Common Myths About Agents of Record (AORs) Debunked

In 2024, the U.S. independent workforce reached 72.7 million strong, nearly double the amount from just five years prior, according to MBO’s State of Independence report. Around the world, more people are choosing independent work because of the freedom it offers, with technology making it easier to find jobs from anywhere.

As companies depend more on independent workers, managing legal and compliance risks has become a top priority. Mistakes in classifying workers, handling payroll, or following local labor laws can result in expensive penalties and other serious consequences.

To avoid these risks, companies often turn to an Agent of Record (AOR). Let’s clear up some myths about AORs and take a closer look at how their services can benefit your organization.

Myths About Agents of Record—and the Truth Behind Them

Myth #1: AORs Are Just for International Hiring

Reality: AORs aren’t just for international compliance. They’re also great for domestic teams working across state or regional lines. AORs ensure adherence to both local and federal regulations, which helps minimize risk no matter where your talent resides. These include California’s AB5 gig-worker laws, the U.K.’s IR35, and many others around the globe.

Check Out: What Are the Risks of Hiring Independent Contractors?

Myth #2: AORs Can Only Support Certain Types of Workers

Reality: AORs are designed to manage a variety of worker types, including independent contractors, freelancers, and gig workers—even digital nomads. With the rise of global independent work, their expertise in proper classification and compliance is essential for avoiding IRS audits or any international hiring challenges.

Myth #3: AORs Are Too Expensive for Small and Medium-Sized Companies

Reality: Establishing legal entities in new markets can cost thousands of dollars—not to mention months of setup time. Fortunately, AORs offer scalable solutions that align with business growth. For small and midsize companies, this flexibility is often more cost-effective than traditional hiring methods.

Discover: 5 Ways to Attract Top Independent Contractors to Your Business

Myth #4: AORs Would Be Unable to Meet Specific Industry Needs

Reality: Leading AOR providers often specialize in sectors like healthcare, finance, and technology. When evaluating partners, be sure to ask for case studies demonstrating their experience with your industry’s unique regulations. Some examples include HIPAA compliance for healthcare contractors or FINRA guidelines for financial services.

Myth #5: AORs Only Manage Payroll and Benefits Administration

Reality: Along with ensuring timely payments and competitive benefits, AOR companies handle onboarding, tax withholdings, and labor law compliance. This full-service support lets AOR companies focus on strategic goals rather than administrative burdens.

Learn More: 9 Common Contractor Compliance Issues and How to Avoid Them

Myth #6: An AOR Is Just an Outsourced HR Department

Reality: AORs complement—not compete with—your HR department. By offloading compliance and payroll tasks, your team can prioritize employee engagement, talent development, and culture-building initiatives critical for retention.

Myth #7: AORs Evaluate the Performance of Your Workforce

Reality: You continue managing performance reviews, setting goals, and leading your team. AOR service providers handle the compliance side of things, ensuring everything is done correctly. As a result, you can focus more on your team and on achieving your business goals.

Looking for Agent of Record Solutions? We’re Here to Help

AOR services simplify workforce management, providing you with the tools and support needed to build a flexible team with confidence. When hiring independent contractors, an AOR helps you develop a solid plan while ensuring compliance with all rules and regulations.

Learn more about how our Agent of Record solution can be tailored to fit your specific needs. Contact our team today!