AOR vs EOR: Key Differences Explained

Managing global teams requires the right tools to handle workforce management effectively—especially when working with both contractors and full-time employees. Two solutions that address these needs are the agent of record (AOR) and the employer of record (EOR).

The AOR model supports businesses engaging independent contractors by handling compliance, contracts, and payments, while the EOR model takes on the role of a legal employer for full-time employees, managing payroll, benefits, and labor law adherence. These approaches are increasingly relevant for companies expanding globally or working across multiple regions with different labor regulations.

Deel provides both AOR and EOR services in a single platform, giving businesses a straightforward way to manage contractors and employees across borders.

Key differences between AOR and EOR

While both the AOR and EOR models help businesses expand globally and manage their workforce, they serve distinct purposes and address different types of workers. Here’s a clear breakdown of the key differences:

📚 Check out our free Guide to Worker Classification and discover strategies and tools to determine employment status and prevent employee misclassification worldwide.

How AOR works

An agent of record (AOR) is a service that helps companies manage contractors by handling key administrative and compliance tasks. These responsibilities include classifying workers correctly, ensuring contracts meet local labor laws, and managing payments. The AOR acts as an intermediary, taking on many of the complexities involved in working with contractors across different regions.

Core functions of an AOR include:

• Classifying workers correctly: Misclassifying contractors as employees—or vice versa—can result in legal disputes, back pay, fines, or penalties. An AOR ensures each worker is accurately classified by reviewing the nature of their work, contractual agreements, and local labor regulations. This reduces the risk of audits and legal challenges stemming from misclassification.
• Managing contracts and compliance: An AOR drafts, reviews, and ensures all contractor agreements meet regional legal standards. These contracts include terms like confidentiality, intellectual property rights, and non-disclosure clauses. This helps to reduce the risk of legal issues or scrutiny from regulatory bodies.
• Supporting the onboarding process: When onboarding independent contractors, you need to collect certain documents, including personal details, bank information, and tax identification numbers. An AOR takes on the responsibility of ensuring these are accurate and compliant. Some AOR services may also conduct background checks and reference reviews to help verify the contractor’s qualifications and reliability.
• Overseeing payments: Processing payments for contractors across different regions requires precise management of currencies, or invoicing. An AOR streamlines this process by automating payments, ensuring contractors are paid accurately and on time.

At Deel, the AOR service is called Contractor of Record (COR). While COR works on the same principles as regular AOR models, the term emphasizes Deel’s role in providing a structured and compliant framework for engaging contractors.

With Contractor of Record, Deel serves as the contractor's Agency of Record (AOR). In this role, Deel acts as the contractor's employer, managing all administrative responsibilities. This includes overseeing contracts, ensuring compliant hiring practices, processing payroll, and leasing the contractor back to the client. Deel assumes all risk, ensures adherence to local labor laws, and mitigates misclassification risks. This model offers businesses greater flexibility and alleviates the administrative burden of managing contractors.

See also: How Do You Determine Employment Status with Deel’s Worker Classifier

How EOR works

An employer of record (EOR) is a service that acts as the legal employer for a company’s full-time employees in regions where the company does not have its own legal entity. By taking on this role, the EOR enables businesses to hire employees in new countries while ensuring compliance with local labor laws, tax regulations, and employment standards.

The EOR handles responsibilities that are legally required of an employer, including:

• Payroll and tax deductions: The EOR manages the accurate calculation and timely payment of salaries, adhering to regional tax regulations and reporting requirements. They handle deductions for social security, income tax, and other mandatory contributions to ensure full compliance.
• Benefits administration: The EOR provides statutory benefits such as pensions, healthcare, and paid leave while offering optional supplementary benefits tailored to local market expectations.
• Labor law compliance: From drafting compliant employment contracts to adhering to local workplace practices, the EOR minimizes the risk of legal disputes or penalties. This includes managing terminations, notice periods, and severance pay according to regional laws.

