A comprehensive contractor management tools guide

Contractor management tools provide business owners with the means to manage contractors from across their lifecycle, with the company hiring them. Despite this intent, these tools are not created the same. 

The following table breaks down the four main categories of contractor management tools, comparing them according to overall cost, compliance services, and ease of scalability. 

We should note that because there are many individual options in each of these categories, the entries in these fields have been intentionally generalized. 

In addition, we provide a summary of who each option might be best suited for.

Contractor management tools by type

Type	Cost	Compliance	Scalability (1-10)	Best for
Agent of Record (AOR) Platforms (Like Payoneer Workforce Management)	$$$	✅	9.8	Mid-size companies and international hiring
Freelance Platforms	$$	✅	6.1	Small projects and short-term gig work
Staffing Agencies	$$$$	✅	N/A	Enterprise-level corporations with legacy systems
DIY Manual Stack	$	❌	3.8	Small businesses employing 1-3 contractors

Agent of Record (AOR) platforms are amongst the most effective contractor management tools on the market, as they are specifically designed to meet the needs of both business owners and the freelancers themselves. 

The following sections detail each of the categories in the table above as well as address several common questions surrounding contractor management tools.

1. Agent of Record (AOR) platforms

Agent of Record platforms act as an intermediary between the business and contractor, effectively helping the business engage talent legally while offering quality payment and invoicing services for the freelancer. 

They provide several critical services, such as: 

• Providing onboarding services and locally compliant contractor agreements
• Managing tax form collection and assisting with compliance for payouts
• Processing payments in the preferred currency of the contractor
• Reducing misclassification risks

Although they make the ideal partner for businesses expanding their operations internationally, AORs also work very well for smaller companies operating with a lean legal/HR structure, since the platform can do much of the heavy lifting for these departments.

Type	Cost	Compliance	Scalability	Examples Include
Agent of Record (AOR) Platforms	Depends on the provider	AORs offer support with workers’ classification and overall compliance	AORs can scale with businesses as needed	Payoneer Workforce Management

2. Freelance platforms

Freelance platforms (also referred to as “marketplaces”) provide a shared online space for businesses seeking contractors as well as the contractors themselves, allowing both to advertise services and available jobs. 

As far as contractor management is concerned, these platforms have a few built-in tools that AORs provide. However, they are more designed for short-term work, providing fewer options to scale up operations. They do, however, provide tools for: 

• Onboarding
• Contracts
• Payments
• Dispute Resolution
• Tax form collection

Where they fall short, however, is in high platform fees (ranging from 10%-20%, depending on the platform) as well as uncertain IP ownership if the business utilizes the standard marketplace contract.

Type	Cost	Compliance	Scalability
Freelance Platforms	Varies depending on the marketplace, but fees range from 10%-20%	The platform offers basic compliance between the contractor and the business	Fee structure de-incentivizes rapid scaling, although the infrastructure is there

3. Staffing agencies

Typically thought of as more of a traditional option for contractor management, staffing agencies provide business owners with a “hands-off” model for outsourcing labor, effectively handing the keys over to an experienced partner to let them handle every aspect of recruiting, onboarding, and contractor management. 

These benefits come with a few downsides, however: 

• Staffing agencies are expensive, with the highest associated costs on this list (~30%)
• Businesses have less/little control over the contractor relationship, since they are employed by the staffing agency
• They typically have a regional/single-country focus, which can make hiring an international team difficult

Often, staffing agencies are best reserved for enterprise-level companies with a budget to spend on a white-glove service. In addition, companies seeking rapid expansion will benefit from the agency’s existing pool of contractors who are ready to go at a moment’s notice.

Type	Cost	Compliance	Scalability
Staffing Agencies	On average, staffing agencies have a markup of about 20-40% over the contractor’s pay rate	Staffing agencies handle all compliance-related issues on behalf of the company since they technically offer work to the contractor	Agencies can be limited by international hiring, as well as requests for non-standard roles

4. DIY manual stack

DIY manual stack refers to business owners who want to handle all of their operations in-house without outsourcing to anything else. This means using the wealth of free/cheap tools on the internet to implement contractor management on the company’s time. 

