Thursday, September 23, 2010

Use caution when hiring freelancers.

You may be at risk with your freelancer.

A shortcut solution to tackling a pile of creative projects sometimes involves calling in your freelancer. To some, a freelancer, or independent contractor (IC), is a flexible solution to not being able to hire. Leveraging freelancers is a traditional solution for both creative and marketing agencies and departments--and future trends shows consistent growth in the need for temporary support as companies resist hiring.
But buyers beware--the Obama administration has funded a program to investigate companies that have co-employment issues, or are misclassifying employees with the use of freelancers or ICs. Most of the missteps are taken in how companies manage and engage with their freelancers. You may be at risk!

Here are three ways to minimize your risks as you consider calling in your freelancer:
  • Determine whether you are treating your freelancer like an employee. According to Pepper Hamilton LLP, (, "The tests used to determine whether a worker is an independent contractor (IC) or an employee are complex, subjective, and differ from law to law. Some federal and state agencies list as many as two dozen factors that may indicate whether or not the hiring party has such control." Do your research, get some help and gain an understanding of whether you are at risk--and to what level.
  • Hire your freelancer, or set strict boundaries. Once you understand the state and federal laws, consider converting your freelancer to an employee, or set up the proper boundaries to maintain a company-to-company relationship--which usually means extra steps and costs for your freelancer. According to Pepper Hamilton LLP, "More and more companies are receiving notices from state unemployment agencies that question whether a former worker classified as a freelancer or IC should be reclassified as an employee, opening the risk of liability for any prior misclassification."
  • Strongly consider staffing alternatives. Using a staffing agency is your best recourse. According to Pepper Hamilton LLP, "The use of a responsible staffing organization can dramatically reduce the risk of such liability as well as the likelihood of a lawsuit challenging the classification of a group of workers paid on a 1099 basis." When a staffing agency provides their employees on a contract basis, the agency withholds income taxes, makes Medicare and Social Security contributions, pays workers compensation and unemployment insurance premiums, and also can provide benefits including health insurance. A staffing alternative cannot eliminate all liability for misclassification, but it can greatly reduce risk.
Creatis is the alternative to your freelancers and ICs. Because we provide benefits for our employees, we manage the taxes, workers compensation and unemployment insurance, employment and management issues so you can focus on your business. Please consider us before you call your next freelancer. We can be your short-term and long-term solution, when hiring is just not an option.

"There is a great difference between knowing a thing and understanding it."
- Charles F. Kettering