What is an Agent of Record (AOR)?

An Agent of Record (AOR) is a third-party entity, usually a staffing or management company, appointed to manage the relationship between a client company and its independent contractors or contingent workforce. The AOR serves as an intermediary, handling administrative, legal, and financial tasks for the client.

It was easy when you started working with the first independent contractor – or even the first ten. Onboarding them, keeping track of their documentation, and processing payments manually was not too cumbersome.

But over time, you realize it is getting too difficult to manage that way. Maybe you are working with more freelancers than ever before, and the admin tasks are getting time consuming. Maybe you are considering working with global contractors for a big project, and have to figure out international contracts. Maybe you recently found out some labor laws have been updated – and are now confused about what your responsibilities are.

The good news is that all of this means that your business is expanding. The great news is that there are services that can help you manage your contractor workforce more efficiently. An Agent of Record (AOR) is one such service.

Content

Defining Agent of Record (AOR): Roles and Responsibilities
The Importance of AOR in Freelance Management
Legal and Tax Implications of Working with an Agent of Record
How to Choose the Right Agent of Record (AOR) for Your Business
Benefits and Drawbacks of Using Agent of Record (AOR) Services
What you should know before signing an Agent of Record (AOR)

Defining Agent of Record (AOR): Roles and Responsibilities

In broad terms, an Agent of Record (AOR) is an entity that works on behalf of a particular company, taking over certain administrative and regulatory tasks. AORs are typically brought in when a company needs to manage interactions with multiple individual workers, vendors and providers. The AOR then acts as the intermediary between the company and the workers, assuming responsibility for those day-to-day interactions.

Understanding Agent of Record (AOR) in Different Industries

An Agent of Record refers to these intermediary entities in various industries. You may have heard of AOR services most commonly in relation to insurance – companies often hire an AOR to act as a go-between to interact with insurance providers. The AORs help streamline health coverages, benefits and more, for the company’s employees.

AORs are also often used in the construction business to work with various engineers, builders and construction professionals, making sure that the work is always up to standard. They also remain up-to-date on all zoning laws, building codes and more, making sure that these are upheld, every step of the way.

Another common industry in which AORs are used is in advertising. In fact, advertising agencies themselves originally used to work on the AOR model. They would be the single point of contact for clients, mediating between them and any professionals that those clients needed to work with to execute their advertising strategies – be it branding experts, creative professionals, developers or media houses.

Key Duties of an Agent of Record (AOR)

From the examples above, you may have realized that the key function of an AOR is to act as an intermediary. AORs are well-versed in the specific methodologies of the industries they operate in, so they are able to step in and take over the administrative tasks on behalf of the client – from managing workers to improving efficiencies between various entities and more.

AORs are also expected to stay updated on all regulatory and compliance-related protocols within the industry, and uphold them in day-to-day functioning. Think of construction AORs overseeing that all safety protocols are followed, thus protecting the client from fines and lawsuits.

Since they are the single point of contact, the client also gets to enjoy an added layer of ownership and accountability. This is very important when working with diverse entities who may otherwise seek to pass the responsibility for any missteps to the other parties involved.

How the Agent of Record (AOR) process works

The specific processes would depend on the industry the AOR is working in. Broadly however, it begins with the client analyzing various Agencies of Record and choosing the one that works best for their needs. They will then sign an AOR agreement, where the responsibilities, liabilities, indemnity clauses and more, will all be clearly outlined.

Once the agreement is signed, the AOR will take over the agreed upon responsibilities, and function on behalf of the client company.

The Importance of AOR in Freelance Management

Now that we have discussed the roles and functions of AORs, you may already be starting to recognize the advantages of AOR services within the freelance management space!

They can act as an intermediary, helping you manage contractor compliance and taking over crucial back office functions – thus freeing up your time and bandwidth to actually grow your business. Let’s delve into some specific ways in which an AOR can help.

