Hiring Freelancers and Contractors

[ChrisHeggem]

When you're at a point where you can't take on any more business you have to either turn away clients or expand. Not being at a place to go hire full time employees, freelancers and contractors seem more appealing.

What advice or insights do you all have on bringing on freelancers and contractors? Anything I should be made aware of?

[vangogh]

Chris I think the best thing you can do is network with others in your industry. Get to know some people who do exactly what you do and some who specialize in things you may not. That way at the very least you can point clients you can't take on to someone who's likely to return the favor in some way. You may also find in time that you can work together. For example I get work from designers and marketing firms mainly looking to have me a develop a site that's already been designed. You might be able to outsource certain types of jobs or parts of jobs to others allowing you to take on more clients.

Also usually when you have more demand for your services than time to serve everyone it's a good time to raise your prices. You'll probably find that most of your clients will be fine paying a little bit more than they are. Some might leave, but the additional revenue you bring in from those that stay makes up for it. As long as you don't raises prices too much where too many clients leave you'll end up either making more for working the same amount you do now or making the same amount in less time.

[ChrisHeggem]

How difficult is it to set up? What do I need to get started?

[vangogh]

I'm not sure what you asking. I'm just saying start getting to know people who do similar work and then once you know what their skills are and have built up some trust in them start pointing clients there way or see if they'd like to work with you. To change prices you just start charging more. I'd try that first with new clients and once you see enough are fine with your higher rates you can start raising the rates on existing clients. I generally don't raise rates on my existing clients to new levels I set right away. Instead I'll increase things a little slower over time.

[ChrisHeggem]

Thanks, vangogh. What I'm asking is what legally do I need to do. I know I can't just come to a verbal agreement and pay somebody under the table :-p What implications does having a contractor have on my business? Is it financially sound decision or does it cost more in taxes, fees, etc.?

[vangogh]

Oh I understand now. Assuming you're outsourcing work to someone you'd probably just need to fill out 1099 forms. Someone you outsource to could be seen by the IRS as an employee if they only work for you and if you do things like purchase things like software or a computer or any other tools of their trade. Assuming these are people in business for themselves though, you'd keep a record of how much you pay to each person and fill out and send them and the IRS a 1099 when tax time rolls around.

[ChrisHeggem]

Are there any advantages to hiring a contractor or freelancer over a part time employee?

[vangogh]

If you hire an employee you have to deal with payroll taxes. You'll be paying more and having to deal with more paperwork. Much easier to outsource to someone, especially it you won't need them full time.

[Dan Furman]

I do not know your state rules, but I found out something very interesting in NY (and your state may do this too).

And that is, YOU cannot set the price, or the deadline. If you set either, they are an employee, not a contractor, no matter what the paperwork says. And you could be on the hook for workman's comp, penalties, etc. If you get audited by the state, they are going to want invoices from your contractor/freelancer, and they may even call them to see if you gave any deadlines/rates/etc.

Make sure you know your state's rules.

[vangogh]

That's interesting. Can you negotiate both price and deadline? That's pretty common when outsourcing. It's even a common request when hiring a service provider. Lots of people try negotiating both with me. Maybe next time someone from New York calls me I should let them set both and then hit them up for employee benefits.