A freelancer is a self-employed individual who offers services to clients on a project or contract basis, rather than working as an employee for a single employer. Freelancers often work in fields such as writing, design, programming, and consulting.
What makes a freelancer different from an employee?
Freelancers differ from employees in several key ways:
Labor and employment laws
- Freelancers: Freelancers are considered independent contractors and are not covered by most labor and employment laws that protect employees. This typically includes laws related to minimum wage, overtime, and workplace protections.
- Employees: Employees are covered by labor laws, including the American Fair Labor Standards Act (FLSA) and other regulations that govern wages, hours, and working conditions.
Employee benefits
- Freelancers: Freelancers usually do not receive employee benefits such as health insurance, retirement plans, paid time off, or sick leave from the clients they work for. They are responsible for securing their own benefits and managing their personal financial planning.
- Employees: Employees typically receive various benefits from their employer, which may include healthcare, retirement contributions, paid vacation, and sick leave.
Freelancers and taxes
- Freelancers: In most countries, freelancers are responsible for paying their own taxes, including self-employment taxes. In the US, this covers Social Security and Medicare. Freelancers are generally responsible for tracking their own income and expenses and may be required to make estimated tax payments throughout the year.
- Employees: Employers typically withhold taxes from employees' paychecks and also contribute to these taxes on behalf of the employee.
Pros and cons of hiring freelancers
Pros of hiring freelancers
Cons of hiring freelancers
Flexibility: Freelancers can be hired for specific projects or periods, providing flexibility for short-term or temporary staffing needs.
Lack of commitment: Freelancers may work with multiple clients simultaneously, which can lead to divided attention and less commitment to a single project.
Specialized skills: Freelancers often bring specialized skills and expertise that may not be available in-house, allowing businesses to access quality work without hiring or training full-time or permanent staff.
Less control: Employers have less control over freelancers' work schedules and methods, as freelancers operate independently.
Cost savings: Hiring freelancers can be more cost-effective than hiring full-time employees, as employers do not have to provide benefits or handle payroll taxes. This can be especially beneficial for small businesses that need extra help but don’t need full-time or part-time employees.
Less integration: Integrating freelancers into existing teams and workflows can be challenging, especially if they work remotely.
How to hire a freelancer
- Define the project. Clearly outline the project scope, deliverables, timeline, and budget.
- Find candidates. Online platforms for freelance work job postings, like Upwork, Freelancer.com, Fiverr, and LinkedIn, can help you source top talent.
- Review freelancers’ portfolios and references. Evaluate candidates' portfolios, reviews, and references to assess their skills and experience.
- Do the right paperwork. When you find the right freelancer for your needs, have them sign a written contract outlining the terms of the engagement, including scope of work, payment terms, and other relevant details. If you’re in the US, they’ll also need to fill out a Form W-9 so you have their social security number or taxpayer identification number and all other necessary information for tax filing purposes. At tax time, you’ll issue them a Form 1099-NEC for reporting taxable, non-employee compensation, as well as filing a copy with the IRS.
How to pay a freelancer
- Agree on payment terms. Determine the payment structure (hourly rate, fixed fee, milestone payments) and include it in your written agreement.
- Wait for an invoice. Freelancers should invoice their clients for payment once work is completed (or according to the payment structure in their agreement).
- Decide on a payment platform. There are many ways to pay freelancers, from mailing paper checks to payroll software. With Rippling, you can pay all your employees and freelancers, wherever they are in the world, in just a few clicks.
How to terminate a freelancer
- Review the contract. Check the termination clause in the contract for any notice periods or conditions for ending the engagement.
- Provide notice, if required.
- Complete payments. Ensure all outstanding payments are made for work completed up to the termination date.
Frequently asked questions about freelancers
What types of jobs do freelancers typically do?
There are many, many different types of freelance jobs. From freelance writers to programmers to software engineers, the rise of the gig economy and the digital age have made freelance work more common than ever. Here are just some of the most common roles for freelancers:
- Graphic design
- Copywriting
- Editing
- Data entry
- Project management
- Web development
- Search engine optimization (SEO)
- Web design
- Social media management
- Digital marketing
- IT support
- Sales consulting
Can freelancers work full time?
Many different people choose to freelance for many different reasons—for some, freelance work is a side hustle, while for others, it’s a career. Studies have even shown that numbers of freelancers increase during times of economic volatility, as laid-off workers turn to independent contracting between jobs or as a new career path. With that said, freelancers can work full time if they choose to. Some manage multiple clients and projects to create a full-time workload, while others may have long-term contracts with a single client.
Are freelancers employees?
No, freelancers are not employees. They are independent contractors who work on a project or contract basis and are not subject to the same labor laws and protections as employees.
Are freelancers self-employed?
Yes, freelancers are considered self-employed. They operate as business owners and are responsible for managing their taxes, benefits, and business expenses.
Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.