How to Work with Freelancers. All You Need to Know
The amount of freelancers is growing every year. The number is expected to reach 90.1 million by 2028, according to ClientManager’s research published earlier this year. Remote work for companies, as well as completing individual projects remotely, are now common forms of employment, not only for creative professions, but also for those who traditionally worked in offices.
The Gig Economy, the Employer and the Freelancer
The gig economy is the environment where freelance was born and is developing today. When discussing freelancers, it’s impossible to overlook the gig economy. It is a system of employment where employers pay solely for the results achieved under a short-term contract. For example, in a traditional employment contract, the hours spent by the employee in the office are also paid. In general, professionals favor part-time project-based work rather than long-term employment with one company.
Freelance offers advantages for both the worker and the employer. The freelancer chooses where and how much to work, sets the price for their time, and most importantly, chooses their employer.
The employer, in turn, pays for the result, not office hours, and doesn’t pay income tax or social security contributions that are associated with full-time employees. This also helps increase efficiency, as it allows for the creation of specialized teams for projects and the quick scaling of business when needed without increasing the regular staff.
Therefore, if a company director decides that maintaining a large staff is not feasible at the moment, but results need to be achieved through professionals, then it’s time to move on to the next step: working effectively with freelancers.
How to figure out how much your project really costs?
One of the reasons company directors and department managers turn to freelancers is that project-based work and result-based payment are more cost-effective than maintaining a full-time employee. As for money, the client wants to save money and the freelancer doesn’t want to undervalue themselves. So it’s important to properly assess the real cost of work and plan on next steps if an agreement on the price can’t be reached.
Here are some recommendations we follow when inviting project contractors to work:
Double-check what the freelancer says. This is a background check, not an undercover investigation. If a freelancer claims to have worked with a particular company or completed certain projects, ask for contact information from the clients or ask to see the work yourself.
Scrutinize costs. Rounding (e.g., $500) or, on the contrary, a supermarket price (e.g., $499.99) should raise suspicion. If the price is rounded, it sounds like it was pulled from thin air rather than calculated based on real costs.
Check how quickly they respond. If, even at the stage of the contract and exchanging terms of reference, unexplained pauses between messages last for several hours, then working with the contractor might be problematic full of missed deadlines and entire days waiting for responses.
Now, the most interesting part – the price. To better understand this issue, it’s helpful to look at the cost of work from the perspective of the freelancer themselves. What do they include in their price?
Understanding freelancer pricing
Regardless of experience, freelancers monitor market trends and try not to deviate significantly from the average rates. The modus operandi of a freelancer is project-based work, often fast and with clear results. Are you looking for a specialist for a task with an unclear solution that requires research and trial and error? The freelancer will likely charge extra for revisions.
Here are some recommendations from the business analytics agency Modelta:
Expert approach. If you don’t understand the cost of a service or how reasonable the proposed price is, consult someone who knows.
Compare prices and experience. In short, you should talk to more than one freelancer and request more than one estimate. Generally, the less experienced the contractor is, the lower their cost will be. Therefore, in addition to the price itself, you should also take into account their experience, portfolio, and reviews.
Evaluate the entire project instead of hourly rate. It’s important to correctly calculate how many specialists you need for the project, how many hours will be spent on the work, and how much this cost will be at an agency. An agency will, of course, be more expensive due to the “brand premium,” but if the price is too high, this comparison will give you an argument for lowering the freelancer’s price. However, if you need the services of a single specialist, this kind of comparison might not be necessary.
Evaluate the freelancer’s work in the context of expected profit. This method is somewhat speculative and works if your niche is closed or innovative, so there is very little information about pricing. You’ll need to calculate by how much revenue will exceed expenses.
How to Sign a Contract With a Freelancer?
What does a contract with a freelancer do?
- It motivates you both to stay compliant and on time with commitments.
- It describes what a completed project looks like and allows the company to formally document this expense.
- A contract prevents either party from failing to fulfill their obligations.
- It provides formalized agreements, so acceptance of results, discussion, and payment happen faster thanks to documented results from the initial discussion.
When working with a freelancer, the client company does not pay taxes. The freelancer will pay income tax as a self-employed individual. Now let’s look at what should be included in the contract so that it fulfills its regulatory function.
| Subject of the Contract | The intentions and general description of the required work. |
| Work Required | This section details the specific tasks that need to be done. You can also outline how additional tasks will be assessed before or after the project is completed. |
| Materials | This section describes the materials that will be provided by the client for the task, outlining the level of responsibility. For example, if up-to-date data is unavailable and the project is being executed using outdated information, then responsibility for the final outcome should be shared between both parties. |
| Representatives | This section identifies the specific person on the client side who will serve as the point of contact for the contractor. |
| Subcontractor | This section addresses potential participants in the work. For example, a website layout designer might invite a colleague who is a designer to collaborate. To avoid creating a three-party contract, this portion of the work can be outlined here. |
| Financial Terms | This section discusses how and where the money will be sent. However, the cost of the work and the payment schedule should be specified in the Orders section. |
| Delivery and Acceptance of Work | This section should outline the process for accepting the completed work and should include the timelines for reviewing the results and making edits from both sides. |
| Intellectual Property | This is a crucial part of the contract that specifies when the client gains the rights to use the contractor’s work. If a third-party solution is used, it’s necessary to agree with them as well or pay for commercial use. |
| Confidential Information | This section governs what information can (or cannot) be disclosed. It should also specify when the contractor is allowed to showcase the project in their portfolio. |
| Liability | This section outlines who is responsible for what errors and how payment is collected or withheld in the event of delays by either party. |
| Force Majeure | This section defines which circumstances constitute force majeure events and how liability changes in such cases. |
| Disputes | This section should ideally stipulate that the parties will resolve disputes amicably (out of court). As a precaution, it’s also a good idea to specify the court that may need to be contacted as a last resort. |
| Document Exchange and Documentation | This section should specify the designated contact person on both sides and what methods of information transmission (e.g., email or paper) are considered official for this project. |
| Duration and Termination | This section should specify the start date of the project with the freelancer. The end date is less important, as tasks can require different amounts of time. Termination conditions outline how much time both sides have to end the collaboration (in case of conflict, for example) and how a terminated project is paid. |
Conclusions
- Working with freelancers offers numerous benefits for both the company and the contractor. For the company, an independent contractor means no taxes associated with a regular employee’s salary. For the contractor, it means multiple projects with the ability to quickly change bosses, a luxury unavailable to regular employees.
- When agreeing on the price, it’s crucial to pay attention to how the freelancer quotes the price and how much such a task typically costs on the market.
- It’s also essential to understand that a proper evaluation of work involves looking not just at the number of hours but at the entire project as a whole.
- A contract with a freelancer is a vital document that disciplines both parties and defines areas of responsibility. A contract ensures that tasks are completed on time and to a high standard, mitigating risks.