International Contractors

What is an Agent of Record (AOR): A comprehensive guide

June 5, 2024

As the business landscape continues to grow and evolve, so do the hiring needs of individual companies. For some, this includes a global expansion — leading to an uptick in businesses hiring international contractors.

The challenge with global hiring is that managing contractor relationships can take time and effort. It’s not just a matter of paying invoices in different currencies. Business owners have to worry about multiple details, like potential employee misclassification, contracts, and adhering to local laws in every country in which they hire. Working with an Agent of Record can help reduce administrative hassles and ensure compliance with local regulations and labor laws.

What is an Agent of Record?

An Agent of Record (AOR) is a third-party service provider that takes on the day-to-day management of freelancers for your global workforce. An AOR provider ensures that contractors are, among other things, correctly classified and paid on time. AORs are also responsible for making certain that contractors are employed in a compliant manner.

To be clear, AORs are only responsible for contractor relationships. For example, in the U.S. this would include 1099 workers. An AOR would not be involved with hiring or managing a company’s full-time employees.

The Challenges of Worker Classification

Even when hiring local contractors the line between who qualifies as a contractor versus an employee can sometimes become blurred and confusing. However, it’s crucial that everyone is correctly classified from the get-go. That’s because employment laws governing contractors and employees are quite different. For example, there are rules regarding minimum wage, employee entitlements, employee benefits administration, and deductions that aren’t relevant for contractors but apply to full-time employees.

When you misclassify team members, you risk not fulfilling your legal obligations. This can result in underpaying taxes for individuals initially hired as contractors but later classified as employees according to legal standards. Mistakes like that can open the door to potential lawsuits, penalties, fines, and increased scrutiny from the government in the future.

Why Choose an AOR When Hiring Contractors

Once a company had extended an offer to a contractor and that person accepts, it’s time to pass the baton to their Agent of Record. An AOR handles all of the paperwork, such as signing contracts, and manages the business end of the relationship. An AOR reduces the potential for hiring issues, the risk of misclassification, hiccups in your global payroll, and potential delays in kicking off the new business relationship. All you need to focus on is the day-to-day management of the contractor’s output while the AOR takes care of all the behind-the-scenes details.

Beyond simply managing the relationship, AORs help in other ways.

Streamlining Onboarding and Operational Efficiency

As experts in managing contractor relationships, AORs have standard procedures in place to help onboard contractors faster, no matter where they are based. An AOR removes the complexity of hiring contractors by taking on all of the necessary administrative tasks.

AORs also make it easy for you to pay contractors around the world. For example, many contractors can now accept payroll through their own payment systems, but only some are set up to do that. AORs make it easy for everyone to navigate payroll on a global scale, no matter their preferred payment method and currency.

Ensuring Compliance & Mitigating Risk

Meeting global compliance standards can be confusing, and it’s best left to the experts in order to avoid potential legal hassles. AORs can minimize the risk of compliance violations by performing tasks such as background checks as well as ensuring any contractor hires are compliant with global employment laws.

AORs can help you stay on top of:

  • Data compliance: This includes safeguarding independent contractors’ personal data per their country’s local rules and regulations.
  • Legal compliance: This covers everything from adhering to a particular country’s labor laws, to contracts to tax compliance and more.

Agent of Record vs. Employer of Record: What’s the Difference?

Agents of Record and Employers of Record (EOR) are both responsible for performing the administrative functions necessary for international working relationships. The key difference between the two is that AORs strictly manage independent contractor arrangements, while EORs serve as the legal employer of a company’s global employees.

While AORs are responsible for overseeing details like compliance, contracts, payments, etc., they do not legally employ contractors. They simply oversee the legalities of the relationship.

EOR services, on the other hand, include managing all HR-related tasks for full-time employees, such as drafting employment contracts and general onboarding. An EOR also takes care of general workforce management tasks like shipping out equipment, payroll processing, employee benefits, and tracking PTO requests.

Tailoring AOR Services to Your Business Needs

If you’re looking to grow a pool of global contractors but aren’t sure where to start, an AOR like Remofirst can help. We have experience managing contractors in over 180 countries worldwide and can help you grow your team. We’ll take care of compliance, payroll, and contracts, giving you the peace of mind to focus on running your business.

Contact us today to learn more about how an AOR can help your business and to book a demo.