AOR vs. EOR: A complete guide

Gone are the days when businesses relied solely on full-time, in-office employees. Now, the average workforce is made up of freelancers, contractors, consultants, and remote hires. 

By accessing a global talent pool and hiring in a more flexible way, you can locate specialized skills and reduce labor costs. However, this distributed workforce model also comes with added complexity. Each country has different rules for hiring different types of workers and it’s up to you to stay compliant with local labor regulations, tax requirements, and classification laws. 

Agent of Record (AOR) and Employer of Record (EOR) are two services that take this responsibility off your plate and help you navigate the maze that is global hiring. However, each has a very different focus.

In this article, we’ll explore everything you need to know to choose the solution that can help you expand your business more seamlessly. We’ll cover logistics, benefits, and the typical costs of both services. 

What is an EOR?

To hire a full-time member of staff in another country, you typically need to set up a local office/ entity to comply with local laws. This process can take months, or even years, and you then become responsible for hiring, onboarding, and managing your team in line with the regulations of the region. 

An Employer of Record allows you to circumvent all of this, by acting as the legal employer of your new hires. Though you maintain full control of your team day-to-day, the EOR handles HR and employment related tasks to ensure compliance with local laws. 

The service an EOR provides typically include: 

• Global payroll support.
• Benefits administration and insurance access.
• Expense management.
• IT asset distribution.
• Local HR advisors with in-country expertise.
• Tax deposits and filings.
• Workers’ compensation administration.
• Issuance of tax forms, such as W-2s.
• Timesheet processing.
• Employment contract generation and management.
• Employee onboarding and offboarding support.
• Certificate of Insurance (COI) maintenance.
• I-9 form completion and storage.
• Employee termination procedures.
• Support for visas and work permits.

What is an AOR?

An Agent of Record is a hiring facilitator that you can use to work with independent contractors (rather than permanent employees). An AOR doesn’t impact a contractor’s status as an independent worker, but they do help ensure that this status is maintained in accordance with local laws — which can often be complicated. 

Let’s say you’re based in the US and you want to hire a freelancer in Argentina… The AOR ensures that you meet the classification requirements which, in this instance, emphasize the degree of control a company has over a worker, the worker’s economic dependence, and the nature of the work performed.

An AOR then creates a contract that aligns with local laws and helps you manage payments, ensuring your contractors get paid on time, in their currency of choice, and in line with local requirements.

AOR vs. EOR comparison

By now you should be getting a clearer idea of how AOR and EOR differ in scope… If you want to execute projects more quickly or avoid the high taxes that sometimes come with full-time staff, you might turn to freelance talent and use an AOR to ensure they are being classified properly. If, though, you are looking to expand permanently into a new market, an EOR is the solution you need to avoid compliance issues and administrative hassle.

In this section, we take a closer look at exactly what’s included in the two solutions. First, here’s a table to show their features. 

How do the two solutions work?

Here’s how the process of using an AOR looks, with Multiplier’s solution as a reference: 

1. Multiplier classifies the worker. 
2. Your company adds the contractor’s details and Multiplier creates a contract agreement.
3. The contractor signs up on the platform and submits their details. 
4. Multiplier verifies the details and activates the contractor on the platform once your deposit is paid.
5. The contractor raises an invoice as per the agreed payment terms.
6. Your company approves the invoice and pays Multiplier.
7. Multiplier pays the contractor within hours.  

When you use our EOR, our onboarding and implementation specialists are also designed to get you up and running as quickly as possible. The steps are as follows:

1. You send over compensation information and employment terms 
2. Multiplier creates a locally compliant contract and sends it to you and your new hire. 
3. In our easy, self-service platform your employee can submit their payroll and compliance forms.
4. We verify the employee documents and activate the employee once your deposit is paid.
5. Your new hire can get to work in as little as 4 hours. We’ll be working in the background to manage payroll, benefits, and compliance. 

Payment solutions

Here we take a look at how AORs and EORs make it easier for you to pay international employees. 

AOR payment support 

Though an AOR doesn’t become the legal employer of your team and therefore doesn’t assume responsibility for HR tasks, a good solution will give you the tools you need to pay your global team seamlessly and compliantly.

An AOR will onboard your contractors, collecting the necessary information to make payments compliantly across borders. When it’s time to pay your contractors, you’ll send the funds to the AOR who’ll send them in the contractor’s local currency as soon as they get approval from you. 

This means you can predict your expenses more accurately since you’re not reliant on the contractor’s home currency which can fluctuate rapidly. Instead, each month, you can pay a predictable, fixed cost in a more stable currency. Plus, while paying your contractors internationally can take up to 5 days and might incur hidden transfer fees, using an AOR means you can ensure a great experience every time.

An AOR is a scalable solution. Multiplier, for example, offers a single platform so whether you’re paying 10 freelancers or 100, you don’t have to worry about accidentally incurring late fees from your contractors. In a user-friendly interface, your contractors can log timesheets and raise invoices which you can view, approve, or reject in bulk. 

EOR and global payroll 

As the legal employer of your new hires, an EOR becomes responsible for the payroll process. You’ll still need to approve timesheets, but we’ll calculate multi-country tax, benefits and compensation so you don’t have to. 

You can also bring your entire workforce into one solution with our global payroll solution. So let’s say you’re managing a team in the US and you also start to recruit remotely, now you can take control of your processes in one place. 

Your employees can use our easy self-service tool and enjoy an easy experience and payslips in their local language. Meanwhile, you can get complete visibility with reports, controls, and integration with HRMS, invoicing, and expense management tools.

How to choose the right global hiring solution 

Whether you an opt for an EOR or an AOR, there are a few factors you always need to look out for:

• Rapid implementation. When you’re hiring in the competitive global talent market, you need to be able to move quickly. Multiplier’s AOR and EOR both allow you to get set up in hours, not weeks, with streamlined onboarding processes and dedicated points of contact. 
• Global payment infrastructure. This gives you a clear view of costs, payments, and timesheets. Plus, with an integrated payment solution like Multiplier, you won’t have to navigate between multiple vendors if there’s ever an error. 
• Low total cost of ownership. Look out for a solution that has everything you need to manage contractors or employees in one place to save money by cutting down on tools.

Multiplier provides 24/5 support and a dedicated point of contact with both our AOR and EOR solutions. Book a demo to learn more about how we can support your distributed workforce.