What is an Agent of Record (AOR)?

In today’s globalized business environment, growing and managing multinational operations presents a myriad of new and complex challenges. Most notably is the engagement of the international talent your company needs to extend and maintain its global business objectives. Talent engagement risks are not to be ignored because each country maintains its own unique worker classification and tax compliance rules on how foreign companies engage and pay their resident talent. Navigating individual country labor and employment laws can be a daunting task, one that most companies do not possess the internal capability to manage themselves. Compliant talent engagement is not an isolated issue by any means. 

The scale of multinational operations is staggering, with recent figures revealing that 146,400 multinational enterprise groups (MNE) operate in the EU and European Free Trade Association countries (EFTA). These MNEs collectively employ a massive workforce of 47 million employees. With estimates of the freelance portion of that workforce approaching 20%, it is clear that non-compliance with country and regional regulations governing freelancer engagements is a mounting risk, one that shows no signs of subsiding.  

Successfully engaging and managing such a vast global workforce presents significant complexities even for the largest of enterprises. That is why many companies, large and small, have already engaged or are considering the use of a compliance intermediary service provider to help them grow their businesses internationally. The intermediary that provides the best and most cost - and risk - effective option to protect companies from these risks and complexities is a global agent of record (or AOR) with international freelancer compliance expertise embedded in their technology and service delivery model. 

With that said, let's take a closer look at what an AOR is and isn’t, the risks and missed opportunities of not having one, and where you can find credible global AOR services to help your company grow. 

Let’s dive in!

What’s an Agent of Record?

To understand what an agent of record is, it is helpful to first look at what they do for their customers. Agents of record are specialized firms that engage and pay freelancers as independent contractors on their customer’s behalf, effectively relieving them of all the administrative, compliance, and payment burden that would be required for them to compliantly engage and pay their freelancers directly. 

It is tempting to think about an AOR firm as a staffing agency MINUS the recruiting or sourcing component. Logically, this makes sense because AORs only engage non-agency contractors presented to them or self-sourced by the customer. However, that comparison misses the most critical element of the AOR offering that staffing agencies do not typically provide: independent contractor compliance screening. This differentiation is dramatic when the customer needs to engage freelance talent across the globe. In other words, an AOR with the ability to compliantly screen freelance talent in a single, or even just 2-3 countries, is of limited value to the company seeking international talent to support their international growth objectives

Finally, it may be helpful to describe what an AOR is by drawing a comparison to what it is not. An agent of record is NOT the same thing as an employer of record or EOR, sometimes referred to as brokers of record or payroll providers. An EOR is considered an intermediary as well, but they only engage freelance talent that fail the independent contractor screening or otherwise must be engaged as contract or payrolled employees. As such they employ the freelancer for the specific purpose of placing them with the customer to augment their internal staffing needs. The EOR ensures that the customer is compliant with country-specific employment and tax withholding laws when hiring the payrolled contractor. 

From a total freelance management solution perspective, the AOR should be considered first and then the EOR provider. Why? Because the AOR will screen all freelancers, according to the compliance laws in their country of tax residence, and enable the engagement of the talent as an independent contractor. Engaging freelance talent as independent contractors is a significantly more cost effective engagement method, if it can be done compliantly. For full customer optimization, and to enable access to talent that cannot be engaged as independent contractors, a global EOR service provider should also be part of the freelance management solution. 

The Risks of Not Having an Agent of Record

There are country-specific risks that global AORs help customers avoid: 

• Misclassification of talent - every country has its own criteria and rules 

• Independent contractor tax compliance - every country has its own tax forms, withholdings, social contributions, requirements

• Contractual requirements - use of the right types of contracts and addressing country-specific terms and conditions is critical. 

Findings of non-compliance, along one or all of these lines, can be costly. Not only are back taxes and benefits, fines, and penalties at stake here, but consider also the risk of reputational damage to your company’s brand. 

For example, in 2021, the delivery app Glovo violated Spain’s Social Security law by misclassifying more than 10,000 workers as self-employed, and they were fined €79 million.

Elsewhere, in France in 2022, British company Deliveroo was fined for abusing the freelance status of its drivers, incurring fines of over €30,000.

