Freelancing Demystified: A Guide for HR Professionals and Business Owners

9 of November, 2023

So you’ve heard the buzz about freelancers and want to know what all the fuss is about. As an HR pro or business owner, freelancers can be an attractive option to get specialized work done without the hassle of hiring full-time. But there are a few things you need to understand before diving in.

This guide will walk you through what freelancing really means, the pros and cons of using freelance talent, and what you need to keep in mind to find, hire, and work with freelancers the right way and how to handle the document management of this kind of worker.

By the end, you’ll have a solid sense of whether freelancing is right for your needs and feel equipped to start finding the perfect freelance partners. So let’s get started and demystify the world of freelancing once and for all.

What Is Freelancing? Defining the Gig Economy and Freelance Work

Freelancing refers to self-employed individuals offering their services to businesses on a contract or project basis. Freelancers are independent contractors, not employees, and they work for themselves. The gig economy, filled with freelance work, is growing rapidly.

As an HR pro or business owner, freelancers provide several benefits. First, you only pay for work completed, so no employee overhead costs. You also have flexibility to end projects easily. Freelancers can hit the ground running with specialized skills and experience. They increase productivity without adding headcount.

However, there are downsides, like lack of control and reliability. You depend on freelancers finishing work on time and meeting quality standards. Compliance also becomes complex, as you must issue 1099 tax forms for U.S. freelancers earning over $600 annually. You’ll also want contracts to outline expectations, scope of work, and payment terms to protect both parties.

If freelancing makes sense for your needs, do your due diligence. Check references, see samples of work, and consider starting with a trial project. Be very clear in your communication and documentation to set freelancers up for success. Managing freelance relationships well results in a highly effective way to scale your business. The future of work is flexible, so freelancing may be an ideal solution if you go in with your eyes open.

The Pros and Cons of Hiring Freelancers for Your Business

As an HR professional or business owner, hiring freelancers can be an attractive option. Freelancers are independent contractors who work on a per-project basis. Using freelancers allows you to tap into a wider range of talent without the commitment of hiring full-time employees. However, there are some downsides to consider as well.

Pros:

• Access to specialized skills. Freelancers often have niche areas of expertise that would be hard to find in a full-time employee.
• Cost savings. You only pay for the work you need, so you can avoid costs like benefits, office space, and equipment.
• Flexibility. It’s easy to scale your freelance workforce up and down as your needs change. You’re not locked into long-term commitments.

Cons:

• Lack of control. You have less control over how and when freelancers do their work. They’re not deeply integrated into your company culture and values.
• Additional hassle. You need to handle contracts, invoices, and compliance for each freelancer. This can create extra administrative work for your team.
• Lack of loyalty. Freelancers typically work for multiple clients, so they may lack dedication to your company’s success. They can also be harder to retain long-term.
• Compliance challenges. Make sure you understand laws around properly classifying workers as contractors. Misclassification can lead to legal issues.

If you go into freelance relationships with realistic expectations, they can be a great way to access skills and complete important work. But for core, long-term roles, full-time employees are often still the best option. With the right freelance management, you can enjoy the best of both worlds.

Managing Compliance and Documentation When Working With Freelancers

As an HR pro or business owner, working with freelancers requires some extra diligence on your part to ensure proper compliance and documentation. Be aware of the freelancer classification in your state and any requirements around taxes or benefits. In most places, freelancers are independent contractors – meaning they are responsible for their own taxes and benefits. However, some states are cracking down on misclassification, so check with your legal counsel.

When bringing on a freelancer, have them fill out an independent contractor agreement that clearly establishes the relationship and terms of the work. This should include details like:

• Scope of work: A clear description of the services to be provided.
• Timeline: Deadlines and milestones for the work.
• Payment terms: How much and when the freelancer will be paid. A deposit upfront is common.
• Intellectual property rights: Who owns any work product, creative, or intellectual property. Often the company retains these rights.
• Termination: How either party can end the agreement. Usually with written notice.
• Non-disclosure: An NDA to protect company confidential information.

Be sure to keep records like invoices, signed agreements, and reports of work completed in case of any dispute or for tax purposes. Issue 1099 tax forms at the end of each year for any freelancer paid $600 or more. A document management solution like Sesame‘s can help you with that.

Working with freelancers allows businesses to tap into specialized skills without the costs of full-time employees. However, doing your due diligence around compliance and documentation will ensure a good working relationship with your freelancers and avoid any legal issues. Keeping freelancers happy and your company protected is worth the extra effort.

Conclusion

So there you have it, a quick guide to help demystify the world of freelancing for HR and business pros. As you can see, working with freelancers isn’t as scary or complicated as it seems.

When you find the right freelancers for your needs, build a good working relationship, and make sure all your legal bases are covered, freelancing can be an easy and affordable way to scale your business.

Give it a try—you’ll be glad you did. Who knows, maybe you’ll even become so enamored with the freelance lifestyle that you’ll want to ditch your day job and join the ranks of the happily self-employed!

Did this information help you? We hope so. To learn more about HR software and digital processes, continue to Sesame HR.