The Benefits Of Hiring Freelance Workers

Why you should hire them and what you need to know when you do.

Temporary staffing is growing by leaps and bounds these days. According to the Bureau of Labor Statistics, temporary help increased by an average of 24,000 jobs in April alone. In fact, it’s estimated that one in three Americans (and rising) are freelance workers. Driving the trend is lingering uncertainty about the economy and employers’ need to keep payroll costs in line with revenues. Some employers have also sought to sidestep the Affordable Care Act’s requirement that they provide medical coverage for permanent workers if they have more than 50 employees. Indeed, a heavy investment in long-term employment isn’t a cost all companies can bear—the number of temps has jumped more than 50% since the recession ended in late 2009, to nearly 2.7 million workers.

From the employer’s perspective, hiring temporary workers simply makes sense under many circumstances. Doing so allows you to “staff up” for short-range projects without the price tag of healthcare and other costly benefits. Employers typically need temporary staff for:

  • Coverage during maternity leave or other absences
  • Busy periods of the year
  • Assistance with special projects
  • Trial periods before a new hire becomes permanent

Benefits of Hiring Freelance/Contract Workers

Flexibility: While organizations are slowly seeing an increase in demand, they don’t quite have the confidence to hire permanent employees. Temporary and contract workers allow a company to address their current needs without making long-term personnel decisions, reducing the chances of a costly employment cycle.

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Prevents Overworked Staff Members and Overtime: Shrinking payrolls mean fewer employees doing more and more work, resulting in overtime and burnouts. Bringing in some extra help will boost the morale and energy of current staff members and eliminate the high cost of overtime.

No More Unemployment Claims: Because temporary workers are technically the employees of a staffing agency, unemployment claims affect the agency, not the company issuing the pink slip.

Eliminate Payroll, Administrative Costs, and Benefits Spending: There are many hidden costs associated with keeping employees on payroll. Using temporary employees shifts this burden onto the staffing agency.

Assess Future Talent: Temporary and contract employees are often eager to work and want to prove themselves for future employment opportunities

Hiring Freelancers Without Getting Into Trouble

If you’re considering hiring freelancers or contractors for the first time, you should be aware of the employment laws that govern these arrangements. The government has been cracking down on companies that treat workers as contractors for wage, tax, and benefits purposes, but as full-time employees when it comes to their work duties. Misclassifying freelancers could result in tax Liabilities for unpaid FICA and federal unemployment taxes. Here’s what you should know:

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An independent contractor (freelancer) is just that: someone who works independently, frequently for more than one company. A sometimes difficult status to define, “independent contractor” has been outlined by common law principles, the Fair Labor Standards Act, the IRS, and precedents set by court decisions.

Employee classification focuses primarily on the level of control an employer has over a service or a product being provided by the freelancer. Is the employer strictly controlling what the freelancer is doing and how and when he or she is doing it? Or does the freelancer have the degree of autonomy you’d expect of an outside consultant?

Why does the IRS care about employee status?  Taxes. Independent Contractors are almost always reported on a 1099 form (no withholding—it’s up to you to pay your taxes), whereas full-timers are W2 employees, which means the government receives timely payments through withholding; there is no danger of non-reporting, the worker doesn’t write off expenses (home office, phone, etc.), and payments are made to unemployment insurance, workers comp, and disability. Even though independent contractors are supposed to cover their own unemployment insurance, workers comp and disability leaves a tax gap that is driving an IRS crackdown.

Here are some questions the IRS asks to determine whether a new hire is truly an independent contractor or an employee masquerading as one:

1. Does the worker set his or her own hours?

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2. Who makes the rules for how and where the work will be done: employer or worker?

3. Does the worker furnish his or her own tools and equipment and hire his own assistants if needed?

4. Does the person have a workplace (home office, for example) that’s separate from the employer’s premises?

5. Can the individual work for other companies?

6. Is the worker paid on a per-job or a commission basis?

7. Does the person send you invoices for his services?

8. Is there a written “independent contractor” agreement between worker and employer?If the answer to these questions is yes, you’ve successfully hired the person as an independent contractor.

The Best Resources For Hiring

The best resources for hiring freelancers or temporary employees are staffing agencies and job boards. Most staffing firms specialize in specific niches, like medical services and professional or technical fields, supplying everything from temporary engineers, administrative support, editors, and accountants to computer programmers, bankers, lab support staff, and even attorneys.

Most temporary staffing firms screen—and often train—their employees, so employers who choose this option stand a good chance of obtaining quality personell. The best job boards are your own (on your website) and LinkedIn.


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