Similarly, in the US, Nike faces a potential $530 million in fines for allegedly misclassifying thousands of independent contractors.

These examples alone demonstrate how important it is for companies, large and small, working with freelancers internationally to stay informed. Keeping up with evolving  rules and regulations at the country level is often the greatest challenge companies face when entering the global market for freelance talent. 

The Solution: How an Agent of Record Can Help

We’ve already outlined what an Agent of Record is, so let’s look at how they can help you solve the challenges mentioned above:

Onboarding

An AOR (Agent of Record) can completely transform your onboarding process, making it faster and more efficient. With the right AOR, using a worldclass freelance management platform, every onboarding step, all required documentation, and compliance screening can be fully automated and supported by the AORs administrative services so you and your team can focus on getting other work done. This eliminates the need for tracking onboarding requirements, tax forms and bank details in unsecured and inefficient Excel spreadsheets or worse yet via email or paper copies.

Getting more into the specifics, an AOR  will manage all necessary aspects of onboarding, including:

• Compliance screening and documentation

• Independent contractor agreements and statements of work

• Bank details and verification

• Freelancer profiles

• Non-disclosure agreements

• Certificates of insurance

• Background checks

• ID verification

• Customer required documentation

Freelancer Payments

A proper global AOR  will enable and support the complexities of timesheets and invoices, routing for approvals, funding via a single customer invoice, and distribution of international payments to talent in their currency of choice. Solving international invoice and payments challenges is usually the first pain point customers call out when talking to an AOR about their needs. By leveraging an AOR, businesses can streamline these processes, ensuring smooth and consistent payments to freelancers regardless of location. 

Not only are payments the customers’ biggest pain point, but so too is it for their freelancers. The ability to pay freelancers accurately and on time, every time, is how companies can best develop loyalty and preference with their freelancer community.

Compliance

Different countries impose varying compliance regulations around freelancer classification.

For example, each member state in the EU has its own rules and criteria to meet to ensure workers are properly classified. For instance, the Dutch Tax and Customs Administration (Belastingdienst) and labor laws guide the classification in the Netherlands; while IR35 is the tax legislation imposed by HMRC applicable to classification of freelancers in the UK.  

Elsewhere, in California, US businesses that are found to have intentionally misclassified their workers may be subject to criminal charges and hefty fines, facing up to a year in jail and fines ranging from $5,000 to $15,000 per violation. 

Helping companies avoid falling foul of such laws is an Agent of Record’s number one job. But proper classification of talent is not the only compliance benefits to be gained by working with an AOR. Freelance tax filing process, contract compliance, data law compliance, and other aspects of the freelancer engagement are all in scope for full service global AORs. 

Bubty's AOR Service

To support our Bubty platform customers who prefer to outsource the administrative and compliance burden of screening, engaging and paying freelancers, Bubty AOR is offered as an easy add-on service. Bubty AOR, facilitated through our extensive partner network, ensures customers have total visibility into the full lifecycle of their freelance talent engagements.

As the hiring entity of independent contractors to provide services on your behalf, Bubty AOR provides the maximum protection against misclassification and other freelancer engagement and payment related risks, both operationally and contractually via full indemnification. Leveraging the Bubty platform as the system of record, Bubty AOR enables our customers fast and easy access to onboarded and compliant talent in 190 countries and enables payment of those talent in 130+ currencies. All this while our customers only have to process a single invoice in a single currency of their choice each pay period. 

And if the talent our customers want do not meet country-specific independent contractor criteria, the Bubty AOR solution automatically reroutes the talent to our platform-embedded global employer of record (EOR) providers. A virtually seamless and thoughtfully communicated transition to an onboarding process that meets our customer’s preferences and is uniquely aligned to the employment laws and hiring norms of their talent’s home country. 

With Bubty’s AOR Services, powered by our global partner network, you really can engage global talent where they are, making your company a freelancer client of choice.

Are You Ready to Rethink How You Manage Your Global Workforce?

Managing freelancers around the world can be tricky. However, using Bubty as your Agent of Record can streamline all aspects of freelancer management and protect your business from human error, reputational damage, and costly fines.

We understand that adopting a new approach using an Agent of Record and a freelancer management system is a big step that shouldn't be taken lightly. Click here to learn more or book a call with one of our experts.