6 Best Practices to Follow When Hiring Freelancers

Including freelancers in a company’s workforce is a key part of a successful project-based work environment. Many organizations are moving to a blended model of high-value freelancers along with full-time employees.

Freelancers offer many benefits to your company. They support workforce flexibility and add skills that might not be present in your current workforce or available through full-time hires. Here are six tips for finding, engaging, and managing freelance talent.

1. Understand the Difference Between Freelancers and Employees

“Freelancer” can mean a lot of different things. As a group, freelancers include workers who might call themselves consultants, contractors, independents, or entrepreneurs. But from a legal standpoint, all of these workers fall under the term “independent contractor.” In other words, these are people who operate their own businesses and may offer services to several clients. The key differences between freelancers and employees are:

• Expertise: Freelancers bring specialized expertise to a project or a task. Employees receive training for their job duties.
• Oversight: Freelancers can decide when, where, and how they work. (Unless, of course, it’s otherwise noted in a signed contract.) Employees receive direct oversight from a manager.
• Payment: When you hire freelancers, they’ll submit invoices for their work. Typically, they will negotiate payment terms of their contract before beginning work. Employees are either salaried or paid hourly.
• Taxes and Benefits: Freelancers pay self-employment tax. This includes both the employer and employee halves of Social Security and Medicare (FICA). As a client, you don’t have to withhold taxes for them like you would with a W-2 employee. Freelancers are also responsible for providing their own benefits such as health insurance or retirement.

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2. Learn How to Avoid Worker Misclassification

When hiring freelancers, it is important to comply with relevant regulations. If you hire a freelancer, but they fall under the category of “employee” in the eyes of the law, your company may be audited or face a misclassification lawsuit.

To avoid misclassification from the start, offer freelancers a variety of ways to work. Remember, freelancers you hire will come from a wide variety of backgrounds and have different levels of self-employability. For example, some workers will clearly meet the legal qualifications to be classified as an independent contractor. Others may fall into a gray-zone because they don’t fully meet the requirements. Rather than forcing freelancers to work a certain way based on their background, offer them a few different options, or help them become qualified to work as independent contractors.

At MBO, we have a wealth of experience helping enterprises remove the risks associated with hiring freelancers. We can help you develop a range of engagement options to keep your company compliant and your freelancers happy.

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3. Always Use a Written Contract

When you hire a freelancer, it is always a good idea to use a scope of work (SOW) or written contract. A contract provides a strong foundation for a freelancer-client relationship. It defines the work you want done, and a timeframe for milestones and payment. Before your freelancer starts work, take time to meet with them and write out a detailed contract.

In your contract, include information about the project such as who is responsible for each task, a bill rate and payment terms, and termination conditions. Discuss a plan for change management in case unexpected requests or delays come up. A contract provides legal protection for both your enterprise and for the freelancer, so include any procedural and operational requirements that are important to your organization.

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4. Prioritize Good Communication Practices

Good communication is an easily overlooked best practice when hiring freelancers but is one that can make or break your project. Before a project begins, talk to the freelancer you hired about how they like to communicate. Will you be checking in via weekly phone calls or written progress reports? If you need to reach them off-hours, is it best to text or call? Have you given the freelancer contact information for project stakeholders? How will you be sharing project documents? Take time to create a communication plan to help the project move smoothly and build a relationship based on trust.

On the other side of the equation, don’t overlook communication with your internal employees. If you are hiring freelancers for the first time, understand that this process will be new for managers as well. Educate employees on why you are hiring freelancers and how this new talent pool will benefit them. Keep staff updated on freelancer policies and processes. Ask for feedback on how the freelancers are doing. Maintaining open lines of communication will help freelancers successfully integrate into your workforce and help employees be more comfortable with this new way of working.

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5. Create a Work Environment that Appeals to Freelancers

When hiring a freelancer, you want to attract the best talent possible. Creating a work environment that appeals to freelancers is a great way to make your company an appealing place to work. Some of the most important factors in creating a freelancer-friendly workspace include:

• Quick and fair compensation: Freelancers care about how quickly and easily they will be compensated. Offering payment in line with market standards and using automated systems to limit paperwork can boost freelancer satisfaction.
• The ability to learn new skills: In order to remain valuable to clients, freelancers need to keep their skills up to date. While many pursue professional development on their own, they also value organizations that give them challenging work assignments and allow them to push the boundaries of their projects.
• Reasonable processes and procedures: Freelancers value clients who make it easy to work with them. Using technology to streamline onboarding and responding quickly to requests is helpful in building lasting relationships.
• Valuing freelancers’ work: 95 percent of freelancers say valuing their work is the single most important factor in picking a company to work for. Providing honest, respectful feedback and encouraging positive reinforcement will go far.

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6. Create a Virtual Bench of Talent to Meet Future Needs

Even if you’re hiring freelancers for the first time, it’s important to think about the future. A virtual bench of talent is a group of freelancers who have already gone through onboarding and work arrangement validations. Think of a virtual bench of talent like having an on-call team of experts.

A virtual bench saves you time searching for and onboarding qualified talent. Freelancers will appreciate it as well, because they must jump through fewer hoops to get started working. There is also a lower risk of worker misclassification because important compliance boxes have already been checked. Your virtual bench may include freelancers who have previously worked for your company, referrals, or strong candidates who have applied to positions in the past.

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The information provided in the MBO Blog does not constitute legal, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situation or needs.  Before acting on any information in the MBO Blog, you should consider the appropriateness of the information for your situation in consultation with a professional advisor of your choosing.