One of the biggest trends of the past years, and which seems to be expected for the future, is the movement from full-time employment to freelance working. According to Upwork, a global platform for freelance projects, 47% of hiring managers are more inclined to work with independent professionals since the pandemic hit. But what implications does your business need to take into account before hiring a freelancer?
Who is a freelancer?
Freelancers are professionals who are self-employed and offer their services to businesses, usually working for different projects and clients at the same time. They are often paid per hour or per project, and ideally the projects they take on are short-term ones. While there are no set guidelines for what type of work a freelancer does, the most common fields of work are technical and creative industries, such as design, content writing, website and software development, and photography.
Being self-employed, the responsibilities of paying taxes, social security, national insurance, or any other fees fall on the freelancer. As such, freelancers often set their rate according to the amount of taxes or withholding they need to do in their location.
Why do people choose to work as freelancers?
There are many reasons why workers decide to become freelancers, however, flexibility of working hours and location tend to always be rated as the top motivators for the switch from subordinate employment to self-employment. According to a report from Payoneer, the freelance community has been growing steadily over the past two years, and the overall satisfaction with this way of working is 4 out of 5.
What is the difference between freelancers and independent contractors?
While you may often see the terms “freelancer” and “independent contractor” used interchangeably, there are some differences between the two. Freelancers tend to be self-employed and charge per project, usually taking on multiple short-term projects at the same time. On the other hand, independent contractors can either work as a freelancer, or can work through an agency, being subcontracted to one client at a time, usually for longer projects.
The pros and cons of hiring a freelancer
While it might seem that hiring a freelancer would be the ideal option for your international needs, especially during COVID-19, there are also some downfalls that come associated with it. Let’s have a look at the pros and cons of hiring a freelancer or independent contractor:
PRO: Financial savings
The hourly rates of freelancers have been increasing over the years, especially in technology-related fields, however, even when paying the highest rates, companies can expect to save 20% to 30% annually through the hiring of freelancers as opposed to employing someone full-time.
PRO: Reduced risk
Overall, there is less risk involved when hiring freelancers, especially when it comes to termination of contract. When hiring a full-time employee, there are certain regulations that must be followed in order to respect the labor rights of the employee, however, in case a partnership with a freelancer is not working, you can easily terminate your collaboration.
PRO: Availability of talent
The pool of talent in the freelance community is excellent and it will be even better in the future. According to a report from the Freelancers Union and Upwork, within the next 7 years, half of the US population will be working on a freelancing basis, and this trend is expected to follow worldwide. This means that it doesn’t matter what type of expertise you need for your project, you will likely be able to easily find it through freelancers.
PRO: Quality of results
Freelancers need their clients to be satisfied in order to keep getting new projects, as such, the quality of their work has a direct impact on their livelihood. This means that freelancers will not only be able to complete the project they were given, but will do so in a timely manner and with high-quality standards, with the aim of being able to renew their contract.
As mentioned before, freelancers are usually involved in multiple projects at the same time, which means that your project will not be the only one getting their attention. As such, if you are looking for someone who will be solely focused on your company’s success, it would be better to hire a permanent employee.
CON: Relationship building
Freelancers often work on their own schedule and remotely, which means that they might not be on the same timezone as you, or may be working evenings when your company is open from 9 to 5. This can cause some difficulties when it comes to relationship building and communication between the two parties.
CON: Classification & False Self-Employment
One of the biggest cons of working with freelancers is ensuring that you are being compliant with the local legislation. This means that if you intend to have one freelancer working on long-term projects that are on a full-time basis, perhaps you should reconsider and hire a permanent employee instead. This is related to the employment classification, which varies widely between countries and jurisdictions, so it is important that you ensure your freelancer is working in projects that are allowed under that title.
What is false self-employment?
While it is not a legal term, false self-employment is used when a freelancer works under the same conditions as a permanent employee, however, is still treated as self-employed. This means that the freelancer has the same responsibilities as a full-time permanent employee, however, doesn’t have the same rights.
According to Eurofound’s report “Exploring the fraudulent contracting of work in the European Union”, self-employment is the main form of contracting work that has been affected by fraudulent use, especially in the case of using freelance work to mask subordinate employment.
With this in mind, it is important to consider that hiring a freelancer should be a solution for short-term projects only, such as one-off tasks, infrequent work, or work that doesn’t need to be performed full-time and on-site. For longer projects that require full-time work using other employment options will be better.
Are you unsure whether hiring freelancers would be the ideal option for your needs?
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