What is a Contractor of Record (COR)?

A Contractor of Record (COR) is a third-party service that acts as an intermediary between your business and independent contractors. Unlike an Employer of Record (EOR), which becomes the legal employer of full-time employees, a COR manages relationships with contractors who remain self-employed.

The COR handles administrative tasks: creating contracts, processing payments, managing compliance documentation, and sometimes assessing classification risk. The contractor remains independent, invoices for their services, and handles their own taxes. But the COR manages the operational details so you don't have to.

Think of it as outsourced contractor administration. You identify contractors you want to work with, the COR handles the paperwork and coordination, and you focus on the actual work relationship.

How the COR model works

The process is relatively straightforward. You identify a contractor you want to engage. Rather than managing the relationship directly, you work through a COR. The COR creates a service agreement with the contractor, defining scope of work, deliverables, payment terms, intellectual property ownership, and independent contractor status. You sign a separate agreement with the COR, authorizing them to manage the contractor relationship on your behalf.

When work is complete, the contractor submits an invoice to the COR. The COR reviews it, confirms that deliverables match the scope of work, and processes payment. You pay the COR, who then pays the contractor. The COR maintains all records—contracts, invoices, payments, tax documentation—for compliance and tax purposes.

Some CORs also provide classification risk assessment, reviewing whether contractors meet the legal definition of independent contractors in relevant jurisdictions. This can reduce your risk of misclassification penalties, though it doesn't eliminate the risk entirely.

COR vs EOR vs PEO: Understanding the differences

The terminology around contractor and employment services is confusing because there are several different models. Understanding the differences helps you choose the right tool:

COR (Contractor of Record) serves independent contractors. The contractor remains self-employed, works for multiple clients, and handles their own taxes. The COR manages administrative and compliance tasks but doesn't employ anyone. Typical cost is $5-50 per contractor per month, or 3-5% of contractor payments, depending on the provider.

EOR (Employer of Record) serves full-time employees in countries where you have no legal entity. The EOR becomes the legal employer, handles payroll and benefits, and ensures compliance with local employment law. Typical cost is $49-99 per employee per month.

PEO (Professional Employer Organization) serves existing employees where you already have a legal entity. The PEO co-employs your staff, sharing HR responsibilities and providing access to better benefits rates through their larger risk pool. Typical cost is $40-200 per employee per month.

The distinction matters. COR is for contractors who remain self-employed. EOR is for employees who need to be employed in a new country. PEO is for employees where you already have an entity but want to outsource HR.

When COR services actually make sense

COR is useful in specific scenarios. You're working with a large number of contractors (20+) and want standardized processes across all relationships. You're concerned about classification risk and want expert review to ensure contractors are properly classified. You're in a regulated industry (healthcare, finance, government contracting) where compliance documentation must be meticulous. You want to completely outsource contractor administration so your team can focus on other work.

The classic use case is staffing agencies placing contractors at client sites. The agency uses a COR to manage contracts, payments, and compliance for hundreds of contractors across multiple clients. The COR handles the administrative complexity, the agency focuses on matching talent to opportunities.

CORs are also useful for companies in regulated industries where documentation standards are strict and mistakes are expensive, or for businesses expanding internationally who want local expertise on contractor regulations in new countries.

Costs and real tradeoffs

COR pricing varies widely. Some charge flat monthly fees per contractor ($5-50 per month depending on service level). Others charge percentage-based fees (3-5% of total contractor payments). Some combine both models. For 10 contractors, expect $50-500 per month in COR fees, depending on the provider and what services are included.

Beyond direct fees, there are operational tradeoffs. When you use a COR, you add a layer between yourself and your contractors. Payment timing depends on the COR's processes—you don't control when contractors get paid. Contracts may be standardized rather than customized to your specific situation. You become dependent on the COR's systems, support responsiveness, and continued operation.

There's also a control consideration. You're outsourcing decision-making about contractors to a third party. If there's a payment dispute, the COR is in the middle. If you need to customize a contract term, you're working through the COR rather than directly with the contractor.

