What is an Agent of Record (AOR)?

Understanding the Agent of Record (AOR): Meaning and Role

To define AOR, it is a third-party management company appointed to handle the human resource management of a client company with multiple contractors on board. 

They are extremely resourceful regarding remote management for foreign-based companies while complying with the country’s labor laws. 

They act as intermediaries between the company and its contingent workforce and manage the client’s legal, financial, and administrative tasks. 

AOR vs. Traditional HR Management

If you plan to outsource your human resource management as a foreign entity, make sure you know the key differences between the platforms providing such services. 

Although similar, each platform has its use cases. 

Traditional HRM differs significantly from an Agent of Record. 

Here’s a tabular guide to their differences:

How Does an Agent of Record Work?

An Agent of record works by performing these tasks:

• Conducting background verifications
• Classifying independent contractors correctly
• Handling onboarding processes smoothly
• Continuously monitoring compliance
• Staying updated with labor laws
• Managing contract administration
• Efficient invoicing and handling of payments
• Administering benefits and avoiding risks
• Providing legal support and insurance coverage

Key Steps in Transitioning to a New AOR

Non-compliance is one of the most common legal troubles of running a global business, especially concerning compliance with IC laws. 

If you are unhappy with your current AOR, you can always consider your options and opt for a transition. Transitioning to a new Agent of Record (AOR) involves these key steps:

• Assess what you need: Identify gaps or issues with your current AOR and define your expectations for a new partner.

• Conduct a background check: Evaluate potential AORs based on compliance expertise, global reach, and client reviews.

• Ensure compliance: Make sure that the new AOR you partner with adheres to regulatory laws and labor codes and meets your industry-specific requirements.

• Negotiate prices and terms: Discuss pricing, service agreements, and transition timelines.

• ‍Make sure you notify your existing AOR: Provide formal notice to terminate the existing contract as per its terms.

Benefits of Using an AOR for Freelance Workforce & Contractor Management

An AOR will guide you through the most efficient mode of contractor management. Hence, partnering with an Agent of Record will offer your company numerous benefits, including:

• Expert guidance in navigating the complex laws surrounding Independent Contractor compliance
• Reducing potential risks associated with misclassification penalties
• Maintaining the business classification of independent contractors
• Providing legal protection for both contractors and organizations
• Ensuring compliance oversight consistently

How to Pay Freelancers & Independent Contractors Overseas

Freelance workers and independent contractors are almost always responsible for managing their taxes and insurance. As a foreign company, you can pay them via:

• Wire transfer
• Bank transfer
• A parent company or umbrella company
• Payment platforms like Paypal
• Agent of Record

Ensure you adhere to the labor rules that apply to the misclassification of employees and ICs. 

First, learn in detail about generating IC pay stubs. Paying them a fixed salary can indicate employee status.

Challenges of Managing a Freelance & Contractor Workforce

You might face several challenges as a foreign company while managing gig workers and contractors. You need to learn to work your way out of the following challenges to keep your business running:

• Integration & collaboration: Freelancers often work remotely, making integrating them into the team complex. An AOR will help you communicate effectively between the freelancers and the company. 

• Compliance and legal issues: To avoid legal risks, clear engagement guidelines are required to navigate labor laws, tax regulations, and contractor classifications.

• Performance management: Due to limited oversight, evaluating freelancers can be challenging. HR needs objective metrics, regular feedback, and defined expectations.

• Cultural alignment: Maintaining a cohesive business culture with mixed workforce types is tough. Virtual meetups and recognition programs can promote unity and shared values.

Freelancer & Contractor Workforce Management Platforms

Freelancer and contractor management platforms finetune the entire process without any hiccups. They are automated, equipped with the latest technology, and integrated with AOR systems for easy operations. 

These platforms can help simplify tasks:

• Sourcing and onboarding contractors and freelancers
• Managing compliance
• Processing payment
• Evaluating performance

Freelance management systems can locate and target talent pools to easily hire gig workers and freelancers. They can also help automate administrative processes using the latest contractor management tools.

Factors to Consider When Choosing an AOR

Before choosing the best AOR service for your business, make sure you take these factors into account while finalizing one. They are: 

• Industry Experience and reputation

Your AOR service should have a track record of client success and solid proof of industry experience. This is a surefire way to know that they offer quality service. Good industry experience also makes for a good reputation. Always conduct subtle background checks by reading online reviews. 

• Expertise and Communication Skills

Ensure that your choice of AOR service understands the latest employee benefits landscape and trends. They should be expert enough to implement the best practices and be updated with compliance requirements. Good communication skills are also a part of being a good AOR service.

• Cost Considerations

Cost is a significant factor in choosing an AOR. Weigh your options and choose one that is reasonably priced but does not compromise on quality. 

• Service Scope

Make sure that the AOR you choose offers the service you need. Your business needs should align holistically with what they provide to their clients.

AOR vs. Freelance Workforce Management Platforms

Although traditional Agent of Record (AOR) models are similar in concept, they serve a different purpose from freelance workforce management platforms. 

Both are great to work with if you partner with independent contractors and freelancers. 

Let’s look at some of the differences between AORs and freelance workforce management platforms:

Simplify Workforce Management with Skuad

Partnering with a reputable EOR company like Skuad can make workforce management more manageable. 

Skuad’s team of experts is always on their toes, keeping up-to-date with the latest labor laws for business compliance and even efficiently managing payroll. 

Whether you need to scale a remote team or manage a global freelance workforce, Skuad provides a seamless, all-in-one solution. 

Book a demo today!

FAQ

1. What is the meaning of AOR in HR?

An agent of record (AOR) is an individual or company authorized to handle an organization's employee benefits, insurance, payroll, or administrative HR tasks.

2. What is the difference between an agent of record and an employer of record?

An employer of record (EOR) is the legal employer handling contracts, benefits, and compliance, while an agent of record (AOR) supports compliance and administrative tasks without being the legal employer.

3. How does AOR work?

An agent of record (AOR) is authorized to manage an insurance policy on behalf of the policyholder, handling updates, claims, and interactions with the insurer.

4. What is an agent of record letter?

An agent of record (AOR) letter is a formal document that authorizes an agent to act on behalf of a business or organization in dealings with an insurance provider.