ASO Companies for Small Businesses: Your Complete Guide

A small business, according to the U.S. Small Business Administration definition, is an independent business that has fewer than 500 employees. However, most small businesses employ far fewer workers than that.

More than 81% of small businesses are solo ventures without employees. Of those small businesses that do have employees, the average number in 2020 was only 11.7 — compared to 3,297.3 for large companies. Companies in business for less than two years had an average of six employees, while those in existence for more than 20 years had an average of 60.

Unfortunately, not all small businesses survive. According to data from 1994 to 2020, 67.7% of new small businesses didn’t make it to the two-year mark. After five years, around half were still operating. After fifteen years, the survival rate dropped to one-quarter.

In this comprehensive guide, we’ll look at the ways that a popular form of HR outsourcing, ASOs, help small businesses.

Understanding Administrative Services Organizations

An administrative services organization (ASO) is designed to serve the needs of small and medium-sized companies that would benefit from outsourcing some or most of their human resources administrative functions. An ASO is an HR outsourcing company. Unlike a professional employer organization (PEO), an ASO is not in a co-employment relationship with their client company. With an ASO, you retain your employer-of-record for payroll tax purposes.

ASO companies for small businesses combine leading technology and human expertise. On the technology side, they often provide a human resources information system (HRIS). This often is a powerful cloud-based software system specifically designed to streamline and automate human resources tasks. On the human expertise side, they provide a dedicated team of experienced HR professionals to help you. These business advisory services provide expertise to help you navigate HR challenges without the cost of hiring experts in-house.

An ASO also offers options. You can choose from different levels of service, according to your company’s needs. Some clients, for example, need help only with payroll tax compliance. Others want to outsource most of their HR administrative tasks. And others are looking for something in between.

An ASO provides a variety of benefits and a wide range of services that provide startup support and small business support. Types of services that are typically offered by ASOs include:

• Payroll processing. An ASO's cloud-based software services make running payroll processing simple, efficient, and easy. The HRIS will help calculate and process the payroll, take out payroll taxes and other deductions, and issue paychecks and/or direct deposits to employees. The system can keep payroll data up to date, work with your existing accounting and retirement software, and provide advanced payroll features.
• Payroll tax compliance. ASOs may support their clients with federal, state, and local payroll tax filings and remittances. They provide best practices to help their clients with their payroll tax compliance concerns.
• Employee onboarding and off-boarding support. ASOs provide the tools to help clients effectively onboard new hires and efficiently manage departing employees.
• Unemployment claims. ASOs support their clients by providing the needed documentation so the company can administer their unemployment claims.
• Policies and processes review. ASOs also review and provide best practices for company policies and employee handbooks.
• Benefits administration. ASOs support employer-sponsored employee benefits. The employer is responsible for selecting and offering employee benefits plans. However, the ASO may help administer health insurance, retirement plans and other benefits, while the ASO tool helps clients keep track of sick leave, time, and attendance.
• HR support. This includes providing tools to help clients with employee onboarding and training, performance reviews and many other tasks that help companies develop their employees and increase productivity.
• Risk mitigation. ASOs can help mitigate certain risks with their expert knowledge of HR best practices.
• Strategic planning and consulting. ASOs may offer strategic HR insight and small business consulting services to help their clients develop a sound business strategy for success.

How ASOs Help Small Businesses Meet Challenges

Small businesses usually don’t have the resources to run full-fledged HR departments on the scale that large companies do. There are also logistical challenges. For example, if a small business has, say, 12, 25, or 100 employees, do some of the managers split up HR duties? If so, how? Do the managers have the expertise to take on those tasks? Do they have the time? What kind of software would they use?

At what point could a small company afford to hire an HR manager? What number of employees or what level of revenue and profits would put that within reach?

A good way for a small business to assess the value of working with an ASO is to see how that relationship would help them solve some of their biggest challenges. This will also help you make the decision about when to outsource HR.

Managing time

An ASO’s services can help a small business save time by:

• Automating time-consuming payroll processing and other repetitive tasks.
• Providing a self-service portal for employees.
• Bringing HR functions together into a single system to sync data and increase efficiency and accuracy.

These time savings give small business leaders more time to think about core issues of business growth and profit.

An ASO helps employees, too, by providing user-friendly tools and a mobile app. Employees can use the system at any time from home or anywhere else on any device with an internet connection. Employees can access and make updates to their own employee records.

