Freelancing is one of the fastest-growing segments of the employment market. Currently, estimates show that freelancers represent upwards of 35% of the global workforce. Rising unemployment and the shift to remote work due to the COVID pandemic are contributing to this trend. Plus, the growing pool of on-demand talent means employers have a practical alternative to hiring permanent employees. Yet somehow, hiring a freelancer who’s responsible and gels with the company culture isn’t so easy. It requires a hands-on approach and a few hacks to find the perfect match.
While there are significant pros to hiring freelancers, such as cost-effectiveness, ease of hiring, and access to a wider and deeper pool of talent, there are also cons. You may encounter quality issues and freelancers can be less responsive to communications or unavailable when you want to meet. At worst, the freelancer might “ghost” you before a project is finished, leaving you high and dry.
However, with a little planning and research, you can successfully leverage the talent of the freelance workforce to help achieve business goals. Below are tips for hiring a freelancer that will ensure you get the most value for your money.
What is a Freelancer?
Freelancers complete a variety of special projects and easily outsourced tasks such as accounting or public relations. Some common types of freelancing occupations include:
- Management Consultants
- Website Designer
- Software Developers
- Writers & Editors
- Marketing & Public Relations
- Graphic Designers
- Photographers & Videographers
When deciding on hiring a freelancer, the first thing that you need to be clear on is what exactly is a freelancer. This is an important distinction for multiple reasons because it affects your taxes, your payroll, and your management style. Violating these distinctions can result in a lot of unwelcome attention from the IRS. The three main differences between hiring employees and freelancers include:
- Hours and location. While employees keep regularly scheduled work hours in the workplace of their employer’s choosing, freelancers can work when, where, and how long they wish as long as the project gets finished.
- Work methods and products. Employers dictate the way that their employees complete a project or task and provide them with the tools and support required to complete their work. Freelancers can choose how they complete a project and are expected to supply the necessary tools and resources themselves without any internal support from the client.
- Compensation and benefits. Employees are paid based on time, either hourly or monthly, and employers must submit payroll taxes on their behalf. In addition, employees generally receive a benefits package that can include paid vacation, health insurance, retirement plans, among others. Freelancers pay their own taxes (including self-employment tax) and take care of their own insurance and retirement plans.
Determine the Scope of Work
The next step in hiring a freelancer is to start your project strong with a good job description. This step is essential to receive accurate quotes from potential freelancers. In addition, the clearer you are, the easier it is to hold the freelancer accountable to meet your project goals.
Also called a statement of work (SOW), work order (WO) or service order (SO), a scope of work contains the essential elements of the work to be completed:
- The purpose of the project or activity. Decide what the goal is for undertaking the project. If you don’t know, you can’t expect a freelancer to read your mind. Many projects get derailed because halfway through a disagreement about the expected outcome transpires.
- Services and deliverables to be provided by the freelancer. Identify the specific services and products you want the freelancer to provide. Detailing these ahead of time can prevent misunderstandings, duplication of work, and scope creeps.
- Timeline, deadlines, and milestones. Because a freelancer has several clients simultaneously, not including a realistic timeline can draw out the length of your project. In addition, it helps the freelancer schedule their time accurately and adjust their workload as necessary.
- Specific tasks and skill requirements. To avoid overpaying on the one hand and disappointment on the other, decide on the skills and experience your freelancer needs for success.
- Define work that is beyond the scope of work. Set boundaries that clearly delineate what isn’t included in the current project. This will avoid unexpected charges if the freelancer completes tasks you weren’t expecting.
Develop a Budget
A final aspect of the scope of work when hiring a freelancer is to determine the cost and payment schedule. There are several things to consider when developing the budget for your freelance projects:
- Required qualifications. The more educated a freelancer is, the more expensive they are. Be realistic in what you really require. You may not need a Harvard graduate in economics to reconcile your monthly statements.
- Years of experience. Sometimes the best and most creative work can come from a recent graduate looking to add to their portfolio of work. Not every project needs someone with 20 years of experience.
- Type of work to be completed. The skills required to complete the work also contribute to the cost. This is especially true if you have very specialized requirements such as proficiency in a foreign language.
Once you have this information, try checking out online resources or your professional connections to establish an hourly pay range. One good website to explore is FreelancerMap. This site includes the profiles of freelancers around the world with advanced search fields to identify pay rates. You can expect to pay more hourly for a freelancer than a permanent employee. This is because freelancers are responsible to pay their own payroll taxes, overhead costs, and benefits.
