How to Better Manage your Freelancers
The Freelancers Union estimates that in 2013 there are about 42 million freelance workers or 1/3 of the national workforce in the United States. This ever-growing number of professionals means that your company will at some point have to hire the services of a freelancer. There are many advantages to contract freelancers. For example, they will provide you the flexibility to lower labor costs in times of economic downturns or slower times in your company’s regular business cycle. Using freelancers also allows companies of all sizes to lessen the impact of employment taxes and employee benefits.
In order to fully enjoy the benefits from employing freelancers, you do need to have a tight control on your contract management processes with them. Here are three specific recommendations on how to better manage your freelancers.
1. Establish a contract template for freelancers.
While you may think that all you need to hire a freelancer is a W9 form, there is much more involved. The IRS has specific guidelines to determine whether an independent contractor is self-employed or employee. There are severe consequences for treating an employee as an independent contractor so it is important that you have everything in writing in advance to avoid an audit from the IRS.
Make sure to develop a pre-approved contract template for freelancers that clearly stipulates the rules. In general, your template should avoid requiring the freelancer to work exclusively on-site, reimbursing for their health care expenses, and requiring mandatory job training. Breaking these three rules of thumb might provide the IRS enough ground to consider a freelancer an actual employee and demand you to pay for Social Security and Medicare dedication, as well as other severe penalties.
The next step is to make those pre-approved contract templates and clauses available to your hiring managers at all times with a contract management system. Finally, it is the responsibility of your legal department to keep those templates up to date with the latest necessary revisions. By keeping a centralized repository of these templates and making them available through a password-protected website, your mobile workforce will be able to hire freelancers more efficiently and follow pre-approved language to prevent breaking any employment guidelines from the IRS.
2. Keep track of signed documents and submitted invoices.
Documentation, documentation, documentation. This is not only important to avoid any headaches with the IRS in case of an audit, but also to keep your own sanity when managing several freelancers. Ranging from deliverables to contract amendments to invoices, several key documents fill up your email inbox everyday and you need to have a better system to manage them. A sensible solution is to organize all documentation relevant to the agreement securely stored within the same contract file. This way you can always display and control access to key documents in a single place.
Additionally with a contract management software you can import electronic documents from virtually any file type and scan paper documents directly into the software. Stop keeping track of that paper mess and streamline your contract processes by digitalizing all documents. By keeping full audit and history trail of the documents from your freelancers, you will be more on control of their activities and your projects.
3. Set automatic alerts for key dates.
Respondents to a Freelancers Union survey said that they often wait as many as 52 days to get paid on invoices, even when clients agree to Net 30 terms. While everybody understands that cash flow can be difficult throughout the year, you also need to understand that you signed a contract with a freelancer. Just like you included clauses to protect your company, the freelancer included clauses to protect himself or herself. While there are some nice freelancers out there that will wait up to 52 days for payment, they are also several others that take action and include fees for late payment. If you signed a contract, they have the legal right to take such an action.
To avoid late payment fees and delays in your projects, you need an enterprise contract management software solution that sends alerts to key people about payment deadlines for freelancers and other key contract milestones. Other key dates to remember when dealing with freelancers is the contract renewal date. If your relationship with a freelancer is not going that well and your manager forgets about the renewal date, your freelancer might be legally entitled to walk out from your project and cause a big bottleneck.
Look for a solution that allows you to set fully configurable email alarms that can be designated to one or various recipients. It would be also highly useful to select a system that keeps a history and confirmation of emails sent and integrates with most email clients.
Hiring freelancers can be a great way to cut costs and create a workforce that is better suited to your business cycle, but you need to set clear contracts to avoid penalties. Three specific steps for better management of your freelancers are: establishing a contract template for hiring freelancers, keeping track of all documents related to a freelancer, and setting automatic alerts for key dates.