The global workforce has been subject to a major transformation over the past few years. It led to a significant increase in hiring independent contractors, locally and overseas. That, in turn, generated the need to use the agents of record.
Agent of record – the definitions
Let us start with the definition of the term. An agent of record is the individual insurance agent or insurance agency that takes over the hiring and administration processes connected to hiring contractors from the company they represent. Agents of record take the roles of intermediaries who connect businesses with subcontractors across the world.
Please, note that this term also exists in other types of industries. One of the other most popular uses is as an insurance policy term. There, it means the third-party company or insurance agents that represent the insured party in the processes connected with the insurance program with a designated insurance company. It usually involves signing an AOR letter. In this article, we focus on the recruitment industry’s understanding of the term ‘agent of record’.
What services can the agents of record provide?
Before answering that question, let’s consider what type of person the agent of record should be to be considered ‘the person for the job’. Firstly, AORs should be characterized by a good knowledge and expert understanding of workers’ classification laws of the country in which they provide their services. If there are cross-border services involved, this knowledge must concern all countries involved. This is of utmost importance as the people whose hiring they oversee must be treated specifically as contractors, not remote employees. It is crucial for compliance with applicable laws regarding taxes, health insurance, pension contributions, and many more major factors. That is why, when hiring and managing engagements of independent contractors, the expertise of a trusted and experienced Agent Of Record (AOR) is invaluable.
Considering the details of the agent of record service, we can distinguish several areas of service they will be responsible for:
Appropriate contractor classification
An agent of record must be up-to-date with the rules regarding worker classification and ensure compliance with laws and regulations. Why is it of such great importance?
For instance, in the USA, worker misclassification can result in severe consequences. It is not so much about the high financial fines. These can include penalties connected to employee compensation, insurance, and taxes. These are only the tip of the iceberg of financial repercussions, which continue and include the repayment of unpaid wages, overtime, healthcare contributions, and pension contributions. Additionally, the organization may suffer legal consequences and be charged with misclassification. As a result, we might be looking at severe damage to one of the greatest assets a company has, its good reputation.
All the above are good enough reasons to ensure that you use the services of a responsible and solid AOR.
Correct contracts
Law compliance not only applies to employee classification, it also concerns all legal documents that AORs are responsible for handling. These include, but are not limited to non-disclosure agreements, and various types of contracts. Also, during the onboarding process, AORs handle many types of documents with company details, bank details, personal details, tax details, and so on. Therefore, the confidentiality principles adherence in operation is also imperative.
Seamless payments
Because the AOR’s service is a comprehensive one, such professionals also manage payments and all administrative aspects of the financial processes. These include contractor’s payments, invoicing, expenses, and documentation storage. This is especially important when the business hires contractors overseas.
Benefits of using an AOR service in hiring contractors
Hiring a third-party company to represent you in the hiring process may seem to you like an unnecessary hassle. However, in today’s fast-paced world and ever-expanding areas of responsibility, it is not such a bad idea to use the agents of record. There are many benefits to this solution for specific businesses. Let’s have a look at who and what may gain by using the AOR’s services.
Opportunity to cooperate with international contractors
Because the laws and definitions of an independent contractor are different among different countries, it is a great challenge to keep up with all international requirements and regulations. Additionally, they change frequently. That is why many businesses do not cooperate with contractors from abroad. It is simply too time-consuming and complicated to keep up with.
An experienced AOR stays on top of all applicable laws because it is part of their work. Thanks to them, you and your legal and HR teams do not have to spend time and money to examine the restrictions, classifications, and regulations which makes it a great way to optimize company costs. An AOR services provider employs law and recruitment experts who keep your business compliant at all times, regardless of the country in which you decide to cooperate.
Possibility to expand and evolve
Sometimes you wish to start or finalize projects that will allow you to grow, expand, and go global. However, such additional work requires extra hands and time to perform it. When all your employees are busy, hiring contractors seems like a perfect addition to your business. However, after careful consideration, you often conclude that hiring and managing hired contractors are time-consuming responsibilities themselves. Who would process onboarding, issuance of accurate payments, and management of multiple projects involving contractors? An AOR, of course!
