PEO, ASO, and EOR are three distinct outsourced employment models. They share some surface similarities — all three handle HR/payroll administration — but they differ in legal structure, liability transfer, benefits pooling, and cost. Here's how to tell them apart.
Co-employment arrangement. The PEO is the legal employer of record for tax purposes (under their EIN), sponsors a master health plan, carries master workers' comp, and assumes liability for federal payroll taxes (if CPEO certified). You retain operational control. PEOs are the most comprehensive of the three and command the highest fees.
Outsourced HR administration without co-employment. You remain the sole legal employer — your EIN, your health plan, your workers' comp policy. The ASO simply handles the administrative work: payroll processing, benefits administration, compliance support. ASOs are cheaper than PEOs but offer fewer benefits (no master health plan pooling, no workers' comp pooling, no federal tax liability transfer).
The EOR is the full legal employer for specific workers — typically used for international hiring, contractor-to-W-2 conversions, or short-term project staffing. EORs handle payroll, taxes, benefits, and compliance for the workers they employ on your behalf. EORs differ from PEOs in that you don't have an ongoing co-employment relationship with all your staff — the EOR employs specific workers under their own infrastructure.
You have 5–500 W-2 employees, you want comprehensive HR/payroll/benefits/compliance under one roof, and you value access to master health plan rates and pooled workers' comp. PEO is the right choice for most established small and mid-sized businesses.
You're an employer 50+ employees with strong internal HR, you already have a competitive direct health plan and workers' comp policy, and you just want help with the administrative processing. ASOs are cheaper and offer more flexibility on which specific services you outsource.
You're hiring internationally (EOR is the standard model for international employment without a local entity), you're converting contractors to W-2 in jurisdictions where you don't want to establish full employer presence, or you have a short-duration project that doesn't warrant standing up full payroll/benefits infrastructure.
PEOs are typically the most expensive ($100–$200 PEPM) because they include benefits pooling, workers' comp, and federal tax liability transfer. ASOs are mid-priced ($40–$100 PEPM) because they're just administration. EORs vary widely — domestic EORs are often $100–$300 PEPM, international EORs $400–$1,000 PEPM depending on country and complexity.
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