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An administrative services organization (ASO) model is a service arrangement where a business outsources specific HR administrative tasks without entering a co-employment relationship. Unlike a professional employer organization (PEO), an ASO does not become the employer of record. Instead, the client company maintains all employer responsibilities, while the ASO provides back-office support—commonly in areas like payroll tax filing, benefits administration, regulatory compliance and workers’ compensation.

ASO services help small businesses and startups streamline operations without giving up control over their workforce. Business owners can choose from self-funded or fully insured benefit plans, process claims through a third-party administrator (TPA) and access stop-loss insurance as needed. This model supports cost savings and flexibility, especially for companies that want to manage financial risk and maintain their own employee benefit plan and health care policies.

Payroll service providers handle the calculation, processing and distribution of employee wages, payroll taxes and related filings on behalf of a business. They are often engaged to manage payroll outside of an in-house team, reducing administrative burden and supporting HR services like onboarding, new hire reporting and payroll compliance.

Many payroll providers also offer extended capabilities such as managing short-term disability deductions, tracking eligibility for health benefits and integrating with enrollment tools for a health plan or insurance plan. While they do not typically provide full HR administration or risk management like an ASO arrangement might, payroll service providers can be part of a broader solution that complements in-house human resources teams or works alongside self-insured benefit strategies.

An administrative services organization (ASO) supports a business by handling HR services such as payroll, benefits enrollment, regulatory updates and compliance reporting without becoming the employer of record. In an ASO arrangement, the employer retains full control over hiring, risk management and all employment decisions, including selecting a self-insured health plan or working with a preferred insurance company.

A professional employer organization (PEO), by contrast, enters into a co-employment relationship. The PEO becomes the employer of record for tax and benefits purposes. This model centralizes HR administration, onboarding and benefits eligibility but limits flexibility in choosing insurance plans, short-term disability providers, or custom pricing structures. Businesses often choose ASO plans when they want support but need to maintain their own insurance coverage, HR policies and in-house control over employees.