After identifying the hourly range, assign the minimum and maximum number of hours you estimate the project will take. The last piece of information you need is any expense that the freelancer may incur while completing the project. For example, travel expenses. To determine the estimated cost for your freelancer:
- (Minimum hourly rate x minimum estimated hours) + additional expenses = minimum cost
- (Maximum hourly rate x maximum estimated hours) + additional expenses = maximum cost
Together, these two figures should give you a accurate cost range for your freelance labor.
Identify a Payment Schedule
Once the budget has been established, you can decide to pay your freelancer hourly or offer a flat rate for the entire project. There are pros and cons to both approaches, however, a good rule of thumb is to pay hourly if the project has a number of unknowns or uncertain variables. If the project is straightforward, then a flat rate is appropriate. Recent statistics report 48% of freelancers get paid a fixed fee, 29% are paid hourly, and 23% mix both methods.
In addition, consider how and when you want to pay your freelancer. Some professionals require a deposit or retainer before commencing work. And if the project is longer than a month, you will probably need to make periodic installments. Paying in installments is particularly effective if you can tie them into project milestones.
Source the Best Candidates
Perhaps one of the most intimidating aspects of hiring a freelancer in the past was finding them. Luckily, this is changing quickly with multiple reliable sources emerging to make this process a little easier. If you are just starting to engage freelancers, a variety of subscription-based websites can make the process easier. A few examples include:
- Toptal. Top technical talent with custom matching by a live recruiter.
- Upwork. One-stop shop for freelancers from software development to sales and marketing, to administration and customer support.
- Fiverr. Good for small graphic design and writing projects.
Freelance websites like those above allow you to search the freelancer profiles or post a job description and have them come to you. In addition, these websites offer other support services that can come in handy such as background and credential checks, funds escrow, dispute mediation, and 1099 issuance.
If you want to go it alone, try dredging the depths of your professional network for referrals to their trusted freelancers. Other options include contacting your local Chamber of Commerce, professional associations, and Facebook and LinkedIn forums.
Minimize Your Risk
When hiring a freelancer, sometimes the most difficult part of the process is determining if the individual hired is the right one. This includes ethics and the skill and experience to complete the project on time and to a high standard of quality. While you can never know 100%, there are a few ways to mitigate your risk:
- Ask for previous work samples and request to check references and talk to prior clients.
- Set clear expectations starting with the information you developed in the scope of work.
- Take a modular approach to your first project with a new freelancer to ensure expectations are met at every step in the project and any issues are addressed in a timely way.
- Establish a communication schedule that includes times/days for progress reports and meetings.
- Ensure strong security measures are deployed on your computer network before providing access.
- Conduct a background check if necessary and warranted by the project content or network access.
Legal Considerations & Contracts
Of course, one of the best ways to reduce your is risk to create an effective contract. Developing a contract that clarifies the working relationship between the freelancer and the person or company engaging the services. Contracts should include the following information:
- Scope of work. As you developed above.
- Clarify working relationship. This is where you state that you are contracting with a freelancer for IRS purposes.
- Project requirements. Specify here anything that is required to complete the project such as software, equipment, training, or credentialing.
- Timelines. Establish a working timeline in the contract with some flexibility. If you are including an end date, you may want to build in extra time to avoid a change order.
- Deliverables. Be clear about what you expect in return for payment. A product, document, website, program, etc. Include specifics on how you will measure completion as well.
- Payment terms and schedules. Decide what payment schedule makes the most sense for your project. Distributing interim payments after the completion of project milestones can ensure timely completion.
- Non-disclosure/confidentiality agreement. If you will be sharing any proprietary company information with the freelancer as part of the project, you will want to include a clause in the contract for protection.
A good contract serves to protect both parties in the relationship. While there’s nothing more frustrating than an underperforming freelancer, freelancers are also frustrated by unresponsive clients. This doesn’t have to become a big legal hassle, however. Several online legal sites provide reasonably priced services, including LegalZoom and RocketLawyer.
Communication is Key for Success
Communication is key when you are hiring a freelancer. Implementing agreed-on communication channels and scheduling regular progress updates can help you stay on top of any emerging issues. In addition, you build positive relationships with your freelancers so you can call on them again the future. After a time, you will have a group of trusted freelancers that you know you can call on to get the job done.
If you haven’t tested the waters of the freelance market before, it may seem like a difficult and risky proposition. However, if you take the time to find quality freelancers and build a good working relationship, you can have hassle-free, on-demand labor for years to come.
Did you have any tips for hiring a freelancer? Where did you find the ideal candidate? What made your freelancer fit your culture or scope? Connect with Virtual Vocations on Facebook, Twitter, LinkedIn, Instagram, and YouTube to share your thoughts and tips. We’d love to hear from you!
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