Reducing Workforce Compliance Risk With an Agent of Record

Managing independent contractors is often complex, even in the best circumstances. With paperwork, legal requirements, and classification rules to navigate, the details can quickly become overwhelming. Without a clear plan, missteps can cause hiring delays or create compliance risks.

An Agent of Record (AOR) takes on these responsibilities, helping you stay compliant while keeping contractor management simple and straightforward. Here’s how AOR solutions make a difference for any organization:

7 Ways AOR Solutions Put Compliance in Your Contractor Management Practices

1. Getting Worker Classification Right

Misclassifying workers as independent contractors instead of employees can lead to substantial fines, tax penalties, and legal trouble. Research from the National Employment Law Project (NELP) shows that 10-30% of U.S. employers make this mistake, often without realizing it. Similar risks plague companies hiring contractors worldwide.

An AOR helps you classify workers correctly by applying expert knowledge of federal, state, and local labor laws. This prevents costly errors that could result in penalties of up to thousands of dollars per misclassified worker while keeping your business fully compliant.

Check Out: 4 Ways to Reduce Worker Classification Risks

2. Making Contractor Onboarding Painless

Hiring independent contractors involves time-consuming paperwork—contracts, tax forms, and payment setup. Without a clear process, these steps can slow down your most important projects.

An AOR makes onboarding faster and more efficient by using tried-and-true processes that benefit all parties. They handle all necessary paperwork from contracts to tax forms so that contractors get started without lengthy delays.

3. Taking the Stress Out of Taxes

Companies working with independent contractors have additional tax reporting requirements, which are often confusing. Filing errors may result in penalties or audits.

An AOR manages all tax documentation, tracks critical filing deadlines throughout the year, and ensures accurate reporting to local and federal authorities. Their support reduces your workload greatly and minimizes tax-related risks that could trigger costly audits.

4. Providing Access to Top Talent Around the World

Hiring international contractors brings added challenges, such as currency exchange, tax laws, and contract differences. Managing compliance across borders can be complex without the right expertise.

An AOR helps companies access the best international talent by managing country-specific compliance requirements and setting up legally enforceable contracts that protect everyone’s rights. They also ensure contractors receive payments on time, no matter where they are or what currency they use.

5. Making Different Local and Federal Rules Less Confusing

Labor laws vary by state and country, and companies working with independent contractors across different locations may struggle to stay updated. Noncompliance risks can be avoided by getting guidance from the experts.

An AOR keeps track of constantly changing regulations and ensures compliance with local requirements through dedicated legal expertise. Their oversight reduces legal risks when hiring contractors in different regions where rules for everything from overtime to paid leave can vary dramatically.

6. Resolving Any Contractor Issues

Miscommunication about project scope, payments, or deadlines can create disputes between businesses and contractors. Without a clear resolution process, these issues can escalate to legal challenges or damaged relationships.

An AOR helps prevent and manage disputes by ensuring contracts contain clear deliverables and expectations, setting up fair resolution processes, and offering practical guidance on maintaining positive contractor relationships based on their experience.

Discover: 3 Benefits of Creating a Contractor Compliance Program

7. Creating Long-Term Structures for Working with Contractors

Many companies handle contractor management on a case-by-case basis, leading to inconsistencies and compliance gaps. This lack of structure can make it harder to attract top contractors, as they prefer working with companies that offer clear expectations, reliable payments, and smooth onboarding.

An AOR can set up standardized, vetted systems for contracts, timely payments, and transparent communication, which ensures a compliant and consistent approach every time you work with a contractor while building your reputation as a preferred client.

Next Step: Finding the Right Partner for Agent of Record Services

Managing independent contractors doesn’t have to be complicated. An AOR services provider takes care of compliance, classification, and administrative tasks, so you can focus on growing your business.

If you’re looking for a simple way to hire and manage independent contractors while staying compliant, reach out to our team today. MBO Partners offers Agent of Record (AOR) services, Employer of Record (EOR) services, and a variety of other contingent workforce solutions for any organization.