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While their core functions may seem similar at first glance, theyre quite different.
While an AOR focuses on hiring contractors, an EOR works with full-time employees.
As such, their legal responsibilities vary considerably.
This guide will break down the main differences and explain the pros and cons of each choice.
What is an Agent of Record?
It also serves as your representative in case of any inquiries or disputes with local authorities.
What is an Employer of Record?
It also provides the expertise and legal knowledge of drafting employment contracts and agreeing on suitable compensation and benefits.
It can handle the legal aspects of hiring and managing contractors.
Essentially, it operates as your dedicated HR department in the new market without setting one up yourself.
Key Differences Between AOR and EOR
The key differences between AOR and EOR are listed below.
Worker throw in
AnAOR primarily works with independent contractors(1099 workers).
It handles all matters related to contractors classification and payment (including taxes) in line with local laws.
An EOR, on the other hand, manages full-time and part-time employees (W-2 workers).
Legal Employer
When working with an AOR, the client remains the legal employer of the contractors.
The AOR simply handles compliance and payment.
An EOR, however, is legally the party hiring the employees for the company.
As such, it assumes full responsibility for compliance.
It does not take on any other employment-related tasks.
Flexibility
An AOR is ideal for businesses with fluctuating short-term employment needs.
In addition, working with agood EORmeans there is no need to establish a local legal entity.
This is especially useful if the business expands to a different country with its own labor laws.
AOR Pros
A flexible option for hiring freelancers and contractors in a new market.
Help with correct classification of contractors.
Company retains full control over all onboarded contractors.
May involve the extra step of setting up a local legal entity.
Does not handle full-time employees.
EOR Pros
Serves as the legal employer for full-time and contract hires in a new country.
Handles the full gamut of HR-related tasks.
Assumes complete legal responsibilities for all hires.
EOR Cons
Company has no visibility into how HR activities are being handled.
Less flexibility in terms of scaling up or down with a full-time team.
Risk of significant legal penalties if policies are not sufficiently robust.
AOR or EOR: How To Know Whats Right for Your Business?
It can be complicated to choose between AOR and EOR when deciding how to manage hiring for your business.
