"Many agent of record providers can classify and pay the contractors you already have. The harder question is often what happens when you need a new one."
Let me start with what an agent of record actually is. Then I’ll walk through how I would choose one if I were running a contingent workforce program at a large enterprise.
What an agent of record does
An agent of record (AOR) is a company that engages independent contractors on behalf of another company.
Why would a large enterprise use one? When you engage someone as an independent contractor, the question is whether that person can legally be an independent contractor in the country and location where they actually are. Answering that question is called worker classification. It means checking a range of criteria, based on rules that differ by country and, in some places, by state or region. Usually, no single criterion decides it on its own.
The agent of record's main job is to run that classification process compliantly, then issue the independent contractor agreement directly to the freelancer. So the agreement sits between the agent of record and the freelancer, not between the freelancer and the end client. That structure can help reduce the end client’s exposure to misclassification risk, depending on how the program is set up.
That is why I describe it as largely a risk game. If a company wants to take on the classification risk itself, it engages independent contractors directly. If it wants to outsource that risk, it goes to an agent of record.
The table stakes
Say you are a large enterprise and you have decided you need an agent of record. What do you look at?
First, can that agent of record classify contractors in every country where your business hires? Your hiring managers often won't fit neatly into a list of countries.
Second, once that agent of record classifies someone and issues the contract, can they pay that person compliantly no matter where they are?
Those two are table stakes. Many AOR providers can do both, and if you just need someone to classify and engage a fixed pool of pre-identified independent contractors, you have plenty of choice.
The part most buyers miss
But that is usually not the full need. Needs are not static. Sooner or later, a hiring manager needs someone outside your talent pool. A contractor moves on, the team takes on more work, or the work needs a complementary skill set nobody in the pool has.
If you choose an agent of record that only works with pre-identified talent, you have to go to another vendor to source someone new. Then you bring that person back to the agent of record to classify and engage them. Two (or more) vendors, two (or more) processes, more time & more costs.
So what most large enterprises actually want is an agent of record that can classify and engage the talent they already have, while also giving them access to many more people when they need them.
Speed and accuracy at the same time
There is one more thing I would look at.
When you engage hundreds or thousands of people, running every classification manually doesn't make sense, even though many companies still do it that way. You want technology that runs classifications fast. You also want those classifications to be accurate, because you don't want to end up piling up risks you are not even aware of.
That is why I believe the answer is technology plus people. At Lifted, an Upwork Company, we classify using both technology and teams of experts, processing 20,000+ worker classifications per year. That kind of global scale is hard to reach, and it gives buyers peace of mind about how the classification process works.
What the Everest Group recognition means
Recently, Everest Group named Lifted a Leader in Contractor of Record (CoR) and Contingent Employer of Record (CEoR) Solutions, in its PEAK Matrix assessment.
What does that mean? In my view, it means we rank among the best companies in the world that enable large enterprises to both source talent and then engage it as an agent of record and employer of record. I am proud of it because it recognizes the two things I have described here: sourcing and engagement in one place, and classification done with technology and experts together.
So look at your own agent-of-record setup.
If one of your pre-identified contractors left tomorrow, or a hiring manager needed several more people with a skill set nobody in your pool has, how many vendors would it take your program to get them engaged?
If you want more of this, subscribe. I write about contingent workforce strategy, what is working in enterprise programs, and where I think the market is going.
Author
Ernesto Lamaina
GM, Lifted
Ernesto Lamaina is the General Manager of Lifted, an Upwork company dedicated to helping enterprises source, engage, and manage contingent talent across every contract type—independent contractors, staff augmentation, employer of record, and managed services.
This content is for general informational purposes only, and is not intended to be and should not be viewed as legal or tax advice. Readers should contact their attorney or tax professional to obtain advice with respect to any particular legal or tax matter. Information discussed can change frequently, and Lifted cannot guarantee that all information is current at all times.
