By necessity, small business owners often rely on freelancers and independent contractors to expand their own business productivity. Whether you hire freelancers to replace vacationing employees or if you need help on specific projects, you need to ensure a seamless fit while understanding the legal requirements that govern their contracts.
These 6 tips can help you retain control over a variable workforce when you need your small business to operate like a larger one.
1. Know the law
In May, 2017, a new Freelance Isn't Free Act (FIFA) goes into effect in New York. This law essentially states that if a business hires a freelancer for $800 or more worth of work over six months (for either one project or a cumulative series of projects), a written agreement must be put in place. The term "freelancer" covers an independent contractor or any other worker not in a traditional employee-employer relationship.
It also outlines key items to be included in the contract and penalties for non-compliance, among other things.
Any municipality can impose legislation like FIFA that affects the company-freelancer relationship. In fact, other states might follow suit to impose similar laws — and laws can change at any time.
Before hiring freelancers, seek advice from a lawyer that knows employment law for any location where you plan to hire freelancers and where your own business is based. These attorneys typically also understand tax considerations, such as the very specific definition for identifying independent contractors used by the IRS. Local taxing bodies might have their own definitions as well.
2. Clarify job parameters before hiring
Let's say that you bring in an enthusiastic order entry person to clean up a backlog of orders. You described the order entry requirements in detail and you mentioned that paper filing will be part of the job. If you didn't mention that filing will actually be 75 percent of the job — and that the file room is hot and claustrophobic, the freelancer may walk out on the first day.
Training new freelancers costs money, so you want to maximize the chances upfront that the relationship will be a good fit. During the interview, qualifications are important, but you also need to spend significant time discussing the high and low points of the job. Your goal is to identify tasks that excite the applicant, but also paint a realistic picture of the less-attractive ones.
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3. Pay close attention to payment matters upfront
Before work begins, take care of all payment issues. It all starts by obtaining a W-9 form from the freelancer, which enables you to issue a 1099 form at tax time. Make sure that your contract stipulates such issues as whether you agree to pay a specific dollar amount per project or an hourly rate, in which case, you need to identify the method of tracking time.
Don't forget to agree on a specific billing cycle, whether it's weekly, monthly or defined by progress in the project.
4. Set clear expectations and milestones
Freelancers are typically good at hitting the ground running, but only if they know what the ground looks like. They need to know the rules and your expectations.
Clearly define what they need to do, how to do it — and the quality checks that you expect them to perform. Set more than final deadlines; set intermediary milestones so that you can monitor their progress along the way. And, whenever possible, put it in writing.
Also, don't forget that some freelancers tend to take more autonomy for their projects. Make sure that they know when you expect them to seek permission and when they can make their own decisions. If they work directly with customers, do they need to know which specific people to deal with and which ones are out of bounds? Up-front instructions like these can potentially make or break your valued customer relationships.
At one time, project management tools primarily focused on creating complex charts that detailed every step in a project while making interesting wallpaper. They still do that, of course, but they now perform a comprehensive range of functions, as well.
Particularly if you use cloud-based software, freelancers can keep you advised of where they are, what they're doing and how much time they're spending. You can retain project control from your smart phone 24/7.
6. Stay connected with remote workers
Some freelancers do their work within your workplace. However, for those that work remotely, you need to establish a good technological connection. Don’t take for granted that they might not have the same tools that you are used to working with, from spreadsheet programs to a secure way to access the Internet. Asking questions is always a good policy, even if it seems obvious.
Out of sight does not mean out of mind. Schedule regular one-on-one meetings or email check-ins to monitor progress and answer questions, communicate important project changes quickly and provide a list of resources that they can use to obtain quick answers when needed.
Freelancers are part of the team.
You hire freelancers to further your business goals. If they feel isolated from your staff or have inadequate equipment to do their jobs, they cannot provide the full assistance that you need.
Welcome them into the fold and make sure that everyone in your company does the same. After all, a valued freelancer might become a full-time employee someday.
About Carol Roth
Carol Roth is the creator of the Future File™ legacy planning system, “recovering” investment banker, billion-dollar dealmaker, investor, entrepreneur, national media personality and author of the New York Times bestselling book, The Entrepreneur Equation. She is a judge on the Mark Burnett-produced technology competition show, America’s Greatest Makers and TV host and contributor, including host of Microsoft’s Office Small Business Academy. She is also an advisor to companies ranging from startups to major multi-national corporations and has an action figure made in her own likeness.
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