the ASO provides administrative support for functions such as payroll processing, benefits administration, and compliance assistance. Unlike PEOs, ASOs do not sponsor employee benefit programs or workers’ compensation coverage but may assist in arranging these services.
ASOs are suitable for businesses that prefer to maintain autonomy over their HR functions while outsourcing specific administrative tasks. This flexibility allows companies to select services tailored to their unique needs without relinquishing control over employment decisions.
Key Differences Between PEOs and ASOs
Understanding the distinctions between PEOs and ASOs is essential for recommending appropriate HR solutions for your hard-to-place risks.
- Employment relationship: PEOs establish a co-employment arrangement, sharing employer responsibilities, whereas ASOs do not, leaving the client company as the sole employer.
- Control and flexibility: ASOs offer greater flexibility, allowing businesses to choose specific services while retaining control over HR policies. PEOs provide comprehensive services but may require adherence to standardized procedures.
- Benefits and insurance: Due to their larger employee pool, PEOs can offer access to broader employee benefits and insurance options. ASOs may assist in managing benefits but do not sponsor them, potentially resulting in less favorable rates.
- Cost structure: PEOs typically charge a percentage of payroll or a flat fee per employee, which may include additional costs for benefits and insurance. ASOs usually charge a flat fee per service or employee, potentially offering a more cost-effective solution for businesses seeking specific services.
Choosing the Right Model for Your Clients
When advising clients on HR outsourcing options, consider the following factors:
- Company size and resources: Smaller businesses with limited HR resources may benefit from a PEO’s comprehensive services. Larger companies with established HR departments might prefer the flexibility of an ASO.
- Desired level of control: Clients seeking to maintain full control over HR policies and decisions may find an ASO more suitable. Those willing to share responsibilities for streamlined operations might opt for a PEO.
- Workers’ compensation considerations: With a PEO and some ASO solutions, workers’ compensation premiums are generally not negatively impacted by a high experience MOD. Instead, they are often rated on a claim-by-claim basis, taking into account claims that may have been mismanaged by the incumbent carrier or that do not reflect actual workplace exposure or practices. This approach can result in price breaks for high MOD submissions that are not typically available through traditional markets.
- Specific HR needs: Evaluate the client’s specific HR requirements, such as benefits administration, compliance support, or payroll processing, to determine which model aligns best with their objectives.
By understanding the unique features of PEOs and ASOs, insurance agents can make informed recommendations and help clients choose the HR outsourcing model that best suits their business needs.
Empower Your Clients for Success
By understanding the distinct benefits of PEO and ASO models, you position yourself as a trusted advisor capable of solving your clients’ HR challenges. Whether it’s the comprehensive support of a PEO or the flexibility of an ASO, offering the right solution can make all the difference in helping your clients streamline operations, reduce costs, and manage risk.
At Landmark Wholesale, we specialize in connecting agents like you to industry-leading PEO and ASO programs. With our unmatched market access, active claims advocacy, and integrated compliance tools, you’ll have everything you need to deliver exceptional service and results for your clients.
Ready to elevate your offerings and empower your clients? Partner with Landmark Wholesale today and gain access to innovative HR outsourcing solutions that drive success. Let’s grow together!
About Landmark Wholesale
Landmark is a nationally licensed facility for tough-to-place risk with a focus on securing alternate workers’ comp solutions. From PEOs to specialty programs, we offer access to coverage solutions other wholesalers can’t. Our recent placements include complex risks in staffing, transportation, and construction sectors — demonstrating our ability to secure coverage where others fail. Partner with Landmark Wholesale to find solutions for your toughest accounts and expand your market reach.
