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Freelancers: Use Them or Forget About Them?

General Business News

September 2014

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Freelancers: Use Them or Forget About Them?

According to Quartz.com, four in 10 workers will be independent contractors by 2020. Whether or not this materializes, the tepid recovery from the Great Recession and the threat of automation certainly makes it possible.

Understanding what advantages and disadvantages freelancers might present will help you make an informed decision about using freelancers for your business.

The Good: Flexibility

Freelancers can provide one time or ongoing project availability. Hiring a blogger for a few blogs or a graphic designer for a single logo is far more cost effective than hiring an employee who looks good on paper but doesn't end up working out. Solopreneurs lacking time and certain skills benefit from freelancers who specialize in marketing or design to, for example, promote their business. This enables an entrepreneur to focus on the task at hand.

Examples include a single-member CPA firm or partners at a law office hiring a freelancer to write blog posts or manage social media. A few blog posts written as needed, or a set number per month, can be contracted out to a freelancer with specialized knowledge. Depending on the experience and capabilities of the freelancer, hiring can be more flexible and less costly.

Reduced Costs

Freelancers enable businesses to cut costs in both the short and long term. Since independent contractors pay their own self-employment tax obligations, employers have fewer longer-term expenses with freelancers. Freelancers often require less interviewing, are more likely to be an expert in their field and may not need professional development and continuing education classes to keep up their skills. These expenses traditionally incurred by employers are the responsibility of the freelancer.   

Potential Drawbacks: Rights and Licensing Works

While employers have exclusive electronic and print rights in virtually all cases for their employees' work, freelancers have the option to license full or limited rights over their work for hire. A freelance writer, for example, can agree to give the client All Rights to their work product. This gives the client complete ownership and copyright privileges to the piece forever.

However, freelancers can also negotiate different levels of rights to their work product. They can negotiate to sell select article rights for only electronic or print, or for both media. Within print and electronic media, freelance writers can give clients first, one-time or all electronic or print rights. The point is that freelance writers have more control over their work product, which can give them more leverage in negotiating – for example – how much they charge.  

Variable Work Product

The same flexibility provided by freelancers can also create disruptions in the work flow. Freelancers may agree only to a smaller project and move on to a client who offers them better work and payment terms after a project or two. Businesses looking for a consistent writing style or voice will have a harder time capturing it with a freelancer versus an employee who works there for many years.

Contracts with longer-term freelancers that have ambiguous or limited terms as grounds for termination may cause disruptions in the work product, including extensive edits, rewrites or even requiring another freelancer or employee to correct the initial freelancer's work. If a freelancer is liable for errors, a lawsuit could provide the client with a remedy. However, if the potential damage payout is low, it may cost significantly less to correct the problem and reassess using freelancers. 

Experienced and competent freelancers can be effectively used to accomplished specific objectives, especially for solopreneurs who lack the time, budget or need for employees. For more mature businesses, freelancers can be used for ongoing or one-time projects as an alternative to an employee. However, conduct careful due diligence to ensure the freelancer you hire is competent and committed to the agreed-upon project. Otherwise, like an employee, hiring a freelancer can come with its own set of challenges.

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These articles are intended to provide general resources for the tax and accounting needs of small businesses and individuals. Service2Client LLC is the author, but is not engaged in rendering specific legal, accounting, financial or professional advice. Service2Client LLC makes no representation that the recommendations of Service2Client LLC will achieve any result. The NSAD has not reviewed any of the Service2Client LLC content. Readers are encouraged to contact their CPA regarding the topics in these articles.

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