Agent of Record (AOR) vs. Employer of Record (EOR) Compared

Both Agent of Record and Employer of Record models help organizations handle work relationships, compliance, and risk, but they support very different parts of that picture. One focuses on employing people in a fully compliant way. The other focuses on contractors, plus the insurance and risk environment around them.

Picture a company that hires a full-time marketing lead in Toronto and a specialist contractor in Lisbon for a six-month project. On paper, they both work “for you”. In legal and compliance terms, they sit in very different categories, which affects how you handle payroll, protections, and exposure in each country.

That gap is where EOR and AOR models separate. An EOR supports global employment-related compliance and HR for employees, especially where you lack a local entity. An AOR usually supports contractor relationships, with a focus on insurance, risk management, and keeping those workers correctly classified in each jurisdiction.

What is an Employer of Record (EOR)?

An Employer of Record is a third party that becomes the legal employer of your team member, while you still direct their day-to-day work. The EOR sits in the background as the official employer on paper and handles the complexity of local labor rules so you do not have to.

Key responsibilities of an EOR:

• Payroll and tax compliance in the worker’s country
• Benefits administration and statutory contributions
• Drafting and maintaining compliant employment contracts
• Local labor law compliance and record keeping
• Support with terminations and related legal protections

Companies typically use an EOR when hiring full-time employees in a country where they have no legal entity or HR infrastructure. It also helps when a “contractor” role in practice looks like employment, and you want to avoid misclassification while still moving quickly into new markets.

The main benefit is speed, since you can hire globally without waiting months to set up entities or navigate every nuance of local employment law. At the same time, you keep control over the person’s goals, priorities, and daily work, while offloading a large share of the legal and operational risk to a specialist partner.

What is an Agent of Record (AOR)?

The role of an Agent of Record is to be a third-party service provider to your business, acting behind the scenes on your behalf when working with independent contractors. The AOR's primary function is to mitigate risk, establish documentation, and manage compliance issues as opposed to managing the everyday operations of the project or contracting relationship.

AORs support specific workforce functions, like:

• Verifying contractor insurance, such as general liability or workers’ compensation
• Facilitating local tax and onboarding documentation for contractors
• Monitoring worker classification risk over time
• Supporting contractor compliance with relevant labor regulations

Companies tend to use an AOR when they rely heavily on independent contractors in the U.S. or across multiple countries and want to manage risk without turning every role into an employment relationship. It fits best when you want to preserve contractor flexibility, while outsourcing the heavy lifting of insurance checks, documentation, and compliance workflows.

The advantages of an AOR center on control and simplicity. They help support compliance and classification without changing the contractor’s status, which is critical in places with strict worker protections and active enforcement. Using an AOR significantly minimizes the administrative overhead involved with managing a large group of contractors. This allows HR teams to focus on identifying qualified candidates instead of spending time obtaining certificates and reviewing and interpreting legal documents.

AOR vs. EOR: Key differences

The most straightforward way to see where EOR and AOR diverge is to compare them side by side across the features that matter most for compliance, risk, and day-to-day operations. Here is how the two models stack up.

Which one is right for your business?

The right choice depends on how you plan to engage talent and what compliance responsibilities you need to offload. Here is when each model makes the most sense.

Choose an EOR if:

• Hiring full-time or long-term workers in another country
• The role requires managing compliance and benefits with local employment laws
• Setting up a foreign entity feels too slow or expensive
• Daily direction, fixed hours, or core team integration defines the role
• Employee misclassification liability is a concern

Choose an AOR if:

• Engaging short-term, project-based, or freelance contractors internationally
• Minimizing misclassification risk while preserving contractor flexibility matters
• Benefits or formal employment protections are not part of the arrangement
• Verifying insurance and managing contractor documentation at scale is a challenge
• The worker should maintain independence and control over how work gets done

AOR and EOR: Can you use both?

Many global companies use both models because their workforce is not one size fits all. The EOR will manage employees requiring benefits as well as compliance with local labor laws. Conversely, an AOR manages the contractor that requires a flexible arrangement and simply verifies that the individual has proper insurance.

The hybrid model above represents the real world. Some roles require long-term commitment and integration into the company’s core group. Others have project-based requirements for specific skill sets that don’t have long-term commitments or the overhead associated with employment. This hybrid model provides less friction when scaling across countries and provides greater flexibility in hiring the right individual the right way.

FAQs: AOR vs. EOR explained

Questions about AOR and EOR models pop up all the time, especially when companies start building teams across borders. Here are answers to some of the most common ones.

Can an AOR convert contractors to employees?

No. An AOR is responsible for ensuring contractors are compliant; however, it does not take responsibility for the employment status of contractors. When a contractor relationship changes from being a contractor to become full-time employment, an EOR will then assume the legal obligations of an employer and be responsible for all associated risks.

Are AORs common outside the U.S.?

Although AOR models were created in the United States and are still predominant within the U.S., many international workforce solutions now provide contractor compliance services in different countries and regions. Depending upon the laws of each region regarding insurance, classifications, and protection of contractors, the nature and extent of the services may vary.

Can I hire remote employees without an EOR or AOR?

Yes, provided you have a legitimate business operation in the employee’s location and are willing to manage the necessary employment or contractor compliance issues locally. Without establishing a legitimate business operation in the worker’s location, using an EOR or AOR is the fastest and safest way to maintain compliance.

What's the cost difference between AOR and EOR?

Generally, AOR services tend to cost less than EOR services, as they provide fewer services. While an EOR offers services such as payroll, employee benefits, tax management, and assumes full employment liability, an AOR only provides services related to contractor documentation, insurance verification, and classification risk management.

What happens if I misclassify a contractor when I should have used an EOR?

Misclassifying a contractor can result in back taxes, fines, legal actions, and damage to your reputation with both regulatory agencies and your talent pool. Choosing an EOR prevents this from happening by correctly classifying workers and providing the legal protections associated with the true employment relationship.

Acquire the talent you need

Building a global team should not feel like navigating a legal maze. Whether you need an EOR to hire employees compliantly or support for contractor management, the right partner makes all the difference. Pebl helps companies scale internationally with EOR services that handle payroll, benefits, and compliance so you can focus on finding great talent and getting work done. Ready to get started? Get in touch to learn more.

Disclaimer: This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

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