Freelance trouble: Legalities of hiring freelancers

Image Source: freelanceshow.com

It’s a trend that’s becoming more pronounced: As hired labor becomes more expensive, many small businesses are relying on freelancers for a large portion of their business processes. Regardless of location—whether in cloud or just within the locality—freelancers provide expert services on a project-based payment basis, even at short notice. This “on-demand access” advantage provides many starting companies with the needed flexibility to manage their expenditures, resulting to less costs and overhead, and ultimately, yielding the expected returns sans the additional burden (i.e., paying for employees’ income taxes, social security, Medicare, etc.) of holding regular employees.

But with all the advantages of hiring freelancers come counterpoising disadvantages—and in most cases, even well-intentioned employers find themselves having some brushes with employment laws.

Image Source: freelance.com

The legalities of hiring freelancers (also commonly known as “independent contractors”) remain shady, most probably because there are still no arbitrary criteria on qualifying someone to be a freelancer. In general, however, the classification stems on how much control the employer exerts over the contractor. As opposed to employees that perform duties under other people’s supervision and work only for one employer, independent contractors operate under a separate business name, keep invoice for work done, and perform work for more than one client.

The most common problem that employers encounter in hiring freelancers is the possible misclassification of workers. When the government is able to detect the misclassification of independent contractors, employers may be required “to pay back taxes and penalties for federal and state income taxes, social security, Medicare and unemployment,” not to mention the legal ramifications subsequent to these consequences.

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