Streamlining Contract Management

The first advantage you will notice is during onboarding. Your AOR will help you bring new freelancers and independent contractors on board, taking over all your contract-related responsibilities.

They will get the right paperwork signed with each new worker – be it agreements, NDAs, non-compete clauses or anything else specific to your industry – and make sure that nothing gets forgotten. They will then store all these contracts safely in one place, making them accessible to you on demand.

Ensuring Compliance in Freelance Engagements

Another key benefit that AORs offer is managing freelance compliance – including classifying your workers right. Correct classification is one of the most important requirements of working with freelancers, and not every employer is equipped to handle this the right way.

The difference between a contractor and an employee is not always obvious, and sometimes, even innocent missteps can lead to this boundary being crossed. For example, you may ask your freelancer to attend your daily huddles, thinking that’s going to make it easier for everyone to stay updated. But doing this can inadvertently lead to the worker being categorized as an employee of your company – since this is the kind of control that only an employer has over their employee. You may then face charges of misclassification.

An AOR will analyze every aspect of the freelancer or contractor engagement when you are bringing them on board to make sure that they are classified correctly. They will also ensure ongoing compliance, advising you when certain aspects of the engagement crosses the boundary and puts you at risk of worker misclassification.

Legal and Tax Implications of Working with an Agent of Record

Navigating International Laws and Regulations

Labor laws differ from country to country, and you may not always be aware of these differences. For example, worker rights or minimum wage requirements in the US may be completely different from those in European countries. A lack of knowledge puts you at risk of violating these laws when engaging a freelancer in a new geography.

AORs take over the responsibility of ensuring you uphold these laws – not just when you onboard new international contractors, but also as you continue working with them. They are obligated to stay updated on any changes in these laws, and notify you if it involves a significant change in the way you classify workers or engage with them. This gives you the peace of mind you need to work with the best contractors from around the world, while mitigating legal risks.

Tax Compliance and Agent of Record (AOR)

As a client, you may also have certain tax responsibilities towards your freelancers or contractors. While they are responsible for paying their own taxes, you may need to file the right paperwork in a timely manner, and make deductions where required. Given that tax deadlines differ across countries too, you can imagine the confusion this can lead to.

An AOR helps you maintain tax compliance throughout your engagement. This means they collect the right tax documents (like the Form W-9 or one of the W-8 forms as applicable) when onboarding new workers. They also ensure they have the right payment information on file, and pay out your contractors compliantly, making the right deductions as necessary. They stay informed about the tax protocols in each country and make sure that the right tax forms are filed when needed.

How to Choose the Right Agent of Record (AOR) for Your Business

Now that you know the benefits of working with an Agent of Record, it’s time to consider the next step – how to choose the right service provider for you.

Assessing Experience and Expertise

Given that you essentially relinquish all your administrative responsibilities to your AOR, it helps to choose one that knows exactly how your industry functions. For example, if you are a production company working with creative contractors around the world, your AOR provider should know how to manage production compliance, uphold protocols within your industry, make payments and more.

Set up a meeting with your shortlisted AORs to ascertain how much they know about your industry’s processes and whether they are aware of changing trends and updates. Also find out whether they have any relevant geographic experience – after all, you’d want to know whether the Agent of Record actually knows about the laws and regulations within the markets you are looking to operate in.

Evaluating Reviews and Testimonials

While an AOR might be perfect on paper, you should also find out whether they would be a good fit for you specifically. For instance, if you are looking for more hands-on support, a provider that remains unreachable during your work hours would not be the right choice.

Ask for testimonials and reviews from their clients in industries similar to yours. If possible, ask to be connected to some of their past clients so that you can discuss their experiences with that provider. Don’t forget to look up their ratings on platforms like G2 or Trustpilot too.

Benefits and Drawbacks of Using Agent of Record (AOR) Services

There are many advantages to working with an Agent of Record, but there are certain drawbacks too. Knowing about these beforehand will help you take the necessary steps to avoid the downsides.

