A plain-English decision framework for co-employment, benefits, control, and administrative depth.
The short answer
Choose a PEO when you want a co-employment arrangement that may combine payroll, benefits, workers’ compensation, HR support, and compliance administration. Choose an ASO when you want outsourced administration while retaining your own benefit plans and employer relationships.
Where the models diverge
The distinction affects contracts, benefit plan structure, workers’ compensation, tax administration, and the boundaries of provider responsibility. It does not change who runs your business or directs employees.
- PEO: broader bundled relationship and co-employment
- ASO: administrative services without co-employment
- Both: service quality and scope vary materially by provider
Use your constraints to decide
List any benefits strategy requirements, existing broker relationships, payroll dependencies, state footprint, internal HR capacity, and control preferences. If retaining current plans is non-negotiable, that may point away from a PEO. If administrative consolidation is the main goal, a PEO may deserve more weight.