Agent of Record (AOR) vs Employer of Record (EOR): Key Differences

AOR and EOR are powerful employee outsourcing service providers.

They may sound similar, but they serve different purposes, and understanding their key difference might help you pick the best option for your international workforce.

In this guide, you’ll learn all about AOR and EOR models. I have compared their core services, prices, and benefits to highlight their unique selling points.

Let’s explore them.

What is AOR?

AOR– Agent of Record–is a third-party outsourcing HR company that deals with international contractors for you. 

It oversees all the procedures involving freelancers, including contract generation, worker classification, onboarding, and payments.

The Agent of Record essentially acts as your company’s representative and tackles the back end of the job to ensure everything goes smoothly. 

What makes an AOR an attractive outsourcing model is its compliance management. Unlike staffing agencies, an AOR takes the legal burden of worker classification and bears penalties should you incur any legal penalty for inaccurate classification. 

Traditional staffing agencies generally don’t offer these benefits to their clients.

Here’s a summary of AOR’s core responsibilities;

• Generating compliant contracts for freelancers.
• Classifying workers as contractors.
• Collecting documents and onboarding freelancers.
• Handling invoices and sending payments to each contractor in local currency.

We also have a dedicated and very detailed article on AOR, which you can read here →

How Does AOR Work?

As an outsourcing company, an AOR serves as an intermediary between you and your contractors, managing the contracts, communication, and payment workflows.

After you appoint an AOR, it reaches out to contractors and starts the onboarding workflow on your behalf. 

Once your contractor is onboarded, the AOR provides a central point to manage invoices and payments–most AOR providers have established payment gateways to simplify international money transfers.

Top platforms that offer AOR services are Deel, Papaya Global, and Multiplier.

What is EOR?

EOR–Employer of Record–is also a third-party outsourcing company. Its core job involves handling the onboarding, payroll, and termination of international workers. 

Unlike AOR, however, EOR takes responsibility for part-time or full-time employees. 

Through an Employer of Record, you can avoid the hassle of establishing legal entities in other countries and work with overseas employees remotely.

Here’s a summary of EOR’s core responsibilities;

• Generating compliant contracts for employees.
• Collecting and verifying documents.
• Onboarding employees.
• Providing a system for expenses and leave.
• Generating and running payroll.
• Managing employee insurance and benefits.

We also have a dedicated and very detailed article on EOR, which you can read here →

How Does EOR Work?

When a company wants to hire someone residing overseas, it requests the services of an Employer of Record for onboarding and payroll.

Once the master agreement is signed, the EOR becomes the company’s official legal representative and takes over the role of a legal employer, handling compliance matters for you.

Everything from contract drafting and paperwork to payroll and taxes goes through an EOR. The Agent also covers insurance, pensions, and other legal matters.

Tons of global platforms offer Employer of Record services. For example, Deel provides good EOR features with extensive global coverage. It also delivers AOR services. 

Other leading EOR providers are Remote, Oyster, and Velocity Global.

AOR Vs. EOR–Feature Comparison

To understand AOR and EOR’s role better, I have made a brief comparison of their core services. 

I have specifically focused on their legal jurisdiction, service quality, and pricing packages to give a general idea of their product limitations.

1. Core Service

AOR and EOR mainly deal with onboarding and payroll. They, however, offer several core and add-on services in their monthly packages.

Let’s break down their package details to see the type of service you can get from AOR and EOR.

AOR

An Agent of Record, as mentioned before, manages your independent contract workers and freelancers. It takes responsibility for the paperwork, compliance, and invoices, leaving the day-to-day operation control to you.

You typically receive a digital portal from your AOR to connect with contractors. Via the in-house, software, you can record, monitor, and manage routine tasks, such as time off approvals, invoice collection, and payment disbursements.

Keep in mind that an AOR doesn’t necessarily hire freelancers. Some platforms might assist you with hiring, but it’s generally not part of their core services. An Agent of Record’s job is to onboard contractors you want to work with. 

 EOR

An Employer of Record acts as a legal employer of your full-time or part-time workforce. Its core function covers all employment-related tasks such as onboarding, termination, payroll, taxes, benefits, and compliance.

Like AOR, an EOR is an online service. You get a digital account to purchase packages, connect with employees, and manage routine tasks.

Employer of Record also offers side benefits like hiring, equipment shipments, and mobility support. The range of services and coverage, however, depends on the providers. 

For example, Remote sells relocation services as an add-on, and its relocation package includes both visa acquisition and housing assistance. 

Takeaway

AOR provides an easy system for onboarding and paying freelancers legally. It’s the best option for small businesses and startups.

EOR is specifically designed for permanent employees. It’s an ideal solution for companies looking to expand their workforce.

2.    Legal Responsibility

EOR and AOR offer legal protection to their client. You can use both to build a diversified remote team without the nuances of compliance and legalities.

The scope of their legal responsibility, however, varies.

Below, I have briefly summarized AOR and EOR’s role as your legal employer to help you decide which service to opt for.

AOR

An AOR is responsible for drafting and ensuring all contractor agreements comply with regional legal standards. These contracts may include intellectual property rights, NDA, confidentiality clauses, and other paperwork.

For example, A US company working with independent contractors in Canada needs to comply with Canadian tax laws and contractor classification rules. By engaging AOR, they can outsource contractor management and protect themselves from misclassification penalties.

AOR also ensures contractors get paid on time. Any payment dispute is typically handled by your agent.

