Finding more effective ways to engage with the contingent workforce is crucial to your growth as a talent supplier. One of the most common ways to streamline engagement is by partnering with an agent of record (AOR). But what is an AOR and how do you know if you need one?
At People2.0, we understand the unique complexities of the staffing industry, and we’re here to make things more accessible. In this blog post, we introduce the concept of AOR. We distinguish it from an employer of record (EOR), explore its benefits, and identify when partnering with an AOR is necessary.
Defining the Agent of Record
The increasing flexibility of the world of work has created more opportunities for talent suppliers than ever before. Many organizations in the global talent marketplace are trying to expand their offerings by sourcing workers from around the world. For these talent suppliers, agents of record (AOR) serve as a valuable support system.
An AOR is a partner that takes on back-office functions and handles compliance so you don’t have to. This includes administrative and legal aspects of contractor relationships. Using this service usually costs less than handling compliance in-house because the AOR has a pre-built infrastructure. Additionally, AORs like People2.0 handle invoicing and payment processes.
Outsourcing to one of these partners allows your firm to focus on core competencies like customer service and connecting job seekers to opportunities.
Why an AOR Is Crucial to Independent Contractor Engagement
If you’ve worked in the staffing industry for any amount of time, you probably have a basic understanding of independent contractors, or ICs. For the uninitiated, an IC is basically a worker who completes assignments on a contract basis, not as a regular employee.
This may sound simple, but working with an IC can become complicated when working across jurisdictions. Whether someone is an employee or an IC depends on several factors, and those factors can vary by the location of both the worker and the end client. Typical criteria for categorization include items like control of work outcome, maintenance of independence, and the relationship between your client and the worker, but these can vary broadly.
Keeping track of all of all the variables can be a lot for one talent supplier, and failing to do so can result in severe fines and penalties. That’s why AORs have local experts in multiple locations. They keep up with the changes so you don’t have to.
AORs focus specifically on ensuring compliance and effective management of the IC. They essentially become an extension of your agency’s capabilities, providing expertise in navigating the complex world of employment regulations.
Note that these services differ slightly from employers of record (EOR), so make sure you compare the two options.
Key Functions and Services Offered by AORs
Now that we’ve covered the basics of AOR services, let’s take a closer look at some of their specific offerings. Here are some vital AOR functions and services People2.0 can provide:
- Background checks and verification
- Accurate classification of independent contractors
- Onboarding processes for smooth integration
- Ongoing compliance monitoring and documentation
- Contract administration, ensuring legal adherence
- Efficient management of invoicing, expenses, and payments
- Benefits administration and risk mitigation
- Indemnification support and insurance coverage
Benefits of Partnering with an AOR
The functions, services, and partnership with an AOR result in several benefits for talent suppliers. These include:
- Expertise in navigating complex IC compliance regulations
- Risk reduction and protection against misclassification penalties
- Maintenance of the independent contractor’s business classification
- Mutual protection for both contractors and hiring organizations
- Ongoing compliance oversight to prevent unintended changes in the nature of the relationship
Scenarios for Hiring an AOR
Understanding the role and benefits of an AOR is important, but even more crucial is recognizing your business’s readiness to engage one. If your firm falls into these categories, you should consider partnering with an AOR:
- Talent suppliers with multiple locations: When your organization hires in different states or countries, the risks of misclassification increase. This is because compliance varies by location. AORs specialize in navigating these diverse regulatory landscapes. They ensure proper classification, reducing the risk of penalties and legal problems. This guarantees adherence to local employment rules, simplifying contractor engagement.
- Independent contractors in multiple jurisdictions: Just as having multiple locations can present challenges, engaging ICs across borders and overseas can result in complex compliance challenges and legal ambiguity. AOR providers safeguard your business from legal troubles and misclassification fines. With an AOR, you can seamlessly hire contractors worldwide in compliance with local laws.
- Scaling operations: If you’re ready to scale, an AOR can significantly improve efficiency and provide a cost-effective solution to complex and time-consuming business tasks. It can eliminate the risk of non-revenue-generating activities pulling from the bottom line. Additionally, AORs can help streamline the onboarding process for new hires. By automating processes like background checks and simplifying IC verification, an AOR helps to ensure a smooth experience for both the talent supplier and job seekers.
Building Strategic Partnerships
AORs are pivotal partners for any talent supplier aiming to flourish in today’s increasingly complex landscape. They take care of the nitty-gritty of compliance, invoicing, and back-office tasks. This enables your business to focus on its core competencies, deliver excellent customer service, and connect job seekers with the right opportunities. If you’re operating in multiple jurisdictions or planning to scale your operations, partnering with an AOR can mitigate risks, increase efficiency, and ensure seamless engagement with independent contractors.
People2.0 is an AOR and EOR service provider with over 20 years of experience in the global talent marketplace. We’ve supported our talent supply partners through 12 audits and over 60,000 IC evaluations with zero fines paid and no classifications overturned. With a comprehensive suite of services designed to simplify independent contractor engagement, we can help you ensure compliance and improve the efficiency of your operations. We are your go-to provider of top-notch AOR services. Reach out today to learn more about the power of our partnership.
For information on the differences between EOR and AOR providers, see our post, “EOR v. AOR: What’s the Difference?”