When you’re building a company, not everything runs smoothly. There will be intense times when people are cranking on deadline, and lulls when everyone’s preparing for the next flurry of activity. Hiring freelancers and consultants can allow you to staff up for peak periods, while helping you save money to hire more employees after you’ve established a pipeline of customers.
Strengthening your workforce with freelancers requires different processes than those for hiring and managing employees. You have to ensure you get value from the relationship, clarify roles and responsibilities, and meet the legal and tax requirements for contractors. Before you hire freelancers, here are some things you may want to consider:
Freelancers or employees?
The IRS and state tax agencies don’t look kindly on businesses that hire freelancers just to avoid giving them full employee benefits. If your freelancers are working at your offices full-time, are being supervised by employees, and have open-ended contracts, you run the risk of being charged Social Security and Medicare taxes, or being ordered to provide the freelancers with full benefits.
You can avoid this hassle by asking freelancers about their own business setups, and training your employees on how to manage them. For example, your freelancers should show evidence of running a real business via their websites and social media accounts, and should have other clients. Your employees should give freelancers direction on project goals, as opposed to exactly how work should be done or what time they should show up for work (and it’s best if they don’t permanently work from your offices anyway). For more rules on defining contractors and employees, check out this infographic.
Tap former employees
People who’ve left your company on good terms are talented resources for your freelance pool. If a good employee is leaving and not immediately jumping into a full-time position, ask about their willingness to do freelance work. You already know how they work with your team and how they can drive results.
Adhere to statements of work and signed contracts
In the absence of daily supervision, clearly defined milestones and obligations will smooth out the working relationship between your business and its freelancers. Ask freelancers to provide statements of work (SOWs) for each project that explains the scope of their services, methodology, start and end dates, fees, and payment dates and requirements. Also, ask freelancers to sign an overall contract spelling out your business’ rules for work ownership, non-compete agreements, and termination. Elance, which connects businesses to freelancers, offers sample contracts and SOWs.
While you shouldn’t need hour-by-hour updates from your freelancers, meetups are a good way to foster tighter relationships with outside workers and keep projects moving smoothly. Thanks to video calls, you can easily connect freelancers to employees so that questions are answered and projects progress at a good pace. Likewise, take advantage of cloud-based project management and document-sharing tools such as Google Docs to give freelancers visibility into project statuses, and to allow them to input their own updates for the team.
Meet payment terms
Talented freelancers will jump to work with your business when they know they get paid on time and according to their contracts. Slow payments are one of the biggest business headaches for freelancers, who don’t like to waste time following up with payroll departments on missing checks. When it comes to processing payments, give your freelancers as much priority as employees and partners. Automating your payroll process is a great way to do this, providing peace of mind to your contractors and freeing you up to focus on other things — like running your business.
Nurturing a strong team of freelancers is not only good for the health of your company, it’s also a savvy way to identify future full-time employees. Freelancers may decide to join a company at some point, and hiring one of your own freelancers will save you time and money recruiting.