Administrative Services Organization Guide

A notable 57% of companies report that outsourcing payroll enables them to focus on their core business functions. This statistic isn’t surprising, as in the world of entrepreneurship, tasks like payroll processing and benefits administration often end up at the bottom of the to-do list. Executives naturally prioritize activities related to revenue generation. To keep their business processes running smoothly and steer clear of legal issues, many companies are turning to EOR, PEO, and ASO services. But what model fits your tech business most, or are there better alternatives?

I’m Viktoriia Keliar, COO at Alcor, with strong expertise in legal compliance for tech businesses and tax structuring. Alcor is a full-cycle R&D service provider in Latin America and Eastern Europe and offers full-cycle IT recruitment with comprehensive EoR support, with no need to establish your legal entity abroad.

In this article, I’ll describe outsourcing administrative services solution for tech companies, explain the functions of such providers, compare ASO vs. PEO and EOR models, and provide an effective alternative that could save you from drowning in paperwork and help you run your IT business abroad. Let’s dive in! 

What is an Administrative Services Organization?

An administrative services organization (ASO) is an external firm that takes on administrative HR tasks such as payroll, compliance, and benefits administration but doesn’t run under a co-employment relationship. Thus, the client company remains the employer and maintains decision-making power. 

Liabilities of an ASO Company

An administrative services organization operates as an intermediary in the employee–employer relationship, significantly reduces paperwork, and covers plenty of routine tasks. The structure of an administrative services organization doesn’t imply a co-employment agreement and allows clients to take more liabilities, such as picking a health plan. 

Commonly, outsourcing of administrative services includes:

– Benefits administration

An ASO can organize and deliver benefits packages to employees.

– Payroll processing 

A vendor calculates the salaries, manages deductions, fills out payroll taxes, and delivers payments.

– Regulatory compliance 

The outsourcing administrative services organization makes sure that your business complies with relevant laws and policies.

– Additional services 

Reporting and safety administration are often included in this category. 

3 Benefits of Outsourcing Administrative Services

Smooth Payroll in the Host Country

Many tech enterprises that opt for offshoring can face diverse obstacles to running payroll in accordance with the standards of a foreign state. A staggering 65% of businesses report that compliance and regulatory issues are major obstacles to their global expansion efforts. For example, when establishing a branch in Latin American countries like Argentina, Chile, Colombia, or Mexico, IT businesses must navigate a variety of tax considerations. Income tax in these regions ranges from 25% to 35%, value-added tax typically falls between 16% and 22%, and personal income tax rates vary from 0% to 40%. 

An administrative services agency can provide “remote payroll” assistance in compliance with employment laws and local regulations. That’s how CEOs can feel both administrative relief and ensure that their operational duties are in good hands.

 

Discover more about nearshoring software development to LATAM and Latin American tech hubs! 

Administrative Expertise

The benefits of administration outsourcing include the presence of experienced people who will cope with time-consuming HR-related tasks that have nothing to do with the core business. That could be particularly useful for small IT startups with a team that is good at programming but not so good at accounting or compliance. With a reputable administrative services organization company, they don’t have to spend time and money on training and onboarding new employees. Therefore, ASO organization is also a good option for software companies to cut costs. 

Take ThredUP, for example. They decided to hand over their HR management duties to a seasoned expert. Thanks to Alcor’s Employer of Record services, Thereup no longer needs to worry about handling salaries, bookkeeping, or tax planning. Alcor’s team manages all the accounting details, ensures timely payments, and delivers thorough reports and insights as needed, letting ThredUP stay focused on its core activities.

Chance to Free up Resources

Among the administrative services organization benefits, there is also an opportunity to focus on generating more revenue instead of just coping with operational concerns. By consolidating multiple secondary functions to a single vendor, you can significantly improve your colleagues’ productivity and reduce the time they waste doing routine paperwork. Moreover, an administrative services organization will help you define the specific needs of your company and provide custom service packages to fit these unique demands. 

ASO, PEO, EOR, and R&D Center – Better Alternatives?

