I noticed that in the world of distributive workforce management, a new term being bandied about: Agent of Record (AOR). This, ostensibly new creation, is designed to describe the services offered to Independent Contractors who do not want to be bound by an employer-employee arrangement. This is aimed at adding a new dimension to the existing Employer of Record (EOR) services, and Professional Employment Organisation (PEO) services, currently used to cater for this category of worker.
Are these not the same thing? Agent of Record (AOR) and Employer of Record (EOR) services, and Professional Employment Organisation (PEO). How do they differ and what is the commonality between them?
While they may seem similar at first glance, Agent of Record (AOR), Employer of Record (EOR) services, and Professional Employment Organization (PEO) are actually distinct concepts in the realm of human resources and employment.
- Agent of Record (AOR): An Agent of Record is typically an insurance agent or broker designated by an individual or business to represent them in insurance transactions and dealings with insurance companies. The AOR acts as the liaison between the insured party and the insurer, handling tasks such as policy procurement, claims processing, and other administrative duties related to insurance.
- Employer of Record (EOR) services: Employer of Record services are offered by companies that act as the official employer for a contingent workforce. This means that the EOR takes on the legal responsibilities and liabilities of being an employer, such as payroll administration, tax withholding, benefits management, and compliance with employment laws and regulations. EOR services are often used by businesses that engage contract workers, freelancers, or remote employees, allowing them to outsource the administrative burdens of employment while maintaining flexibility in their workforce.
- Professional Employment Organization (PEO):A Professional Employment Organisation is a firm that provides comprehensive HR services to client companies. This includes functions such as payroll processing, benefits administration, risk management, compliance assistance, and other HR-related tasks. Unlike an EOR, which specifically focuses on serving as the legal employer for a contingent workforce, a PEO typically works with companies to manage their entire employee lifecycle, from recruitment to retirement.
- AOR focuses on insurance transactions and representation.
- EOR services specifically pertain to assuming the legal responsibilities of an employer for contingent workers.
- PEOs offer a broader range of HR services beyond just being an employer of record, catering to the entire spectrum of HR needs for client companies.
- All three concepts involve outsourcing certain administrative functions related to employment or insurance to specialized service providers.
- They aim to alleviate the administrative burdens associated with these tasks, allowing businesses to focus on their core operations while ensuring compliance and efficiency in HR or insurance processes.
How do EOR and PEO services treat independent contractors differently to employees?
Employer of Record (EOR) and Professional Employment Organisation (PEO) services treat independent contractors differently from employees primarily due to the legal and tax distinctions between these two types of workers. Here's how they typically differ in their treatment of independent contractors versus employees:?
- Independent Contractors: Independent contractors are self-employed individuals or entities who provide services to a company under a contract or agreement. They maintain control over how they perform their work and are responsible for their own taxes, insurance, and benefits.EOR and PEO services generally do not treat independent contractors as employees. Instead, they may engage with independent contractors on behalf of their client companies for specific projects or services. However, the independent contractor remains responsible for their own employment-related obligations.
- Employees: Employees, on the other hand, are individuals who work under the direction and control of an employer. They receive wages or salaries, are subject to payroll taxes and withholdings, and may be eligible for benefits such as health insurance, retirement plans, and paid time off. EOR services specifically treat contingent workers (including independent contractors) as employees for legal and tax purposes. The EOR becomes the official employer of these workers, assuming responsibilities such as payroll processing, tax withholding, benefits administration, and compliance with employment laws.PEOs also engage with client companies' employees, but they typically offer a broader range of HR services beyond just serving as the employer of record. PEOs may handle tasks such as recruitment, onboarding, training, performance management, and employee relations in addition to payroll and benefits administration.
In summary, while EOR and PEO services may engage with independent contractors on behalf of client companies, they typically do not treat them as employees. Instead, they assume the role of the employer for contingent workers who are classified as employees, providing them with HR and administrative support while the independent contractors maintain their self-employed status.
So where does leave us with the newly-created term, Agent of Record (AOR)? Clearly, this is already a well-established term used in the insurance industry to describe a go-between for transactional purposes. In my mind, it somewhat disingenuous to try to adopt this term for a broker operating in the distributed workforce management industry, and adds little to the comprehensive services that EOR and PEO organisations already offer the industry. Indeed, a rose by any other name, is still a rose?