Pros of Agent of Record (AOR) Services

They free up time and bandwidth. They take over the non-billable administrative tasks associated with working with independent contractors. This leaves you free to focus on growing your business.

They offer peace of mind. With your AOR staying updated on the ever-changing laws and tax protocols, you no longer have to worry about whether you’re missing some important compliance-related detail that impacts your worker engagements.

They mitigate risks. Since the AOR takes over your administrative responsibilities, they reduce your risks as a client. Should they fail to uphold any law or regulation, it is the AOR who will have to be liable for the fallouts.

Cons and Considerations

There are added costs involved. AORs usually charge a monthly fee per each contractor they handle. This is an extra expenditure that you need to account for in your project budget. However, when weighed against the time and cost savings this leads to (not to mention, the fines and charges they save you from!), engaging the services of an AOR usually makes good business sense.

Some tasks are not within their purview. Having an Agent of Record does not mean you’d have no freelancer responsibilities at all. You would still be responsible for finding and recruiting your contractors in the first place before the AOR steps in to onboard them. You would also need to handle project management, briefing, feedback and other work-related processes.

Potential disconnect from contractors. Since an AOR takes over much of your day-to-day interactions with your contractors, many clients report a sense of disconnect with their workers. You may need to put in some thought and effort into overcoming this and helping your team bond with your freelance and contractor workforce.

Hidden costs and loopholes. Some unscrupulous AOR providers may have hidden costs and ambiguous processes that leave you feeling less than satisfied. A thorough vetting of the fine print can help you avoid any unpleasant surprises.

What you should know before signing an Agent of Record (AOR)

With that, let’s get into how you can ensure the best AOR experience for yourself – and the red flags to watch out for before you make your final decision.

Understanding Agent of Record (AOR) Agreements

Have a frank conversation with your AOR representative to understand every detail of the agreement. Ask exactly what they will and will not be responsible for, so you can plan accordingly.

Understand logistical details like what protocols they follow, what technology they use, what payment software they have for cross-border payments and more. If they do not have the necessary automations in place, that can be a potential red flag, indicating there’s scope for human error.

Also find out more about the interpersonal aspects of the engagement – when will they be available to you, what kind of support will they provide in case of any issues, what their typical resolution timeline is and so on.

Reviewing Termination Clauses and Conditions

There is, of course, a chance that the AOR you sign up with doesn’t work out for you – be it due to unmet expectations or interpersonal differences. Be informed about what charges and fees you may incur if you want to terminate your contract with them. This is a potential situation where you may encounter hidden costs or exorbitant cancellation fees, so it’s best to be aware.

Considering Liability and Indemnification Terms

Your Agent of Record assumes your liabilities along with your responsibilities – so it’s important to understand how they hold themselves accountable. Find out what happens if there are any laws or regulations they fail to adhere to. Ask how compensations and payouts would be made in case you face any repercussions due to neglect on their part.

Agent of Record (AOR) with TalentDesk

Here at TalentDesk, our AOR services can help you reap similar results. We act as your international Agency Of Record – offering contractor compliance solutions, administrative assistance and payment support to manage freelancers globally.

As your AOR, we sign contracts with your workers on your behalf, thus taking over your legal and admin responsibilities and mitigating your risks. We offer an extra layer of protection when it comes to compliance and worker classification – with our AOR agreement providing a shield service in case of any liability issues.

We conduct all AML and KYC checks on your freelancers, so you can rest assured that you are always up-to-date on all regulatory requirements. Once you engage your freelancers and contractors, we collect all the necessary contracts, NDAs, tax forms and other documents – and store them securely in the cloud. Aside from organizing and streamlining the onboarding process, this also enables you to uphold data protection requirements.

Our strong payment capabilities go on to ensure that you are able to pay your workers compliantly, with a single click, and at low costs – every time.

With the kind of workflow efficiencies and the peace of mind you enjoy with an AOR service, expanding your business and onboarding new freelancers becomes a breeze.