Comparison

PEO vs ASO: Which HR Outsourcing Model Fits?

A PEO co-employs your workforce and brings master health, workers' comp, and tax filings under its FEIN. An ASO administers HR and payroll under your FEIN with no co-employment. The right answer depends on benefits leverage, risk transfer, and how much HR work you want to keep in-house.

See how it works

Co-employed

Worker classification under PEO

Sole employer

Worker classification under ASO

Decision dimensions covered below

The five decision dimensions

Co-employment. PEO files payroll under its FEIN. ASO files under yours. This affects unemployment ratings, tax credit eligibility, and lender comfort.
Benefits buying power. PEOs aggregate thousands of employees into master health plans. ASOs let you keep your existing carrier relationships.
Workers' compensation. PEOs typically include WC under a master policy with pay-as-you-go billing. ASOs leave WC with you.
Pricing model. PEOs price as PEPM or % of payroll, often bundled. ASOs price per service, à la carte.
Exit complexity. Leaving a PEO mid-year resets wage bases (FUTA/SUTA/FICA caps) and requires unwinding co-employment. ASO transitions are simpler.

Is a PEO always more expensive than an ASO?

No. The headline admin fee is usually higher under a PEO, but the bundled benefits, WC, and SUI handling can produce lower total cost — especially for small employers without their own benefits leverage. The honest answer requires modeling both with your real census.

Does ASO mean I keep my own benefits broker?

Yes. Under an ASO model you retain your existing health carrier and broker relationships. Under a PEO you typically move onto the PEO's master health plan, though some PEOs allow benefits carve-outs.

Which model is better for compliance?

Both can be strong. PEOs assume more shared liability under co-employment and tend to invest heavily in compliance infrastructure. ASOs advise but the legal employer responsibility stays with you.

How to decide

Run the comparison with your actual census, your current benefits load, and your workers' comp class codes. The right answer changes as employers grow — many companies start with a PEO for benefits leverage and migrate to ASO + direct carriers when they cross a threshold where master plan economics flip.

When you're ready to compare both side by side, Entravia's How It Works covers a structured intake that supports either model.

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