AOR services or Agent of Record allows you to hire and manage independent contractors. They ensure freelancers and contractors are paid on time and in compliance with local laws and regulations. They also help you prevent misclassification and avoid legal issues.
Using AOR services makes sense from both cost and compliance perspectives. First, they eliminate the need to hire human resources to manage contractors. Second, they allow you to scale more efficiently. Third, they keep track of changing compliance requirements to help you avoid penalties.
In this blog, we’ll learn in detail what AOR companies do and how they can be game changers for your business.
What is an AOR?
An AOR is a third-party company that helps you classify and manage independent contractors. When you hire an AOR services provider, you won’t have to worry about the complexities of hiring contractors. Instead, you can focus on getting the work done while the AOR takes care of their HR and payroll needs.
What Does an AOR Company Do?
AOR company helps you classify contractors correctly. They also engage with the worker, create a legal contract, and facilitate negotiations.
Here are some questions an AOR services provider can answer.
- Should a contingent worker be classified as an independent contractor?
- Are they set up as an LLC (limited liability company) or an incorporated entity?
- Do they use their social security number (in the case of the US) or have a federal employment identification number?
- Do they file their taxes via W9 or social security number?
Additionally, they can help you manage the following aspects of hiring contractors.
- Independent contractors’ classification
- Background checks
- Onboarding contractors
- Initial and ongoing compliance
- Contract administration and documentation maintenance
- Invoicing and payments
- Benefits administration, including insurance.
- Risk mitigation and indemnification
In layman’s terms, AOR companies act as intermediaries between contractors and the company. As a result, they control the dynamics, ensuring neither the client nor the contractor inadvertently changes the nature of the contract.
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When Should You Hire an AOR Services Provider?
You might not need AOR services if you employ a handful of freelancers or contractors. However, if you have offices in multiple locations or work with contractors in different states, AOR services can prove beneficial.
1- You Work In Multiple Locations
Whether you’re a staffing agency or a business with branches in different locations, you can benefit from AOR services. They eliminate the chances of misclassification and ensure compliance in every region.
For instance, although the US employs FLSA (Fair Labor Standards Act) at the federal level, each state has its laws. So, when you go to a different country, say Australia, they have different IC definitions.
That’s where AOR services can help. They ensure that you comply with state, federal, and international laws.
2- You Regularly Hire Contractors
If you’re a company that hires independent contractors regularly, the chances of mistakes are relatively high. And even a single mistake can cost you millions of dollars in legal fees and fines. Therefore, it makes sense to partner with a company that can manage the legalities of hiring independent contractors for you.
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Benefits of AOR Services for Your Business
Although we’ve already discussed how AOR companies help you navigate the legalities of hiring ICs, let’s look at it in more detail.
1- Meet Compliance Requirements
Worker classification is a serious problem and can invite huge penalties, depending on the extent of misclassification. For instance, Jerry Brown, a California Attorney General, won a $13 million judgment against two companies that misclassified 300 janitors.
In another case, New York State Commissioner M. Patricia Smith identified more than 31,000 instances of misclassification, bringing in $11 million in unpaid unemployment taxes and $14.5 million in unpaid wages since late 2007.
Another scenario could include classification issues when an independent contractor works alongside full-time employees doing the same work as them.
However, when you work with an AOR company, you can leave the classification task to them and focus on growing the business.
2- Save Time and Money
As mentioned above, AOR providers help avoid legal issues, fines, and penalties. This can save hundreds of thousands of dollars. Moreover, you save hundreds of hours annually since you don’t have to worry about understanding the legalities or staying atop changing laws. It is also worth noting that leading AOR companies offer legal protection from misclassification issues.
3- Leverage Complete Scalability
Opening a new office in a different country? Want to strengthen your presence in an international city? Well, you’ll need workers. And if you’re like most companies, you’d not want to make a full-fledged investment unless you’re sure of the market.
An AOR company can help you onboard independent contractors within a few business days and get the work up and running. This allows you to scale faster and more cost-effectively.
AOR services have been around for decades, but most businesses don’t realize their importance. They empower you to comply with ever-changing regulations, meet international standards, and save time when scaling your business.
Ready to take your business to the next level with an AOR services provider? Reach out to us for a free consultation!