For example, they can change their address in the system when they move, or they can elect a new benefit plan during open enrollment. This saves employees time because they don’t have to make requests to an HR person to make the changes for them. It also saves HR staff time because employees take care of these tasks themselves.

An ASO saves time with benefits administration by:

• Giving employees access to information through a self-service system about the benefit plans the company offers.
• Providing benefits information to help employees make their decisions.
• Allowing employees to enroll themselves in the plans they choose.
• Providing a mobile app that allows access for benefits information and services.
• Producing reports for managers on benefits enrollment and costs.
• Automating by syncing information from the benefits and payroll systems.

ASOs help make onboarding new hires more efficient and effective. The time savings are substantial. On average, companies that work with ASOs spend 50% less time onboarding*. TriNet HR Platform customers also spend 50% less time on payroll processing*, according to third-party analysts.

Managing workflow

When it comes to HR functions, efficiency and accuracy are essential. For a small business to accomplish all its HR tasks, it must set up efficient processes. An ASO can help with that, using the specialized HR experience, expertise and technology that a small business couldn’t match on its own.

Payroll processing has to be accurate and timely. Employee morale and trust might take a big hit if paychecks are late, or if the amounts are wrong. There are also important compliance concerns involved with accurately calculating overtime pay, paid leave and payroll taxes. Payroll mistakes can result in substantial fines and other penalties.

Trying to process payroll by hand or by using outdated software substantially increases the chances of making costly errors. ASOs excel at processing payroll efficiently, thanks to their up-to-date technology, teams of expert payroll advisors.

Connecting the ASO software with your own existing HR applications is another way that working with an ASO can help you create more business efficiency. TriNet’s HR Platform integrates with certain applications you may already use, such as accounting software and retirement-benefit platforms. Enabling your applications and the ASO’s software to sync HR data can help eliminate repetitive tasks, streamline the workflow and increase accuracy.

Fatigue

Fatigue can ruin a small business. The passion of its leaders is crucial for company success. Unfortunately, the tedious day-to-day tasks involved with running a business can kill the passion that drove the leaders to start it.

Processing payroll, for example, involves many tiresome, repetitive tasks, including having to make a large number of precise calculations, bringing data together from different sources, ensuring accuracy, keeping required records, and then doing it all over again every week, two weeks, or month.

Payroll and other HR functions must align with a large number of federal, state, and local employment-related rules and requirements. The rules change often, so a small business leader trying to handle HR must devote substantial time and effort to keeping up with the changes and adapting to them. The result can be fatigue that clouds the leader's ability to focus on the big-picture items that interest them the most and drains their enthusiasm for their work.

An ASO's business support services can help ease the burden. By using leading, modern software, an ASO automates paperwork and repetitive tasks. An ASO’s professional HR experts provide best practices that can help streamline the workflow. The ASO frees small business leaders from the HR grind. They can regain their passion for entrepreneurship, business innovation and growth.

HR Compliance

Simply getting people paid and managing the company's payroll tax-filing responsibilities requires knowing federal, state and local payroll-related rules and requirements including payroll tax. Businesses also have to keep up with frequent changes to these rules and requirements and make sure their software is updated for those changes. You also have to account for things many people might not have thought of, such as how to handle leap-year payroll.

Most businesses that have employees also need to comply with workplace safety rules and, in many states, with state safety rules as well. Employers also need to comply with a vast network of rule and requirements concerning discrimination, disability accommodations, time off and benefits.

ASOs ease the burden by providing integrated compliance support tools to help you stay informed of important HR and business deadlines. Experts in payroll tax compliance helps you monitor changes and provide best practice guidance and support.

Operating costs

Small businesses usually run on a tight budget. They are in a constant battle to squeeze value out of money spent on business operations. ASOs can help. By outsourcing HR functions to an ASO, you can expand the capability of your existing HR team without the expense of recruiting and hiring new in-house HR employees.

The average human resources manager makes a salary of $136,350 a year, according to the 2023 BLS Occupational Outlook Handbook. For a small business with 50 employees, the average cost to obtain outsourced HR services is $36,000. By using an ASO instead of hiring an in-house HR manager, such business might save an average of more than $100,000 a year.