While this maintains a low operational cost, the DIY approach can be dangerous: 

• Drafting contracts will require legal counsel, resulting in hidden costs 
• The business owner assumes all responsibility and liability for misclassification or other compliance issues
• This approach is not scalable without turning to one of the other options. 

In short, the DIY approach to contractor management tools is ideal for a very small business relying on <5 contractors. As operations grow, however, this model is not sustainable without either hiring in-house legal and HR professionals or turning to an AOR, a marketplace, or a staffing agency in the future.

Type	Cost	Compliance	Scalability
DIY Manual Stack	Free/cheap tools keep costs low, but some hidden costs are involved	Business owner assumes all liability for compliance issues	This model is not scalable above 5 contractors

Would you like to know more? Request a demo today.

FAQs

1) Do I need contractor management software?

Not everyone needs contractor management software. The most obvious example is if you don’t have any contractors to manage (if you aren’t sure about their classification, we’ve made this handy checklist to help you verify), but other qualifications exist.

• Companies with very few contractors (1-5)
• Companies with an in-house legal/HR team available

2) How much does an Agent of Record (AOR) cost?

AORs are more budget-friendly than you might think. Many business owners opt to work with an AOR primarily because it is more cost-effective than hiring a whole legal/HR team. Just take a look at how a DIY contractor management arrangement compares to Payoneer Workforce Management’s AOR platform:

Contractor management costs: Self-management vs AOR

	Self Manage	Payoneer Workforce Management’s AOR
Platform Cost	None	$19/month per contractor
Payment Fees	~1-3%  (typically varies depending on the chosen bank or payment provider)	Covered under AOR
Currency Conversion Fees	~1.5%-4% (typically varies depending on the chosen bank or payment provider)	Covered under AOR
Time/Operations Cost	Manual setup requires paying an employee to create workflows, spreadsheets, and PDFs	None
Contract Drafting	~$200/contract if working with a lawyer	Covered under AOR
Misclassification Risk	The business owner assumes all liabilities for misclassification with fines averaging ~$1,000 per instance of misclassification.	Minimized (The AOR helps you take care of worker classification.)

This is a case where numbers matter; smaller businesses with 1-2 freelancers can likely provide their own support, albeit they will still assume a great deal of financial risk. Anything larger than that, however, will require either a team of specialists or the input of an AOR to cover legal/compliance, payments, and onboarding. 

3) What if I’m hiring internationally?

International contractor management is an especially challenging task, as it requires a thorough understanding of the local laws and regulations, as well as your own, in order to maintain compliance.

These laws are vastly different depending on where you are hiring, so business owners working on their own will need to coordinate with a local specialist to stay compliant. 

4) How do contractor management tools compare to payroll software?

Business owners considering the DIY approach will still need to look at options for making payments (e.g., bank transfers, ACH transfers, credit cards), which typically take the form of payroll software or a payments platform.

These options might be tempting for business owners seeking to reduce costs, but there is a great deal these platforms do not provide. For a more in-depth comparison, consult the table below: 

	Contractor management tools	Payroll software
Use-Case	Managing the contractor lifecycle from beginning to end	issuing payments from sender to receiver
Classification Services	✅	❌
Onboarding	✅	❌
Compliance	✅ (Included with AOR)	❌
Contract Drafting	✅	❌
Invoicing Support	✅	Varies

In short, payroll software handles payment: that’s about it. For business owners thinking about expanding their operations, working with more comprehensive contractor management tools will provide significantly more value in the long run.

5) What if I need more time to think about it?

We totally understand! Here are a few pages we would recommend having a look at if you are still unsure of where to go from here.

• Frequently asked questions
• The Ultimate Guide to Contractor Management: Best Practices, Payroll, Compliance, and Beyond
• Streamline global contractor management