The gig economy is on the rise and more people than ever are freelancing. Especially in the US, some 60% of the population are either freelancers or grab freelance gigs from time to time to add extra money to their pay cheques.

Add to that the uncertainty surrounding BREXIT and the changed visa rules in the US that push the employers to hire remote workers. It is no surprise, as the recruiters in the UK see fewer applicants from the EU and their colleagues in the US urgently need highly-skilled workers that can hardly be found locally.

However, the flexibility associated with the gig economy may be an illusion. In many countries, the ‘’freelancers’’ and ‘’self-employed’’ working for Uber, Google and Deliveroo are protesting demanding the same rights as their employed counterparts. To make the situation even more complicated, those employed by the taxi companies, couriers, etc. are protesting demanding that Uber, Deliveroo, etc. follow the same rules.

Hiring freelancers, self-employed or independent contractors have many advantages including budget flexibility, the ability to hire a highly-skilled expert to provide strategic advice to a startup or a small company that can’t afford to hire her/him on a permanent basis and have an extra pair of hands during seasonal peaks in demand.

Hiring freelancers overseas as remote workers allows companies to tap into a global talent pool and have top talent without breaking the bank.

PWC projects that by 2020, the gig economy will be worth almost USD 63bn globally and about GBP 2bn in the UK alone. Post-BREXIT, the gig economy in the UK may be worth even more due to the uncertainty surrounding EU citizens and their rights to work in the UK. It is highly likely, that UK businesses will prefer to hire temp workers versus permanent employees for a while.

 

So, what the recruiters need to consider prior to hiring a freelancer or an on-demand worker?

 

The length of the contract or assignment

 

Gigs

 

If it is a small one-off task, it is likely to be defined as a ‘’gig’’. Examples vary but may include writing a blog article, designing a logo, formatting Excel spreadsheets, designing PowerPoint presentations, etc. Freelance platforms like Freelancer.com, PeoplePerHour, Fiverr or Upwork have millions of listed freelancers competing for ‘’gigs’’. What is important to consider is whether the employer has a direct connection with the freelancer, how the quality of work is certified as most platforms charge a dispute resolution fee in case of a dispute and if the entire payment is due or only part of it if the quality of work is unsatisfactory.

There may be traps on the tax and legal side as well.

Are the freelancers paying taxes in their country of residence, have they registered as a self-employed person, do they have the right to issue invoices as individuals?

What is the likelihood for the tax authorities to chase the employer for information on the paid fees and is the employer liable for disclosing information as part of monthly or annual reports to a government agency, etc.?

Have the personal details of the freelancer been verified? How is the intellectual property of the employer protected in case of artwork or a piece of code?

Most of these points are not addressed when hiring freelancers for small gigs via freelance platforms. So far, the employers mostly suffered poor quality of work, but any tax or legal issues were relatively rare. This is likely to change going forward as more government agencies are looking closer at the freelance working arrangements. In any case, a formal agreement and an invoice are a ‘’must have’’.

 

Projects

 

A project can span over days, weeks or months. Typically, these are either repetitive tasks or a pre-defined scope of work. Ranging from digital and market entry strategy, to full webpage design, client acquisition or even SAP and Oracle implementation and customization, the projects require clear definition of the rights and obligations of the parties, and in most cases, a signed NDA.

Hiring highly-skilled freelancers for mid and long-term projects require a different approach, too. It is essential to have direct contact with the candidates, information about their skills and desired pay rates, etc. Some recruitment platforms like Transformify provide laser-focused information on the skill sets, location, pay rate expectations of the candidates while at the same time don’t limit the direct contact of the recruiter with them.

Once the right candidate is assigned to the project, the billing and self-billing functionality is used by the freelancer to self-bill the recruitment platform. Then, the recruitment platform bills the employer transforming it into a B2B arrangement as the employer receives invoices from and transfers payments to only one partner – the recruitment platform. It saves tons of work and money if the company is hiring many freelancers, the length of the contract varies, the personal and payment details of all these individuals are to be stored and processed in compliance with GDPR, etc.

The processing of payments to freelancers based in different countries may be a headache for the employer as well. In many cases, companies face adverse FX rate fluctuations, duplicate payments and rejected payment transfers. All these potential problems could be avoided by opting for recruitment platform offering an integrated payment solution supporting payment transfers worldwide.

Last but not least, in some countries, a freelancer may be treated like an employee if (i) s/he has only one client and (ii) the client can control the ‘’coming and going’’, the number of working hours to be worked out, the exact work that is to be delivered on a daily basis and other arrangements.

Put simply, a freelancer or an independent contractor is expected to be relatively independent of the employer and work in their own pace delivering within the pre-agreed deadlines.

Despite the legal complexities surrounding the hiring of freelancers, independent contractors and self-employed, the number of the ‘’on-demand’’ workers will continue to grow. There are many advantages for the business and the society at large provided that the freelancers are treated fairly, and their rights are protected.