Getting and keeping good employees

Effective recruitment and onboarding are especially important for small businesses because the competition for talented employees is fierce. Getting help from an ASO can make the difference, improving your ability to find, attract, and retain top talent to give you a competitive edge in your industry.

ASOs can help with employee onboarding and off-boarding. The software they provide can help modernize and streamline your recruiting efforts so that you get better results. It can help you:

• Create and publicize your job openings.
• Sort and track job applicants.
• Automate the sourcing process.

A positive onboarding process is crucial for:

• Making a good impression on your new employees.
• Making them feel part of the team.
• Getting them off to a productive start.
• Jump-starting their satisfaction and engagement.

A bad onboarding process can have the opposite effect. In fact, a report from the Society for Human Resource Management found that 1 in 25 employees quit their new jobs because of negative onboarding experiences.

Cybersecurity

Employee records contain a substantial amount of sensitive, private information, including Social Security numbers, bank account numbers (for employees paid by direct deposit), and health insurance information. If hackers get this information, employees could become the victims of identity theft or fraud.

Companies can be vulnerable to cyberattacks because they may not have the expertise and/or business resources to effectively protect their employee data. If there is a data breach, the company can lose the trust of its employees and might also face legal repercussions.

An ASO may include expertise in data security, processes, and HRIS cloud-based data management, which can help data security. Before signing up with any ASO, find out about their data security measures, standards and policies.

Leveraging technology

Technology can be a godsend for a small business, or a challenge. The challenges they face in leveraging technology include:

• Finding and using the latest technology.
• Identifying the right technology for their needs.
• Managing data security concerns.
• Integrating new technology with existing tools.

Leveraging technology is an essential strategy for overcoming common challenges like cash flow management, competition from larger companies, limited funding, and compliance. But how can a small company do that when adopting the latest technology is itself challenging?

Choosing the wrong system can be a costly mistake for a small business, which might lose not only the cost of the software itself, but also the costs of employee training, data migration and down time.

ASOs can provide business solutions for effectively leveraging technology. An ASO helps ease the difficulties small businesses may have with adopting technology and generally:

• Provide up-to-date, cloud-based software.
• Establish measures for data security concerns.
• Integrate its technology with other certain existing software.
• Offer a mobile app and tools for remote workers.

An HRIS system may also provide people analytics, so you can do a deep dive into your employee and industry data to identify trends and make informed decisions on your workforce, productivity, business management and other concerns.

Scaling

Despite all the challenges, many small companies do prosper and grow. An ASO can work with you throughout your company’s growth trajectory by scaling its level of service and providing optional add-on services. You could start with a minimal level, so you don’t have to pay for services you don’t need. As you grow, you could switch to higher levels and/or add new services for increased functionality. By customizing the services you receive according to your evolving levels of small business development, your relationship with your ASO can be a long-term solution to your HR needs.

Consultative approach

Small businesses usually don’t have in-depth knowledge of HR concerns. When challenges arise, they might need help. An ASO's business consulting services can provide strategic insight from experienced HR specialists. With experts by your side, you gain a peace of mind on handling your complex HR concerns.

An ASO’s consultants can help you with HR compliance concerns, payroll, payroll tax, benefits and other complex HR concerns. When you work with an ASO, you don’t have to scramble to find someone to give you best practices when something unexpectedly arises. You already have a team of experts ready to help because of your existing relationship with the ASO.

ASO Companies for Small Business

ASOs can help small businesses thrive. They help relieve their clients of the burden of handling their time-intensive HR administrative tasks on their own. When a small business outsources HR functions to an ASO, it frees up the time and energy of its leaders, who can then devote themselves to advancing their company’s core missions.

The ROI for a small business working with an ASO can be substantial. The average small business could save more than $100,000 a year by using an ASO instead of hiring an in-house HR manager*. The returns might also include incalculable benefits like additional savings from navigating HR compliance, more talented new hires, lower employee turnover, and increased employee morale.

TriNet’s ASO — HR Plus — offers potential valuable ROI at every service level. For example, Payroll Tax Compliance Manager, this tier, can be cost-effective by helping navigate payroll tax compliance concerns, thanks to the best practice guidance of our professional payroll tax experts. At this tier, we will actively monitor your current registered payroll tax accounts, changes in employee records and pay, and applicable changes in payroll tax rules and requirements. At other service levels, the ROI may be even more. Call us today at 888-874-6388 to learn more.