When it comes to outsourcing administrative services, there are three popular HR-related options companies usually consider: EOR vs PEO and ASO. Although all models ensure administrative assistance and regulatory protections, there are fundamental differences you should take into account before making a final decision. Let’s break it down: 

PEO stands for Professional Employment Organization. When a company owner starts the cooperation with a PEO, they enter into a unique co-employment relationship. That partnership allows the provider to take on many risks and liabilities related to being an employer. To begin with, shared responsibility for managing employees implies that payroll is run under the PEO’s federal employer identification number (FEIN). What is more, a provider chooses the health and welfare benefits and sponsors them. The PEO model is commonly favored in the US, where the employment laws vary by state, so tech companies often need extra help to navigate these differences. However, it’s worth noting that while a PEO handles many employment-related tasks, you still operate under your own legal entity. 

So, what’s the difference between an administrative services organization vs a PEO? Contrary to the PEO services, an Administrative Services Organization (ASO) provides rather selective administrative support. An administrative services company doesn’t establish a co-employer relationship with the client and doesn’t process taxes under its FEIN. In addition, a partner may only assist in arranging health coverage but doesn’t sponsor the benefit programs. Under the ASO structure, the client gets rid of administrative headaches and keeps a decent level of control and flexibility. However, just like with a PEO, when working with an ASO provider, the company must still establish its own legal entity to handle employment and compliance matters. 

There’s one more cooperation model that’s particularly popular among technology companies ready to scale – Employer of Record (EOR) services. In fact, 78% of business leaders believe that using EoR services can help them expand globally. Why? Because EoR providers offer a broader range of HR services than PEO and ASO companies. They hire tech specialists, manage their contracts, and handle benefits and insurance. Unlike PEO and ASO providers, which require you to set up your own legal entity in an offshore location, an EoR partner handles all of that for you. That’s why in the comparison between Employer of Record vs Staffing, the former wins. They assume all the legal and accounting responsibilities involved in the employment process so that IT companies can easily enter new markets and enjoy full transparency. 

However, with the intention to grow, product tech companies usually need more than just outsourcing administrative services. When expanding into foreign markets, tech executives must also handle recruitment for local engineers, secure office leases, manage procurement, build their employer brand, and handle other back-office tasks. Instead of juggling multiple vendors, many tech companies partner with R&D service providers, offering Employer-of-Record (EOR) services alongside IT recruitment and operational support.

Intrigued? That’s exactly how Alcor has assisted leading tech companies like Ledger, Gotrasverse, Sift, and others in scaling their operations. Here’s what we can bring to the table… 

Consider Alcor as Your Trusted EOR Provider

Designed specifically for product tech companies, Alcor’s unique solution reinforces the advantages of other models and keeps the balance between comprehensiveness and full client control. Our BPO company is an all-in-one place to ensure your successful operation in the Eastern European and Latin American IT markets.  

Our EoR services provide IT product companies with:  

• employment of software developers; 

• compliance with all local laws; 

• tax payments; 

• onboarding/offboarding; 

• monthly payroll management; 

• employee benefits coverage. 

 

With Alcor, you gain a reliable business and legal shield. We keep you informed about local legislation and manage ever-changing regulations, ensuring you stay compliant. Meanwhile, you retain full control and flexibility over decisions related to recruiting, onboarding, terminations, promotions, and communication. Plus, we offer a 100% compensation guarantee if any fines are incurred due to our oversight. 

In addition, we provide full-cycle IT recruitment services, from sourcing top talent to ensuring a smooth onboarding process. With 40 experienced IT headhunters on board, we can connect you with the ideal software engineers for your development team in just 2 to 6 weeks. We pride ourselves on delivering both speed and quality, with an impressive 98.6% of our candidates successfully passing their probation period. 

To round out your R&D center, we also provide comprehensive back-office support. This includes everything from leasing office space and boosting your employer brand to procuring hardware and establishing stock option plans.  

In essence, Alcor provides everything you need to set up an offshore development center in Mexico, Colombia, Argentina, Poland, Romania, and other Latin American or Eastern European countries. Many of our customers enjoy such a solution, including People.ai. They’re an IT product company from the United States that owns a platform for B2B sales acceleration based on machine learning technologies. To enter the offshore IT market swiftly and effectively, they partnered with Alcor to establish an R&D center with its own development team. Our skilled IT recruiters managed to hire over 25 top-tier software developers, with about half specializing in AI engineering. Meanwhile, our legal and finance experts managed all the complex details, such as payroll, tax management, and legal compliance with local laws, required to set up People.ai in their new location. Once everything was in place, we had their office up and running in just four weeks. 

Ready to give it a try? Contact us for more information! 

References on Administrative Services Organization Services

1. B2B Reviews  
2. Gitnux