The shift towards hiring contractors in place of permanent staff was already in full swing before the pandemic transformed our economy for good. It’s just that Covid accelerated the move towards sourcing and securing talent that might otherwise be out of reach of the average creative business owner.
So, should you join the outsourcing trend and hire a freelancer for your next project?
If you do, how can you make sure you develop a positive working relationship with your freelancer that solves more problems than it creates?
Read on for everything you need to know about hiring creative contractors and freelancers for your agency, including a brief breakdown of the IR35 legislation that governs off-payroll working.
The benefits of outsourcing your work to freelancers and contractors
It’s easier
Forget managing NI contributions, pensions, office perks, health and safety training, and annual leave. Freelancers manage their own affairs, so you won’t need to worry about all the admin that traditionally comes with onboarding a new employee. And unless you need to supply them with specialist hardware or software, your freelancers will come equipped with their own gear.
It’s cheaper
Hire someone external to your company, and you won’t need to spend time or money setting them up in your office, taking care of their payroll, or accounting for their holiday days. You’ll only ever pay them for the work they do, which means you’ll never waste any cash on downtime. You can also choose to pay your freelancers on an hourly or project-by-project basis, which can be a lot more cost-effective than placing them on a salary.
It enables you to scale quickly
Need someone fast? No problem! There will be a freelancer out there waiting to step in and help. (It’s just a case of finding them – we’ll cover this in a moment.) Plus, you can easily add more contractors to your team as time goes on and the demand for your products or services grows.
It allows you to deliver a better service to your clients
Tapping into other people’s knowledge will allow you to plug any gaps in your current service offering. Hiring freelancers will also give you a fresh perspective – which, let’s be honest, we all need from time to time! Getting input from someone who’s new to your business can help you find a better way of doing things, particularly when it comes to looking after your client base.
It reduces financial risk
Taking on a new member of staff with a contract in place can seem daunting, especially if you’re concerned about finding the money for their wage bill every month. Bringing freelancers into the fold will take the pressure off, especially if you only want them to deliver a one-off project for now.
How to find the right person for the job
A great place to start is to ask your network for their recommendations and referrals. Chances are, you’re already connected to your perfect candidate – you just don’t know it yet! Your colleagues, suppliers, and even your clients will have first-hand experience of the people they’re sending your way, so you can get a feel for their skillset and the way they work before you bring them in for an interview.
Otherwise, there are plenty of websites that specialise in matching companies with great freelancers, and vice versa. Platforms like Fiverr, Upwork and PeoplePerHour are popular hubs for freelancers of all ages, abilities, and specialisms, while marketplaces like Twine, 99Designs, Toptal, YunoJuno and Revolancer are specifically designed for designers, illustrations, animators, and other creative types. You could also share posts on your existing social media accounts to see if anyone in your network fits the bill (or knows someone who will). There are always old-school job boards, too!
Before you jump straight in and start advertising for your freelance position, make sure you write a detailed role or project description, so contractors know exactly what’s going to be required of them. You’ll also need to set aside enough budget for the kind of talent you’re after.
Once you’ve created a shortlist, do as much research into your potential freelancers as you can. Check their portfolios; read their reviews; contact their existing clients for their honest feedback, if you want to. Then, when you’re ready to meet them, make sure you prepare a series of questions that will give you in-depth insights into their background, their career to date, and the kinds of clients they usually work with. This article from CloudPeeps includes 10 must-ask interview questions that you can use as a starting point.
It’s also common practice to set sample ‘test’ projects for freelancers so you can begin to understand how they communicate, how easily they can work to deadlines, and whether their work is of suitable quality. (It’s not common practice, however, to expect this work for free. Be prepared to pay your candidate for their time, even if you don’t end up using their services.)
What kind of agreement should you have in place?
Your freelancers may not ‘officially’ be on your books – but they deserve to know what’s expected of them, and what they can expect from you in return. This means drafting up a watertight agreement that will work in the best interests of both parties.
Your freelance contract should include:
- The contact details of each party signing the contract
- A description of the service that’s required
- What the deliverables are
- An outline of any additional roles and duties that the freelancer will need to take on
- The freelancer’s agreed rate(s)
- The agreed payment terms
- Signatures from every party
Some freelancers may approach you with their own terms. For example, they may have specific requirements relating to how long they are willing to wait for payment; what happens if they are paid later than planned; or using their work in the public domain without settling their invoice first. Make sure you’re happy with any extra stipulations before you move forward.
What are the challenges of hiring freelance staff?
These days, hiring external support makes sense in almost every scenario. But there are a few things to be aware of, especially if it’s your first time working with freelancers and contractors.
You might hire the wrong freelancer to begin with
It happens. Keep a close eye on your freelancer’s performance and be prepared to have an honest conversation if they’re not meeting your expectations.
Distance could be a barrier
There are many perks to hiring an offsite freelancer – but the downside is, you won’t be able to walk over to their desk to have a quick chat, or ‘supervise’ them in the same way that you would monitor your in-house staff. Similarly, it may be difficult to integrate your freelance worker into your team when they’re not in the office all the time. We recommend checking in with regular conference calls, and even inviting your contractor into your workplace regularly so they can get to know your business and its people a little better.
You will be sharing your freelancer with other clients
Unlike a full-time employee, your freelancer will not be completely committed to your project and your business. They will have other work to do, and they will need to manage their time accordingly. You must be respectful of their schedule, and mindful of the fact that they can prioritise projects that are more profitable to them or decide to jump ship for another gig.
Freelancers have the final say
These talented professionals have the freedom to choose which projects they want to work on, and which companies they want to partner with. To attract the best possible person for your new role, you’ll need to make it clear that you’re willing to look after them, even if they’re not directly on your payroll. In the same way that you need to motivate agency staff with package perks, you’ll need to give your contractors every reason to choose your job over another company’s request.
Remember, IR35 legislation places limits on how you employ external contractors
IR35 was introduced in April 2020 to prevent companies from getting out of making the appropriate tax payments and National Insurance contributions (NICs) for freelancers who are essentially carrying out the same roles as their employees. In the past, freelancers and contractors often worked under a limited company to avoid paying higher tax and NICs – but now, IR35 prevents them from doing so.
Freelancers are considered to be inside IR35 or outside IR35. Inside IR35 means that, based on the nature of their work and the agreement they have in place, the relationship they have with their employers is really one of employment – so their employer needs to treat them as though they are employed, and pay the necessary tax and NICs.
The rules that govern each status are quite complex – but your freelancer may be inside IR35 if they:
- Receive the same benefits as other in-house staff members
- Can be easily substituted in their role by another member of staff
- Rely on you, as their employer, to control their workload and instruct them how to carry out their work
- Are obligated to work for you, and you are obligated to provide work for them (otherwise known as mutuality of obligation)
- Are not exposed to any financial risk due to their role – for example, there’s no chance that they will not be paid if the project needs to go on hold
As the business using your freelancer’s service, you will usually be responsible for determining whether they are inside or outside IR35.
Want more advice on how to hire freelancers and contractors? Need help navigating IR35 rules? Either way, the team at AO Accountants are here to help. Our accountants specialise in supporting creative businesses like yours. Get in touch for a friendly chat or to learn more about our accounting and bookkeeping services.
