Do You Need an AOR, an EOR, or Just Insurance?
If you manage contractors, it is easy to get three very different recommendations for the same roster. An employer of record may tell you to put the workers on its payroll. An agent of record may recommend reviewing and documenting why particular roles can remain independent. An insurance platform may focus on getting them covered.
None of those answers makes sense until you look at the roles. Some should be employment. Some are independent but close enough to warrant a formal review. Others are clearly independent and just need insurance.
1099Policy sells the last two services, so that is our bias. The practical point is to avoid forcing the whole roster into one model.
Start with the role
Look at how the work actually operates. Who decides when and how it gets done? Is the engagement ongoing or tied to a project? Does the contractor serve other clients? Do they use their own tools and operate as a separate business?
Do this role by role. A freelance editor hired for a defined project is different from a project manager working full time under one of your managers, even if both receive a 1099.
Our AOR vs EOR post goes deeper on the classification questions. Once the role is clear, the vendor decision usually is too.
Employment: use an EOR
Some contractor roles are simply jobs with the wrong label. Your managers set the hours, direct the day-to-day work, and expect the person to remain available indefinitely. No classification opinion or insurance policy changes those facts. The person should be employed, either through your own payroll or an EOR.
An EOR is useful when you do not have an entity or payroll setup where the worker is located. It handles payroll, tax withholding, benefits, and employment administration. For an international hire, or a worker in a state where you are not set up to employ, it may be the most practical option.
Our EOR alternative page argues against using an EOR where the role does not require employment.
Independent, but not clear-cut: use an AOR
Then there are roles where the answer is not obvious. Maybe the contractor controls most of the work, but the engagement will last a year. Or the assignment has a defined scope, but your company provides equipment or imposes detailed operating rules. The facts may support independent-contractor status, but the decision deserves more than a checkbox in an onboarding form.
That is a reasonable place for an AOR. Before work begins, the role is reviewed against the federal and state factors that apply, and the reasoning is documented. A 1099Policy determination evaluates 38 indicia, is signed by a specialist, and explains why the role was approved or rejected. It carries indemnity, and eligible contractors can obtain coverage in their own name for the assignment.
An AOR has to be willing to say no. If the facts point to employment, the worker should go to payroll or an EOR. Otherwise, the review is just an approval service.
Clearly independent: solve the insurance problem
Some roles do not present a serious classification question: a freelance editor with several clients, a photographer quoting a fixed project fee, or a specialist working through her own company.
These contractors may still be missing insurance required by your contract, a client, a venue, or your own risk team. That is an insurance problem. It does not need to become a classification project.
Per-assignment insurance can be issued in the contractor’s own name, with the certificate available before work starts. Workers’ compensation, general liability, and specialty coverage can all be handled this way through 1099Policy. Our COI tracking material covers the certificate and renewal side.
Putting these roles through an AOR adds a review they may not need. Putting them through an EOR changes the relationship altogether.
Real rosters are a mix
Consider a hypothetical roster of 100 roles. Five may need to move to payroll. Fifteen may be independent but worth reviewing and documenting. The other eighty may need only the right coverage and a current certificate.
Putting all 100 through an EOR adds employment costs where they are not warranted. Doing nothing leaves the employee-like and ambiguous roles unresolved. Routing at onboarding lets each role follow the process its facts support.
What each option costs, and who pays it
An EOR generally charges the hiring company a monthly fee per worker, on top of wages and employer costs. Our AOR fee, a percentage of contractor remuneration, is also the client’s cost. Insurance is split between the parties: the per-assignment premium is the contractor’s responsibility, since the contractor is the named insured, though many platforms remit it on the contractor’s behalf, and the small platform fee is billed to the platform. Our pricing page breaks down who pays what.
A general liability certificate does not justify an EOR fee. And an insurance policy does not make an employee-like role independent. The cost comparison only makes sense after you know which service the role actually needs.
Where to start
Start with your ten highest-spend or highest-control contractor roles and apply the questions from our AOR vs EOR guide to each one.
Move employee-like roles to payroll or an EOR. Send mixed cases through a determination. For clearly independent roles, confirm the insurance requirements and keep a current certificate on file.
Keep reading
Cover every contractor, on every assignment.
See how teams bind workers' comp and liability per assignment — in the contractor's own name, without EOR markups. A 20-minute walkthrough covers live coverage, real COIs, and the savings math for your workforce.
