Friday, February 5, 2010

Freelancers vs. Salaried Employees

I've been getting a lot of inquiries lately from people who seem to expect the same thing from a freelance writer as they would from a salaried writer. While there are some similarities between me and the copywriter in the next cubicle over, there are also some key differences. Those differences show up in our contracts, the way we work, the sort of contact we have with our clients, and our fee structures. Here's an overview of why freelancers are different than salaried employees.

Freelancers have higher overhead--so you have to pay them more per hour. I've seen several ads for jobs lately at New York City marketing and ad agencies for temporary on-site freelance help--for as long as a few days to a few weeks. These are clearly freelance positions, but they're offering an hourly rate that's probably about the same as what they'd pay their salaried employees.

Here's why that doesn't work. As a freelancer, I'm paying all my own health insurance. I'm paying twice the Social Security taxes, plus other business taxes and fees. I'm paying for my own ongoing education, my own marketing, legal fees, collection fees, Internet fees, and so on. Our business has a lot more overhead than a salaried employee has. So, basically, I HAVE to charge about twice as much as you'd pay a salaried employee in hourly wages.

Freelancers can't be available 24/7. I've had requests before from clients who expect 24/7 availability and fast turnaround on projects. While I accommodate client needs as much as I can, I can't always be available--nor can I always offer near-immediate turnarounds. The reason is mainly because I'm running a business that has other clients as well, some of which were in line before you, and I have to treat everyone fairly. In addition, I sometimes have daytime classes to attend and client meetings to go to--so I'm not always in the office, and I prefer to have phone time scheduled so I'll know I'll be home.

Freelancers set their own prices and terms. I've seen a lot of clients offering work for $x per hour (and usually the "x" is lower than I'd prefer to charge). I've also sometimes used client contracts instead of my own. But in general, I set my prices and my terms--this is because I know how much I need to make every month to keep things going around here, and I know the kind of pitfalls my industry is prone to with clients--so I know how to protect myself. I accept client-picked prices when they jibe with my own, and I accept client contracts sometimes--but I make sure the terms that are non-negotiable to me are included.

Freelancers are cheaper in the long run. True, we have to charge more from an hourly perspective than a salaried employee. But you're also not paying our health insurance, sick days or vacation days, maternity leave, office space, and so on. When you can hire freelancers for as-needed help, you're saving your company a lot of money in the long run.

Freelancers are not necessarily desperate for work. Just because a freelancer isn't on a regular payroll doesn't mean we're hurting for work--and it doesn't mean we'll necessarily take any price you offer. I've definitely had encounters with people who don't understand how contract workers can live on the less certain prospect of freelance instead of salaried work--and try to enter into negotiations with the idea that we'll take anything.

Freelancers and salaried employees have different challenges, requirements and processes--and you'll work with them differently. Of course, there are pros and cons to working with each. But they're not the same type of worker--and clients do need to expect different business arrangements with each.


David Fideler said...

Perfect in every respect.

Anonymous said...

I am on the other side - working at a company - and have been working with contractors through marketplace services such as I am very satisfied with their works (seriously they are not only professional but also attractive as all-round nice and smart people) but am afraid oDesk and similar services are putting severe downward price pressure on freelancers in exchange with simplified, secure money transaction. Plus there is the monitoring features (I never use but it might be tempting) that work against building healthy relationship between freelancers and their customers. I would like to know what you think.

Anne Wayman said...

Excellent... and employers who put too many restrictions on the freelancer may find they are actually employing them as far as the IRS is concerned... lots of trouble in that misunderstanding for the employer.

Isao - thanks for that comment - over at my site I keep reminding freelancers they can be in charge of their own destiny and not get caught.

Payday Loans said...

I prefer to have phone time scheduled.
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Jennifer Williamson said...

@Isao: Yeah, I agree about both the monitoring features and the downward pressure bidding websites put on freelancer prices. I think monitoring creates a negative environment where if you don't use it, clients who are used to that sort of thing will wonder what you have to hide (and of course I have nothing to hide, but just think the idea of someone looking over my shoulder as I work is a bit creepy).

@Anne: That's true; I read an article recently about Microsoft classifying many of its employees as contractors (misclassifying them, according to the IRS). Great idea for a follow-up blog post!

Newsletter Associates said...

Hi Jennifer,

Good comment. I run an association for self-employed communication professionals (IASECP) and much of what your address in your article is exactly what companies need to understand. You left out one thing that's really important. In most cases, the "freelancer" is much better at what they do because that's all they focus on. They're not just hired guns but they're consultants so that really ups the value that they bring to the game.