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What is an Agent of Record (AOR)?

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What is the meaning of agent of record?

An agent of record is an employment model for contractors where an AOR (an entity) hires a contractor on behalf of their client (another company). As the hirer, the AOR is liable for the contractor relationship, whereas their client is protected from misclassification claims. The term AOR can also refer to the entity that hires the contractor.

What can AORs help with?

AORs can help with several tasks, including making sure clients:

  • follow the strictest legal and regulatory requirements for hiring contractors
  • comply with relevant laws and tax regulations
  • use proper onboarding workflows
  • navigate payment processes
  • avoid contractor-associated risks
  • maintain thorough records for audits
  • properly classify their independent contractors

What are the benefits of an AOR?

An AOR can give clients peace of mind in several areas:

  1. Compliance: The AOR (the hirer) is responsible for ensuring compliance on the client’s behalf.
  2. Liability: AORs are liable for benefits, payroll taxes, misclassification, and all compliance-related issues, limiting the client’s risk.
  3. Legal protection: In the case of disputes or audits, AORs provide clients with legal help and protection.
  4. Record keeping: AORs keep detailed records of payments, tax filings, and compliance affairs, as well as guide clients through audits.
  5. Administrative matters: AORs take on administrative and compliance tasks so their client can focus on other initiatives.

What are the cons of using an AOR?

Despite its benefits, AORs do have a couple of disadvantages. The two main cons of AORs are price and potential miscommunications.

Price

AORs are an end-to-end solution for contractor compliance. Prices may be higher than other options—for example, contractor management platforms—because they take on payment processing, compliance management, and administering benefits. AORs can cost between $200 to $500 per month per contractor.

Potential miscommunications

With AORs handling essential tasks, their clients can turn their attention towards other important matters. This can come at a cost, however, if the AOR-client communications aren’t strong. Both entities must keep the other in the loop for the smoothest outcomes. For instance, if an AOR learns of new compliance regulations, it must inform the client so everyone is aligned and ready to proceed with a new strategy.

How to choose an AOR

Choosing an AOR comes down to making sure it provides:

  • Compliant onboarding according to local regulations
  • Embedded payments for easy invoicing and cross-border payments
  • Ongoing protection and preparation for audits
  • A robust electronic filing solution for all related documents
  • An audit defence file with documents proving compliance

What’s the difference between EOR and AOR?​

Essentially, an Employer of Record (EOR) is a model that allows businesses to hire full-time employees in locations where they don’t have a legal entity. An EOR focuses on employee compliance.

An AOR takes on compliance risks for their clients (businesses) and operates essential administrative tasks. AORs focus on contractor compliance.

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