Classification risk is another consideration. While CORs can help assess whether workers are properly classified as contractors, they don't eliminate the risk. If a worker should legally be classified as an employee, using a COR doesn't protect you from misclassification penalties. The COR provides documentation and review, but you retain ultimate legal responsibility.

The direct management alternative

For many businesses, especially smaller ones, a COR is unnecessary. If you're working with 5-25 contractors and comfortable managing relationships directly, contractor management software is often a more practical fit.

With contractor management software, you maintain direct relationships with contractors. You create contracts tailored to your needs, track milestones and deliverables, approve invoices, and coordinate payments through your own accounts (Wise, PayPal, Payoneer). The software provides organization and documentation without inserting a middleman.

This approach costs less ($99/month for up to 25 contractors versus $50-500/month for COR services). It gives you more control—direct relationships with contractors, ability to customize contracts, flexibility on payment timing. It maintains simplicity because fewer parties are involved and communication is direct.

The tradeoff is that you handle more administration yourself. But for most small to mid-sized businesses, the time investment is manageable—typically 2-5 hours per month for 10-20 contractors—and significantly less than the cost savings and increased control.

Frequently asked questions

Does a COR protect me from misclassification risk?

A COR can help assess whether workers are properly classified and provide documentation supporting contractor status, but it doesn't eliminate the risk. If a worker should legally be classified as an employee based on their work arrangement, using a COR doesn't protect you from misclassification penalties. You retain legal responsibility for proper classification. The COR reduces risk through documentation and review, but doesn't eliminate it.

Can I use a COR for international contractors?

Yes, some CORs operate globally and manage contractors in multiple countries. They handle local compliance requirements for contractor classification and payment processing in local currencies. If you're scaling internationally, this is a potential advantage of using a COR.

What's the difference between a COR and a staffing agency?

A staffing agency recruits and places workers. They find talent and match them to opportunities. A COR manages the administrative relationship with contractors you've already identified or that an agency has placed. Some staffing agencies also offer COR services, combining recruiting with contractor administration.

How long does COR onboarding take?

Most CORs can onboard a contractor in 1-2 weeks, depending on how quickly the contractor provides required documents and completes the onboarding process. Some CORs are faster (3-5 days for simple cases), others slower if local compliance requires additional documentation.

Can I use a COR for just some of my contractors?

Yes, many businesses use a COR for certain contractors (perhaps in new countries or regulated industries) while managing others directly. This hybrid approach lets you balance complexity management with control and cost.

What happens if the COR goes out of business?

If your COR goes out of business, you need to transition contractors to a new system. This typically involves issuing new contracts, collecting new payment details, and re-establishing administrative relationships. It's disruptive. Choose a COR that's financially stable and established before committing.

Making the decision

Ask yourself: How many contractors are you managing? (COR is more practical at 20+. Below that, direct management usually makes more sense.)

How much administrative burden can you handle? (Direct management requires more internal time but gives more control.)

Are you in a regulated industry? (If yes, COR's compliance expertise may be worth the cost.)

How much do you value direct contractor relationships? (COR puts distance between you and contractors.)

Is international expansion a priority? (COR's global compliance expertise is valuable when expanding.)

Based on your answers, COR might be the right fit, or direct management might be better.

The bottom line

COR services are valuable for businesses with large contractor networks (20+), complex compliance requirements, or a willingness to pay for complete outsourcing of contractor administration. They provide standardization, documentation, and risk assessment.

But for most small to mid-sized businesses working with 5-25 contractors, direct management with contractor management software is typically a better fit. You maintain direct relationships with contractors, use your own payment accounts, avoid adding a middleman, and save significantly on costs while maintaining full control.

Know your situation. If you have 50+ contractors, operate in regulated industries, or need complete outsourcing, a COR makes sense. If you have 5-25 contractors, want organization without losing control, and prefer direct relationships, contractor management software is usually the better choice.

The right answer depends on your specific needs, not on general best practices. Evaluate both options for your situation before deciding.