An EOR is especially valuable in situations where a company is:

• Expanding into new markets: For businesses entering a new country, setting up a legal entity can take months, require significant financial investment, and demand a deep understanding of local laws. An EOR eliminates this hurdle by acting as the legal employer for your workforce, enabling rapid hiring.
• Operating under complex labor regulations: Employment laws can vary significantly between regions, with intricate requirements around notice periods, benefits, overtime rules, and termination processes. An EOR simplifies this by staying up to date with local regulations and ensuring your business operates within legal boundaries.
• Managing distributed teams: As remote work and global hiring become more common, businesses increasingly need to manage employees across multiple locations. An EOR supports this by centralizing compliance, payroll, and benefits administration while offering localized support.

Deel’s global EOR service supports businesses hiring full-time employees across 150+ countries by taking on these employer responsibilities. With Deel, companies can focus on their growth while the EOR ensures compliance with payroll, benefits, and labor laws, streamlining global expansion efforts.

See also: Provide a Good Employee Experience Globally with an EOR

5 common misconceptions about AOR and EOR

Misconceptions about AOR and EOR services can be dangerous, sometimes leading to costly legal issues and adversely impacting your business operations. Despite the proliferation of both services, many organizations are still unclear about the distinct functions of AOR and EOR. Below, we address some of the most common misconceptions to help you make informed decisions.

1. Assuming using an EOR eliminates all employer responsibilities

Some companies believe that engaging an EOR means they no longer have any obligations toward their employees. However, while the EOR handles legal and administrative employment aspects, your company still manages the employees' day-to-day tasks, performance, and work assignments. Operational control and responsibility for workplace practices remain with you.

2. Believing EOR services are only necessary for international hiring

Many assume that EORs are only needed when hiring employees in foreign countries. While EORs are indeed valuable for international expansion without establishing a local entity, they can also be beneficial domestically. This is especially true when navigating complex state laws or when a company lacks a legal presence in a particular region.

3. Underestimating compliance requirements when using an AOR

There's a misconception that using an AOR absolves a company of all legal responsibilities concerning contractors. While an AOR assists with compliance, your company must still ensure that contractors are properly classified and that the terms of engagement meet all legal standards. Mismanagement in this area can result in significant legal and financial repercussions.

4. Thinking an EOR limits control over employees

Some companies believe that engaging an EOR will reduce their control over employees' work and decisions. In reality, while the EOR handles legal and administrative employment aspects, your company retains full control over the employees' daily tasks, performance management, and work assignments. The EOR does not interfere with how you manage your team operationally.

Want more? Read our deep dive on 8 Employer of Record Myths & Misconceptions

How to decide between AOR and EOR

Choosing between AOR and EOR depends on the type of workforce you’re managing, your compliance requirements, and your growth objectives. AOR is ideal for engaging independent contractors, focusing on classification, contracts, and payments. EOR, on the other hand, is designed for hiring full-time employees, taking on payroll, benefits, and labor law compliance.

The table below provides a detailed breakdown of common scenarios, what to consider in each case, and the recommended solution. Use it as a guide to determine whether AOR or EOR is the right fit for your workforce strategy.

AOR or EOR, Deel does it all

Deel is your all-in-one platform for managing a global workforce, offering comprehensive solutions for both** **EOR and AOR needs. Whether you’re hiring full-time employees in a new country or engaging independent contractors, Deel simplifies every step of the process—helping you stay compliant, reduce risks, and focus on growth.

For full-time employees, Deel’s EOR service provides:

• Local payroll, tax compliance, and benefits administration in over 150 countries.
• Customized benefits packages tailored to regional expectations.
• Expert support from local HR and legal professionals.

For contractors, Deel’s AOR (Contractor of Record) service handles:

• Classification to eliminate misclassification risks.
• Fully localized, compliant contracts.
• Automated payments in 120+ currencies.

With Deel, you can use EOR for full-time employees, AOR for contractors, or a combination of both to suit your workforce needs. Whatever your hiring goals, Deel provides the tools to help you scale globally while staying compliant.