Glossary
- 13th month pay
- 13th month pay is a mandatory extra month's salary for employees in many countries (Philippines, Brazil, Mexico and others). Independent contractors are not entitled to it.
- Agent of Record (AOR)
- An Agent of Record (AOR) administers independent contractors as an agent: classification vetting, contracts, invoices and 1099 tax paperwork, while the client directs the work.
- AML (Anti-Money Laundering)
- AML (Anti-Money Laundering) is the body of laws and controls that require financial and payout platforms to verify customers (KYC), monitor transactions (KYT) and report suspicious activity.
- Co-employment
- Co-employment splits employer responsibilities between two entities — typically a client and a PEO or staffing agency. Useful by design, risky by accident.
- Contractor management system (CMS)
- A contractor management system centralizes contracts, onboarding, classification checks, invoices and payouts for independent contractors — distinct from safety-compliance CMS.
- Contractor misclassification
- Contractor misclassification is treating a worker as an independent contractor when the law considers them an employee — triggering back taxes, penalties and benefits claims.
- Contractor of Record (COR)
- A Contractor of Record (COR) engages and pays independent contractors on a client's behalf, signing local contracts and assuming misclassification liability.
- Employer of Record (EOR)
- An Employer of Record (EOR) legally employs staff abroad on your behalf, with no local entity needed. What it covers, who it is not for, and where the arrangement breaks.
- Form 1099-NEC
- Form 1099-NEC reports payments of $600+ per year to US independent contractors to the IRS. Foreign contractors working abroad get no 1099 — a W-8BEN documents why.
- Form W-8BEN
- Form W-8BEN certifies a contractor's non-US status for a US payer — documenting why no 1099 is filed and which tax withholding, if any, applies to the payments.
- Gig economy
- The gig economy is work organized as on-demand tasks through platforms rather than jobs. Its legal engine — and its biggest fight — is independent contractor classification.
- Global contractor
- A global contractor is an independent contractor engaged across borders — a self-employed professional in one country invoicing a company in another, rather than an employee.
- IR35 (UK off-payroll working rules)
- IR35 is the UK's off-payroll working legislation: it tests whether a contractor working through their own limited company is, in substance, an employee — and taxes them accordingly.
- KYC (Know Your Customer)
- KYC (Know Your Customer) is the identity check a payout or banking platform runs before onboarding you — confirming who you are with ID and proof of address — to meet anti-money-laundering rules.
- Master Service Agreement (MSA)
- A Master Service Agreement (MSA) is the umbrella contract fixing the standing terms between a company and a contractor, so each project runs off a short Statement of Work, not a new contract.
- PEO (Professional Employer Organization)
- A PEO co-employs your staff alongside your existing legal entity, pooling payroll, benefits and HR admin — unlike an EOR, which employs workers where you have no entity.
- Permanent Establishment (PE)
- A permanent establishment (PE) is a taxable presence a company can unintentionally create abroad — via a fixed place of business or a dependent agent — exposing it to local corporate tax.
- Umbrella company
- An umbrella company employs contractors who work on client assignments — mainly a UK model around IR35 — handling payroll, taxes and employment rights for a margin.