6 Best Practices to Follow When Hiring Freelancers

By MBO Partners | January 18, 2022

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The future of work is increasingly project-based. And, as you already know, it’s mostly remote. And many enterprise organizations are moving to a new model of hiring to accommodate the changing tides. They’ve started to hire freelancers. These independent, project-based workers bring ultra specific skills to an organization’s workforce and help them maintain a competitive advantage among their peers. Hiring freelancers is an incredible workforce strategy, but it can be intimidating if you’re new to the game.  

Freelancers can bring a ton of benefits to your company. They add workforce flexibility and add skills on-demand. So, by understanding how to find, engage and manage a talent pool to hire freelancers you can simplify your entire hiring experience.

1. Know the Difference Between Freelancers and Employees

“Freelancers” can mean a lot of different things. It includes workers who might call themselves consultants, contractors, independents or entrepreneurs. But, from a legal standpoint, they all fall under the term “independent contractor.” In other words, they’re all people who operate their own business and may perform work for 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.) But, employees tend to receive instructional oversight from a manager.
  • Payment. When you hire freelancers, they’ll submit invoices for their work. And, they’ll negotiate payment terms of their contract. Yet, employees are either salaried or paid hourly.
  • Taxes and Benefits. Freelancers pay self-employment (SE) 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 like health insurance or retirement.

Read Next: Employment Types: Determine if You Need an Independent Contractor, Temp, or Employee

2. Offer a Variety of Engagement Options to Avoid Misclassification

When hiring freelancers, it is important to keep your company compliant. If you hire a freelancer, but they actually fall under the category of “employee” in the eyes of the law, your company may be audited. Or worse, you could 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. But, 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 an independent contractor.

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.

Read Next: The Costs of Independent Contractor Engagement

3. Always Use a Contract to Structure Work

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.

Read Next: 3 Reasons to Use a Written Contract for Consultants

4. Prioritize Communication with Freelancers and Internal Employees

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 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.

Read Next: Managing Remote Teams: How to Work Effectively with Remote Consultants

5. Build 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 work space 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.

Read Next: 2020 Client of Choice Report

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 have to 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 that have applied to positions in the past.

Read Next: 6 Ways to Build a Virtual Talent Pool

 

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.

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