In the next three posts, all aspects of freelancers, also known as independent contractors and contract workers, will be explored. From the pros and cons of hiring them, to the legal aspects, as well as what a freelancer should understand about their own employment.
According to Freelancers Union, one-third of those employed are independent contractors. That is an estimated 42 million, and the number is steadily growing. While the obvious positions exist, such as writers and graphic designers, the options for contract jobs are endless: coding, computer programming, HR, and even practicing law. Employers are moving toward hiring contract employees as a way to solve several problems. However, it is important to understand that there are pros and cons to hiring freelance workers.
At a time when companies are looking to get as much out of each dollar as possible, hiring freelance workers can be the answer. While contract workers often make more per hour than normal employees, there are fewer additional expenses. No Medicare taxes, social security, unemployment insurance, or worker’s compensation apply. Also, there is normally less training needed when hiring a freelancer because they are already well versed in their field. They start doing actual work much quicker and therefore start adding to the bottom line quicker.
When hiring a traditional employee, a company is limited geographically. When hiring a freelancer, the applicant pool is unlimited. Employers have access to candidates not just all over the country, but all over the world. For a company located in a remote area, hiring an employee online to telecommute can be more cost-effective than moving a qualified individual to the area.
Using contract employees has flexibility that is not possible with full-time employees. They can be hired on a project-by-project basis, and it is possible to afford different people for different projects. There are also no concerns over layoffs and terminations.
The Human Resource aspects of independent contractors are simple. Because they are considered business entities instead of employees, they do not have the same rights. There is no minimum wage or overtime. Instead, there is an agreed-upon fee for service. Freelancers do not receive protection from workplace discrimination. They are not eligible for typical benefits available to employees such as FMLA, workman’s compensation, 401 K, or health insurance. While there is a contract between the employer and the freelancer for payment, the freelancer cannot sue for wrongful termination.
Before deciding to abandon the notion of ever hiring another traditional employee again, it is important to realize that there are drawbacks to employing freelance workers.
The nature of hiring independent contractors is that they need minimal supervision. That also means that the employer has less control. To be considered a freelancer by the government, there must be limited management. Therefore, the worker has much more latitude to complete the job in the way that they choose, which may differ from the way the employer would prefer.
In many companies, the concept of “team” is important. It binds the employees together and creates a collaborative atmosphere. When using freelance workers, it can be much harder to achieve this environment. If there is a mix of both types of employees, there can be resentment from both sides. These issues may arise quickly when there is a continual in-and-out of new contractors.
While the use of freelancers provides a large pool of workers to choose from, it also means that the actual level of workmanship can vary greatly. One person may turn out work quickly and efficiently with few mistakes, while another may show less professionalism, drag their feet turning in projects, and produce sloppy work. Because of this, many companies work hard to find a few good contractors they can count on to meet their needs. Unfortunately, weeding out the ones that are not a good fit can cost time and money.
Using freelancers is often a quick way to get flagged for an audit from various government agencies. Different agencies have different rules. In the following post, the legal aspects of who is considered an employee and who is considered an independent contractor will be surveyed.
Global Business Survey 2012. (n.d.) Elance. Retrieved March 31, 2013, from https://www.elance.com/q/global-business-survey
Fishman, J.D. Stephen. (n.d.) Pros and Cons of Hiring Independent Contractors. NOLO Law for All. Retrieved March 31, 2013, from https://www.nolo.com/legal-encyclopedia/pros-cons-hiring-independent-contractors-30053.html
Independent Contractor or Employee: How Government Agencies Make the Call. (n.d.) NOLO Law for All. Retrieved March 31, 2013, from https://www.nolo.com/legal-encyclopedia/independent-contractor-or-employee-government-decision-29681.html
Revolution Law Group is located in Greensboro, NC, and serves individuals and small businesses throughout the Triad and surrounding areas. To contact us please visit Revolution.law or call 336-333-7907.
The information included here is for informational purposes only, is not exhaustive of all considerations when creating documents, is not intended to be legal advice, and should not be relied upon for that purpose. We strongly recommend you consult with an attorney and do not attempt to create your own documents.