There is no need for adding duties to someone’s plate in-house. Outsourcing contractor management to a professional services provider lets you have exactly what you dreamt of: realizing your projects without the need to devote more time to administration and additional staff management. An AOR allows you to leave the administrative tasks in the hands of a professional services provider.
Security
Security in hiring contractors is a benefit that should be automatically provided. Thanks to working with an experienced AOR, businesses can be sure that they are cooperating with true independent contractors. On the other hand, the contractors have the benefit of respecting their rights and legal protections throughout the cooperation.
Special Q&A for you
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Ask our team of business experts, industry specialists and lawyers – we’ll come back with the best answers.
Cons of using the AOR services
There are many pros to using an agent of record services, however, certain downsides should also be mentioned. Let’s analyze them.
Firstly, using the services of AOR is not free. The business will incur a monthly fee. The fee amount is also not comparable to the money you earn thanks to hiring contractors and the ability to save time by outsourcing day-to-day additional chores.
Another often-mentioned con is that employers tend to feel disconnected from the contractors. It is, however, the price you must pay for the luxury of not having to micromanage workers. Luckily, in return, you gain the lower possibility of liability errors and save time you can devote to important decision-making.
How to choose an agent of record?
While choosing the appropriate AOR provider for your business needs, you should pay attention to a few factors, such as in-depth knowledge, and experience. The proper experience means you can hire an AOR having certainty of their sufficient network of connections and support within the given market. However, both knowledge and experience should be proven and verifiable. What does that mean? You must have evidence of other successful businesses within your market that used the AOR provider services. You should rely on reviews and testimonials coming from an AOR’s past clients. You can either request them from the agent of record or check yourself on their website. However, perhaps the best way is to search online for other reviews and ratings on third-party websites, such as Google Reviews, Trustpilot, or various forums.
The steps of choosing an agent of record
Once you decide that hiring an Agent of Record is the action you want to take, there are several steps you should take to ensure the process is smooth and successful.
Book the first meeting
The first meeting is when the new agent needs to make an impression. After all, you must assess whether you can trust the AOR with your business affairs. That is why, an Agent should be open to discussing your specific needs and be able to prepare a plan of action according to what has been said. Such a plan should have basic information regarding your case, such as the length of a given project, and certain services your business needs. The AOR should be helpful and knowledgeable regarding the topic of contractors and hiring them.
Sign an AOR agreement
While signing the agent of record agreement ensure that it contains clear and understandable responsibilities of both parties.
Let the agent do their magic!
The next steps are technically taken (or initiated) by the AOD. They start their search for appropriate independent contractors or get in touch with those you have already managed to find. You can actively take part in the search in the form of taking interviews and shortlisting candidates.
Signing of the contract
Once you decide on the contractors you want to cooperate with, the AOR prepares work contracts and other necessary documents for the contractors and takes care of the administrative part of the onboarding on your behalf.
The start of work
The contractor can now start working on your project. During the process, the Agent supports your business in matters outlined in the AOR agreement, such as accurate payroll, onboarding, and other administrative duties. All you have to do is pay contractors according to the terms of work contracts and pay your monthly AOR fees.
Agent of record vs. employer of record – what is the difference?
Agents of records are often mistaken for employers of record. Both offer similar services, especially when it comes to the administrative part. The difference between the two is that EORs provide services to employees and become their employer of record, whereas AORs specialize in administrative duties and compliance with independent contractors.
Therefore, an EOR will deal with the HR tasks related to employment, e.g., contracts, payroll processing, or employee benefits. EOR services are great when a company wants to hire overseas.
In light of the above article, you can see that the difference between the two is significant as misclassification can result in substantial consequences. What is more, employee and contractor management requires different skill sets and knowledge to manage them correctly.
Hassle-free AOR service with Useme
To sum up, AOR’s role is to be an intermediary between businesses and contractors around the world. When companies decide to hire contractors with the AOR’s service help, the AOR becomes responsible for a variety of administrative and HR actions performed on the company’s behalf.
If you have ever thought of hiring freelancers abroad, there is no better AOR than Useme. We sign the job contract with your chosen freelancer, take care of all administrative tasks connected to the remuneration, ensure the compliance with law, offer safe payment terms (for both parties), and oversee all other aspects needed for the appropriate course of cooperation. From the perspective of a business owner who wants to cooperate with contractors internationally, there is no better solution than choosing Useme as your AOR.
