Knowledge is power: a simple statement that says a lot and applies to all sorts of situations. Your trip goes much more smoothly when you know the route. Your turkey dinner is much more edible if you know what “baste” means. You’ll do much better on the test if you know the subject. This concept certainly applies to running a business – you need to know your merchandise, pricing, how much sales tax to charge, how to manage employees, and – more and more these days – how to manage freelance contractors.
It may appear that hiring a freelancer is a simple proposition; however, there are some legal issues you need to be aware of in order to protect yourself and your business. Here’s where the “knowledge is power” concept comes in. The more you know about these things, the more successful your relationships with freelancers will be.
First, when hiring freelancers, don’t just casually throw an assignment toward a random individual and expect to end up with positive results. Communicate your needs and expectations clearly, and draw up a written contract that covers all the details involved, how much you will pay, and when work should be completed. Don’t leave these things to chance. A contract will protect both contractor and client.
Making sure that you classify your hires accurately is highly important, according to Nellie Alkap in her article, “Note These Legal Issues Before Hiring Freelancers” on mashable.com, and originally on the American Express OPEN Forum. Alkap points out that the Internal Revenue Service is turning its attention to how clients are managing their freelance hires. Be very careful about not classifying an independent contractor as an employee. This could lead to an audit, back taxes, and penalties. Alkap suggests taking into account how much control the employer has over the freelancer. For example, if the freelancer is expected to keep certain hours and work in the hirer’s office, this is an indication that he or she may actually fall into the employee category. Alkap also suggests issuing Form 1099s to your freelancers to dispel any doubt as to their status.
In her blog post, “3 Legal Issues with Freelance Work,” Carol Cochran emphasizes the importance of defining ownership of intellectual property when working with freelancers. Attorney Thomas Nowland strongly suggests in his blog post entitled “Four Legal Considerations when Working with Freelancers” that employers include this in their contracts with freelancers. Add a clause designating who will own the finished product, whether it is a piece of writing, artwork, a musical piece, or any other finished product. Typically, this type of work is viewed as being the property of the creator, so you need to specify from the outset that the product belongs solely to you or to your company.
According to Nellie Akalp, these legal considerations shouldn’t scare you off from hiring a freelancer. There are many advantages to using freelancers for certain types of work. All it takes to have a positive relationship with your freelancers is knowledge of what is required, along with how to protect yourself and your business in case a dispute arises. In this case, knowledge really is power.