After funding, many startup founders feel the pressure to build a team and execute on the vision that won over investors. In today’s globalized world, this often means tapping into international talent to find the right skills at the right price, fast. With entry-level hiring in tech down 50% in 2025, the talent pool is expanding, creating even more opportunity to focus on talent acquisition and retention. Building a strong team to grow with your business is the key to success.    

But what starts as an agile move to hire contractors can quickly become an administrative quagmire.

This is the classic founder’s dilemma. 

Imagine: A founder with 1-200 employees and a mandate to expand into new markets, while the company lacks international legal entities. The immediate need is to onboard software engineers, product managers, and sales reps across the globe to accelerate growth. However, managing a distributed team of contractors through a patchwork of spreadsheets and email chains is inefficient. It creates a minefield of operational challenges that can jeopardize the very runway she’s trying to build. 

If you’re in a situation like this, choosing the right approach to contractor management can seem daunting. Do you build an internal system to handle the administrative load, or do you outsource it to a specialized partner? The decision will have a significant impact on a startup’s speed, cost, and risk exposure.

The DIY Approach: Using Contractor Management Software (CMS)

For founders who prefer to maintain direct control over their contractor relationships, a Contractor Management System (CMS) can be an effective tool. A CMS acts as a centralized database, allowing an internal team to organize, track, and manage all contractor-related information. This can help enhance visibility and streamline administrative tasks.

Core Functions of CMS:

• Centralized Database: Creates a single source of truth for all contractor profiles, eliminating scattered information across multiple platforms.
• Document Management: Helps securely store and track essential documents such as Statements of Work (SOWs), Non-Disclosure Agreements (NDAs), and invoices.
• Project Monitoring: Allows for the tracking of project timelines, deliverables, and milestones, ensuring alignment with business goals.
• Internal Reporting: Consolidates contractor data to provide insights for internal analysis and decision-making.

A CMS is often the right choice for startups with a small number of domestic contractors, a robust internal administrative team, and a higher tolerance for managing compliance risks directly. It offers maximum control and can be a cost-effective solution when operating at a smaller scale.

The Outsourced Approach: Engaging an Agent of Record (AOR)

While a CMS is a powerful organizational tool, it is fundamentally a passive system; it centralizes information but doesn’t solve the underlying complexities of global compliance. As a startup scales its international contractor base, new challenges emerge that a simple software solution can’t handle. The internal team is still responsible for correctly classifying workers, managing multi-currency payments, and ensuring every contractor agreement complies with local labor regulations. 

Even the most powerful companies in the world struggle with this issue. Uber, a global transportation company and platform, has paid millions in worker misclassification settlements. This administrative and legal burden grows exponentially with each new hire in a new country, introducing significant risks that can distract a lean startup team from its core mission.

When the burden shifts from simple organization to complex legal and financial management, it’s time to consider an outsourced approach. For startups looking to offload these administrative and legal complexities, an Agent of Record (AOR) provides a full-service solution. An AOR offers support to engage international contractors compliantly, assisting with administration like worker classification.

Core Functions of an AOR:

• Legal Compliance: The AOR helps you set up localized contractor agreements as per local laws and requirements.
• Administrative Management: Handles all administrative tasks, including global payment processing, tax form collection, and verification, often making a separate CMS redundant.
• Risk Management: By managing compliance and administrative functions, an AOR minimizes the startup’s exposure to legal and financial risks associated with international contractor engagement.

An AOR is the ideal solution for startups hiring multiple contractors across different countries, those with lean internal teams, or founders who want to minimize their direct involvement in compliance and administrative tasks to focus on core business growth.

How to Choose? Here’s a Framework for a Startup

Selecting the right approach depends on the startup’s unique circumstances. Here is a simple framework to guide the decision-making process:

Number of Contractors:

If you are managing 1-5 contractors, a CMS may provide sufficient functionality. However, as you scale to 10 or more contractors in various countries, the complexity of managing compliance and payments may necessitate the support of an AOR.

Geographic Diversity:

Managing compliance for contractors in one or two countries with similar legal frameworks is significantly different from navigating the regulatory landscapes of Europe, Asia, and Latin America. The more geographically diverse the contractor base, the stronger the case for partnering with an AOR.

Risk Tolerance & Internal Resources:

Evaluate whether the business has the internal expertise and resources to manage compliance effectively. If not, an AOR can serve as a crucial risk mitigation strategy, allowing companies to tap into global talent without taking on undue legal and financial exposure.

The Payoneer Workforce Management Advantage: A Flexible Platform for Either Path

Payoneer Workforce Management is designed to support a startup’s evolving needs, providing the flexibility to choose the path that best suits the stage of growth.

For founders seeking maximum peace of mind, Payoneer Workforce Management acts like an AOR that can assist with all aspects of contractor management from day one. This allows the company to focus on the core business without getting held up by the complexities of global hiring.

Alternatively, for those who prefer a more hands-on approach, Payoneer Workforce Management’s tools provide the software necessary to manage and pay contractors efficiently. Backed by a world-class payment engine, our platform helps ensure that contractors are paid on time and in their local currency, fostering a positive and reliable working relationship.

The key benefit of Payoneer Workforce Management is the integration of both capabilities in a unified solution. As a startup scales and the contractor management strategy evolves, the company can transition seamlessly between a DIY approach and an AOR partnership without the disruption of switching vendors.

The Right Strategy for Growth

The right global hiring strategy preserves your runway and accelerates your growth. Whether you need robust software for a DIY approach or a full-service partner to handle it all, the key is to choose a system that can scale with you.

Payoneer Workforce Management brings the flexible tools and services to build a global team your way. Discover which solution is right for your business.

FAQs

1) What is a Contractor Management System (CMS)?

A Contractor Management System (CMS) is a digital platform that helps companies manage their independent contractors and freelancers in one place. It streamlines key processes like contract management, project tracking, invoicing, and payments.

A CMS gives companies better visibility over their contractor workforce, helping maintain accurate payments and proper documentation. When paired with an Agent of Record (AOR), it simplifies every stage of global contractor management.

2) What is the key difference between using a Contractor Management System (CMS) and an Agent of Record (AOR) for international hiring?

A CMS is a software tool used to organize and track contractor information, while an Agent of Record (AOR) serves as a partner that handles legal and administrative burdens. Payoneer Workforce Management offers a unified platform that covers both needs, allowing you to use our software for a DIY approach or engage us as an AOR to assist with administration and worker classification.

3) When does a startup’s growing global contractor base demand a transition from a CMS to an outsourced AOR solution?

Startups usually transition when the complexity of managing global teams outweighs internal capacity, such as when scaling to 10 or more contractors or hiring in diverse regions like Europe or Asia. Partnering with Payoneer Workforce Management for AOR services assists you in mitigating misclassification risks and minimizes your exposure to administrative liabilities as your business expands.

4) How does the Payoneer Workforce Management platform offer a flexible solution for both the CMS and outsourced AOR approaches?

Payoneer Workforce Management enables businesses to build and manage global teams by providing a flexible, all-in-one solution. You can utilize our software tools to pay contractors efficiently in over 70 currencies, or you can leverage our AOR services to handle legal and administrative tasks. This allows your company to seamlessly switch between a CMS model and an AOR partnership without the disruption of changing vendors.

5) How do I pay international contractors in local currency?

To pay international contractors in local currency, companies can use global payment platforms, international wire transfers, a Contractor Management System (CMS), or partner with an Agent of Record (AOR) to engage international contractors.

With a CMS, businesses can track invoices, automate payment approvals, and pay contractors accurately and on time in their local currency. When paired with an AOR, companies can simplify and centralize global contractor management.