EOR

The EOR assumes full legal responsibility for your employees on your behalf. It ensures your company complies with local laws and meets an employer’s legal obligations. 

For example, If your company is U.K.-based, and you want to hire an employee in France through an EOR, your agent will make sure the contract covers France’s 35-hour workweek quota–among other things.

Any employment disputes, like termination claims, are also an EOR’s responsibility.

Takeaway

EOR, in my opinion, is a safer option comparatively. 

An Agent of Record, no doubt, shoulders the classification responsibility, but its legal liability is limited.

An Employer of Record, on the other hand, offers greater legal protection and compliance management, given the nature of its service. 

3.   Service Flexibility

Flexibility is an important factor to consider when exploring outsourcing services like AOR and EOR. There’s a possibility you might need additional service in the future as your company grows. 

Learning about your provider’s service scalability and level of customization will give you the necessary information to make an informed decision.

AOR

Agent of Record allows you to scale up and down as needed without making any legal commitments. Some platforms, like Papaya Global, also offer bulk onboarding and payments. 

Apart from scalability, you receive tons of other benefits from an AOR.

It provides better global coverage, quick onboarding, and legal protection. It also offers flexible payment methods to help you work with a diversified workforce. 

EOR

EOR is well-suited for growing and established companies. Since it handles permanent employees, it provides better compliance support and strong HR expertise.

Let me give you an example.

Deel’s Employer of Record package gives you access to 200+ in-house experts and offers 360° compliance management.  You might not find the same level of commitment in its AOR package. 

One more thing. If you want to provide perks and benefits to your employees, your EOR can tailor your package accordingly. You can ask for Insurance, equipment shipment, and immigration support.

Takeaway

AOR delivers fast onboarding and flexible payment, while EOR offers risk-free workforce management solutions and excellent support.

Pricing

The pricing structure of AOR and EOR is similar, but there’s a significant difference in their package features and rates. 

I have used some real examples to explain their pricing structure better. The platforms I have picked are some of the top AOR and EOR providers, with excellent ratings and good global coverage.

Let’s check out AOR and EOR pricing.

AOR Price

AOR price can go from $15/month to $200/month, it depends on your chosen platform.

For example, Talentdesk charges $99 per contractor, and Papaya Global’s AOR’s starting price is $200. 

The difference in their pricing is due to their package details. While TalentDesk offers AOR as a part of its core package, Papaya Global sells AOR as a separate service, providing enterprise-grade features.

EOR Price

EOR pricing falls in the $200 to $700 range. The average rate per employee is $599, but add-ons and hidden costs might increase the gross amount.

Remofirst is the most affordable EOR provider. It charges $199 per employee and delivers all the essential features. 

But if you opt for more established platforms with better digital support, the price may go up.

Takeaway

AOR is a budget-friendly service, while EOR is slightly expensive due to its comprehensive legal and administrative coverage.

Pros and Cons of AOR and EOR

Below, I have shared some major advantages and drawbacks of both services. Go through them to get a brief summary of AOR and EOR.

Pros of AOR

1. Managing Independent Worker Is Hassle Free

An Agent of Record streamlines the contractor management workflow, allowing you to manage everything from one place. 

You don’t have to worry about documentation, invoices, and taxes. Your AOR tackles the administrative tasks for you, and you only need to log in and approve payments.

2. Mitigates Risks and Ensures Compliance

Agent of Records is well-versed in local labor laws, providing a layer of protection to their clients. 

It ensures the contractor agreement meets the country-specific requirements, and appropriately classifies contractors, saving you from potential legal issues.

Cons of AOR

1. Might be Expensive For the Local Workforce

AOR isn’t ideal for local contractor management. 

You can hire it for local freelancers, but the monthly fee might prove counterproductive.

2. Some Contractor Related Tasks might Not Fall Within Their Scope

While an Agent of Record onboards and manages your contractors, your company would have to source candidates. 

Tax filing is also not part of an Agent of Record’s job. You’ll get help with tax recording, of course, but your contractors would be required to manage the taxes themselves.

Pros of EOR

1. Hiring Permanent Employees Overseas with Little Cost

With an EOR, you get access to the global pool of talent in more than 90 countries without investing in offshore branches.

EOR takes legal responsibility for your international employees, eliminating the need for an in-house representative in each country.

2. Easy Compliance Management

EOR’s unique selling point is compliance management. It takes charge of all the administrative tasks related to contracts, payments, and taxes.

3. Payroll And Benefits Administration Outsourcing

EOR’s services also cover payroll and benefits administration. The agency generates payroll, manages taxes, and deals with country-specific employee benefits on your behalf. 

Cons of EOR

1. Dependence on Third-Party Service

As an outsourcing company, EOR takes care of contractors and local authorities to simplify workforce management. This might leave you little control over your team and payroll.

2. Potential Hidden Costs

EOR packages typically have additional or hidden charges for specific services. It may cause budgetary problems for some.

Conclusion–Which Service is Better

If you are a startup with a small budget and limited resources, AOR is perfect for you. The agency can help you work with temporary workers legally and send payment overseas.

If you are planning to expand your workforce and looking for better ways to hire overseas employees, EOR is the ideal option. It can make the process easier and cost-effective.

To conclude, AOR and EOR target different audiences and provide valuable services to their respective clients. 

I recommend picking the platform that fits your workforce requirements. Good luck!