Would you like to expand your business internationally with an experienced workforce to scale your business? Hiring contractors is one of the best business development hacks for growing businesses. Although hiring independent contractors has immense potential to help you scale, there's more than meets the eye.
There are many rules, some of which you may never know until you break them. You risk violating certain laws, from wrongful termination to misclassification, especially when hiring overseas. Rest assured, there's a solution.
An agent of record (AOR) thrives in helping companies hire independent contractors with ease. Working with an AOR like Skuad helps you handle contractor management responsibilities and drastically reduces liability. Book a demo with us to experience how our agency of record service can make a difference in your company. Read further if you aim to learn more about what an AOR does and how it can help your business.
The role of an agent of record in hiring independent contactors
An agent of record helps companies hire and manage independent contractors. They ensure that the contract terms meet labor law standards and help you avoid misclassification. They are experts in handling both individuals and entities working as contractors.
An agency of record can help you achieve your hiring goals faster while helping you comply with labor laws. They play many roles in your partnership and take care of crucial areas of your contractor management processes. If you want to find out more about what an AOR can do for you, examine these points:
- Proper classification of independent contractors: Misclassification can get you into a lot of trouble with the authorities. You have a better chance of avoiding these issues with the help of an AOR. An AOR properly classifies your contractors and ensures that their schedules, payment plans, and management differ from your employees'. They also help contractors fill out the ideal tax forms, such as the W-8 BEN for US companies.
- Background checks on new hires: Hiring independent contractors can be a long process due to procedures like background checks. An AOR takes care of this procedure. They ensure that the records of the independent contractor check out before making them part of the team.
- Contract preparation: The AOR handles the contract administration process. They understand the rules regarding hiring contractors and the various types of employment contracts. Upon hiring, they prepare the contract per employment law regulations. They explain the terms of the contract and ensure that contractors understand and agree to them before commencing work.
- Invoicing and payment management: When you partner with an AOR, they ensure you don't have to worry about payroll. An AOR handles the invoicing and disbursement of earnings. They assess the invoices your contractors prepare for completed projects, calculate their earnings, and process payment.
- Risk management: A major reason why employers choose AORs is to minimize risk. An AOR assumes responsibility for the contractors they oversee. They bear the risks to make sure that you have one less thing to worry about.
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AOR vs EOR
An agent of record shares some similarities with an employer of record (EOR). They are both ideal for businesses that want limited liability. However, they are unique entities with distinct functions. Knowing the differences between these entities can help you choose the ideal partner to achieve your hiring goals.
An AOR is to an independent contractor what an EOR is to an employee. AORs assist businesses in hiring independent contractors. They perform various responsibilities to ensure that a company doesn't have to move a muscle. An AOR would help a company manage payroll and protect its intellectual property as well. They also identify the tax forms and advise independent contractors on how to file them.
Usually, an EOR deals with employees. The company employs these people as core staff with all the perks of being a member of the organization. Managing employees is different; some might argue it's more complex than contracting. For instance, an EOR resolves internal conflicts while ensuring employees get their benefits and participate in trade union activities.
When deciding which entity to partner with, it's not a question of which option is better. The choice depends on what you want for your company. You may choose an AOR if you want to scale by increasing the number of people working for you. Or, you may select an AOR to quickly hire experienced professionals who provide their own working tools and need little training.
Alternatively, if you want skilled workers who would be pillars of your company long-term, use an EOR. They will help you manage employees, pay them, and complete the paperwork. With an EOR working with you, you have time to focus on developing your business. Contact Squad today for a breakdown of the ideal option to achieve your contractor hiring goals.
AOR and independent contractor compliance
Every region or country has unique laws regarding how employers conduct business. These laws cover business registration, payroll, employment contract terms, and non-compliance penalties. Compliance refers to abiding by these rules.
Complying with local labor regulations concerning contractor compliance can help you achieve:
- Good legal standing: The primary reason for complying with labor laws regarding independent contractors is to avoid legal problems. The law punishes individuals and entities that break these laws by either misclassifying contractors or evading taxes.
- Earn respect and loyalty of contractors: Many contractors have had poor experiences with other clients at some point in their careers. In many cases, contractors have little or no incentive to exceed expectations, unlike employees who may enjoy various benefits. Independent contractor compliance can encourage contractors to go the extra mile for you.
- Positive review: Word spreads quickly about positive or negative practices in business. Study shows that a dissatisfied customer will likely discourage up to 15 others. This also happens when you hire an independent contractor. However, when you comply with employment laws on paying and managing contractors ethically, they may give your company positive reviews.
- Long-term profitability: Doing the right thing when hiring can have a "snowball" effect. Complying with the rules of labor and having a positive reputation over a long period builds trust. More people would want to associate with your company, from contractors to clients. This can lead to longevity and continued profitability for your company.
Managing independent contractor payroll with AOR
Payroll is a continuous process that can be difficult. Accessing contractors' bank, tax, and personal details for payroll processing can be challenging. This is usually more complex when managing hundreds of contractors around the world. Since independent contractors determine their schedules, you may struggle to get the necessary data on time.
If you want to lessen your administrative burdens, hire an AOR. With an AOR managing your payroll management, there are numerous benefits. Hiring an AOR for your payroll processes reduces your HR tasks. From handling your paperwork to onboarding contractors, your HR team will have less tedious work. Contact the team today for a demo of how we can help you manage your payroll.
Hiring an independent contractor
Hiring contractors can be a good alternative to hiring full-time employees. You can hire contractors as long as they have adequate knowledge and essential skills to execute tasks.
There are also certain perks of hiring contractors, which is why many companies practice these employment trends. Although hiring contractors for your company's needs can be profitable, you shouldn't jump in head first.
You should have some crucial pieces of information before venturing into this process. Explore these key points:
Contractors are not employees
The first and perhaps most important point to understand before hiring independent contractors is how they differ from employees. They can be substitutes, but this can be tricky. Virtually every region has strict laws guiding the employment of company staff and independent contractors. These laws categorically state that these two individuals are different in the eyes of the law.
From payroll obligations to contract termination, labor laws treat both sides differently. Recognizing the many differences can help you avoid hefty fines and harsh penalties.
A contract is necessary
Usually, employers must prepare a written contract that a contractor would sign. This contract must contain certain crucial details, such as the duration, pay rate, and other contract conditions. Additionally, there may be terms of the contract termination, the contractor's duties, and a confidentiality clause. A contract does not only protect you from liability, but it also helps you comply with labor laws.
Labor laws matter
Pay attention to labor laws in your region, as these regulations matter to your business. Labor laws guide how you operate your legal entity, employ workers, and ultimately make a profit. Breaking these laws can harm your business, from heavy fines to a prison sentence. Learning them can help you remain compliant and grow your business with the law on your side.
You will help contractors file taxes
Usually, a contractor files their own taxes. Yet, employers must ensure that contractors get the appropriate tax forms to file. For instance, contractors working for a United States employer fill out any of the W-9, W-8 BEN, or 1099-NEC forms. These forms depend on the contractor's earnings, location, and other crucial details.
Hire independent contractors overseas with Skuad
There is no need to continue to scratch your head and wonder how you can hire independent contractors for your business. Finding and hiring the best talents to work independently can be easy. Partner with an AOR like Skuad if the procedure seems a bit intense for you.
Skuad will help you with the hiring process and beyond. We can help you start hiring internationally without having a legal entity in the country. Speak to a Skuad agent to learn how our service can help you start hiring contractors in no time.