Freelance employees offer several conveniences, but one major inconvenience are the administrative functions necessary to pay this unique talent pool. Before diving in head first, understand the financial and legal ramifications of hiring and paying freelance talent.
From digital media to the introduction of new devices and technology, companies are looking for the best freelance talent to hire. However, making sure freelancers can be quickly engaged when needed, paid efficiently and administratively managed while on assignment creates a nightmare for HR or procurement.
Not only is this population multiplying, but with state and local governments starting to drive larger initiatives around auditing freelance and independent contractor resources, companies are starting to look for help to build a centralized freelancer payrolling program that protects them from risk.
How to Outsource Paying Freelance Employees
In short, when utilizing payrolling services the administrative functions of managing non-employee workers, such as freelancers, are removed and the legal employer of the freelancer becomes the third-party vendor. In essence, the vendor manages the employment relationship, thereby taking the burden from the company utilizing the freelancer.
This supplier relationship, if properly structured, provides the company with a way to take advantage of the skills of the freelance worker, while not having to hire the worker as an employee.
This is distinct from temporary staffing or other recruiting solutions, because payrolling is used for workers and freelancers already known to the company. Freelancers, independent contractors, interns, and retires are all examples of this type of worker.
The third-party payrolling company is responsible for the on-boarding and on-going administrative management of the freelancer, by providing essentially the same working relationship as most employers and employees. However, the worker is assigned to the client, working under the day-to-day direction of the client.
The payrolling company is responsible for:
- Taxes and Insurance
- Payroll and benefits administration
- Communications and employee care
The costs for freelancer payrolling services are typically on an hourly basis, only for time worked. The third-party payrolling company charges a small percentage fee on top of the freelancer’s hourly or daily rate to provide the employment services.
Benefits of Using Payrolling Services
The primary benefit of using a payrolling provider for freelancers is the freedom to engage the workers when needed, without having to employ them directly or be concerned with their employment status, required paperwork or providing them with a paycheck.
But there are also several other benefits to using this model to engage freelancers.
- Clear delineation of employment and insulation from co-employment risk
- No payroll, benefits or termination costs
- Ability to efficiently deal with different types of pay and engagements
- Quick ramp up
Companies that use freelancers find that as usage grows and the complexity of engagements increases, a payrolling program can provide an efficient and cost-effective solution to using internal HR or procurement processes.
Companies that Commonly Use Payrolling Services
- Those with unique or highly-specialized needs
- Short term needs
- Need for agility and flexibility
There are many examples where freelancer payrolling solutions has helped companies overcome the hurdles involved with using freelance workers. A few of these include:
- On-going production and promotional brand-building needs
- Technology roll-outs and refreshes
- Live events and on-location production shoots such as annual awards productions and sporting events
- Sales and promotional teams and other yearly events such as upfronts, new cable networks, film or other promotional launch events.
Similar to other types of payrolling, freelancer payrolling is a specialized solution that combines the efficiency and flexibility needed by customers with the focused attention freelancers requires. This includes annual projects or events to supplement core staff.