Companies are increasingly turning to freelancers for tasks that were previously done in-house. This shift has been encouraged by employees branching out on their own to take their deep domain expertise to the open market.
Many employees discover that they are able to earn more money with their skills out at a market rate. One massive tradeoff with this arrangement is that these employees lose traditional employment protections, such as health insurance, disability insurance, retirement contributions, and other benefits.
Another significant trade-off is the security of a bi-weekly paycheck. Freelancers are put at an enormous risk, as it's not always assured that company will pay for services rendered.
For companies that hire freelancers, it's important to understand that these relationships should be taken as seriously as any other vendor.
The Freelancers Union estimates that a whopping eight out of 10 freelancers struggle to either get paid on time or at all. The organization, which represents hundreds of thousands of freelancers, has recently launched an initiative called #FreelanceIsntFree. The objective is to remind companies the freelancers deserve to be paid for work performed, as reliably as internal employees are.
This issue of non-payment has recently received more attention than ever, as the city of New York became the first city to implement stringent protections of freelancers. These rules include the right to timely payments, protection from retaliation, and up to $25,000 in fines for repeat violators. Even if you do not employ freelancers based in New York City, it's enlightening to read the full rules. They signpost a potential path for many other jurisdictions.
As groups like the Freelancers Union continue to amass massive support, these types of freelancer protections are sure to expand far beyond the city of New York. So, in order to prepare your company for emerging regulations about how freelancers are managed, here are four ways that you can mitigate risk in the gig economy.
A right to a written contract is the backbone of the New York City regulations. While that sounds obvious, not all freelancers have a contract with clients. Sometimes a project is too to fast-moving to stop and do a contract, and sometimes freelancers feel like a contract is over-kill. There's also some reluctance to require contracts, as many companies have robust legal departments that prevent many freelancer contracts from being approved.
So insist on a contract without dense legalese. Focus instead on the parameters of the project and the expected milestones. Clarity keeps projects on track.
And just because something is listed as a milestone on the contract doesn't mean that it can't be adjusted in the future. The point is simply to get everybody aligned around the timeline. This eliminates any future discussions that the project scope was not clear. It prevents scope creep, which can dramatically increase the cost of the project for your company.
The majority of professional freelancers pride themselves on being professionals in their fields. This means that they understand the importance of milestones for tracking progress. As mentioned above, these rough milestones should be baked into any contract.
As the engagement unfolds, these milestones should be marked as completed. Progress should be tracked, and any adjustments to future milestones made immediately.
Milestones are also an important litmus test to ensure that you're only working with the highest quality freelancers. If you find that a potential freelancer is hesitant to commit to milestones, it's probably best to move on. You don't want to end up in a situation where you either have to fight about money owed or decide milestones on-the-fly.
Clarity upfront saves time down the line. After all, if using a freelancer takes many more hours of your time to manage, then it's really not worth it in the end!
Some of this advice could also be made for freelancers, of course. So, even though you are the client and the freelancer is the service provider, don't let your freelancer define your relationship.
Take an active role in communication, and be sure to implement the right workflows to keep the communication flow consistent and effective. By taking ownership of communication, you also show the freelancer that this is important to you as the client.
If your team has a communication tool like Slack, consider inviting the freelancer as a guest to be sure they're up to speed on anything pertinent to their work.
Remote workers are often out of the loop on things the managers think they know. While it might come across as too eager, over-communicating at least delivers visibility and transparency. Under-communicating facilitates inaccurate conclusions to be made and rumors to flow freely.
Hope doesn't pay the bills! Your company benefits greatly from the cost savings associated with employing freelancers versus employees -- this cost-savings is one of the key reasons why the freelance economy is thriving. Remember that these freelancers are not only absorbing common expenses as a cost of doing business, but they're also responsible for paying the portion of payroll taxes usually paid by the employer.
So, do your part in fostering the freelance economy and pay your freelancers on time and as agreed per the contract. If milestones are slipping, and you feel that this merits a pay decrease, discuss this in advance of an invoice due date.
Regardless of how you approach payments, there's one core truth when working with freelancers: Clients that pay on time consistently go to the front of the line. When there are active clients to pay on time, it's hard to prioritize work for clients that are often late with their payments. Know the psychology and set yourself up for success!