Administrative Services Organizations: An introduction

An administrative services organization (ASO) can be just what a company needs to address its human resources needs. An ASO can deliver cost savings, and it offers flexibility to an organization. What follows is an introduction to administrative services organizations.

For starters, it’s best to compare and contrast an administrative service organization with a professional employer organization (PEO).

In the case of a PEO, a company outsources its human resources functions to a third party — the PEO —through a co-employer structure. In this case, the PEO becomes the employer of record. The positives of this structure? The PEO, not the employer, assumes liability for matters such as workers compensation and employment matters. There is also the possibility of a reduced tax burden under this approach. (For even more on professional employer organizations, check out our recent blog on some of the trademarks of a PEO approach.)

However, in a PEO structure, a company surrenders a great deal of control. That’s the trade-off for the reduction in liability.

For companies seeking the benefits of outsourcing while maintaining more control, an administrative service organization might make more sense. Under the ASO model, a company remains the employer of record, but it also has greater ability to makes benefits choices, such as picking a health plan. Also, an administrative service organization costs significantly less to implement, with a savings of about 50 percent.

While the ASO strategy results in a company taking more liability than the PEO model, a firm might well decide that the benefit of choice outweighs the risk of passing on some of the decision-making power. The right answer will depend upon the firm.

For more on administrative service organizations, including transitioning to an ASO model, contact a Plexus client representative or reach out to us at 312-606-4800. You can also contact us via the Web at plexusgroupe.com.

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