17 Feb Freelancer vs Employee: Do You Understand the Difference?
Do you understand the difference between someone who freelances or works on a 1099 basis as an independent contractor versus an employee? If you’re rolling your eyes like, “Well, yeah, duh. It seems self-evident,” I get it. Yet you might be surprised how many people don’t actually understand the difference.
✔️ Someone who works freelance or as an independent contractor is not an employee of your company. Periodt. Expecting them to function as an employee even though they cover their own benefits and taxes is dirty pool.
✔️ If you are an HR professional, it is important to explain to your hiring managers that someone freelancing for your company is not an internal, W2 employee. The onus is on you to educate the team.
✔️ If you are freelancing and find that you are attracting clients who expect you take their equipment, camp out on Slack channels, be butt in seat from 8 to 5, and that is not what you want, you have to speak up for yourself. You are not obligated to function as an employee when you freelance!
✔️ Your time is valuable as a freelancer and you have every right to run your desk as you see fit. It’s OK to acknowledge that some companies don’t deserve your skills.
✔️ I would humbly suggest that if you feel that you need someone to “plug in” and “integrate into the team” on a temporary basis, find a temporary employee through a staffing agency. You will probably have to pay a mark-up, but you may have a better chance of finding someone who is willing to give you the temporary employee experience.
Links I discuss in this episode:
Need more? Email me: https://causeyconsultingllc.com/contact-causey/
Transcription by Otter.ai. Please forgive any typos!
Welcome to the Causey Consulting Podcast. You can find us online anytime at CauseyConsultingLLC.com. And now, here’s your host, Sara Causey. Hello, Hello, and thanks for tuning in. So in today’s episode, I want to talk about what is the difference between someone who works freelance, 1099, independent contractor or independent consultant versus someone who is a more traditional W2 employee inside a company. Now, you may be listening to this thinking, Well, I think I pretty much already know the difference between those things. I mean, isn’t it sort of self evident? Unfortunately, no. And I’m really recording this episode today for people who are already out on their own freelancing, but they feel like they’re attracting in individuals who really just want a W two employee that they can boss around, or someone that’s sitting in a cubicle and they have a boss who bosses them around and they think, Gosh, I would really like to be on on my own as a freelancer, I just want to make sure I do it the right way before I jump off the cliff, as well as hiring managers who maybe they mean well, they might have a good heart and good intentions, but they just simply don’t understand that a freelancer or a consultant outside the company is not your employee, and they’re typically not going to put up with functioning as your employee. Now, I will warn you in advance, my voice has been a little bit iffy today. I’ve talked quite a bit this week, and I have some voice strain. It’s not COVID or Flu-Rona. So if you hear my voice start getting like Minnie Mouse or it starts to crackle. It’s not disease, it’s actually just good old fashioned laryngitis. And I do have a mug of hot tea over here to the side that I will be partaking from time to time. So here we go. The definition of a freelancer from investopedia.com reads. A freelancer is an individual who earns money on a per job or per task basis, usually for short term work. A freelancer is not an employee of a firm, and may therefore be at liberty to complete different jobs concurrently by various individuals or firms unless contractually committed to working exclusively until a particular project is completed. And they have a little box of key takeaways underneath that sort of like a TLDR. And the key takeaways read. A freelancer is an independent laborer who earns wages on a per job or per task basis. Typically for short term work. Benefits of freelancing include the freedom to work from home or from a non traditional workspace, a flexible work schedule, and a better work life balance. An example of a freelancer would be an independent journalist who reports on stories of their own choosing, and then sells them to the highest bidder and quote, yes, so there’s nothing about that key takeaway segment that I don’t love. Now, here’s what’s not to love, if you are attracting in or you are working with clients who want to treat you as a W2 employee, or they want to treat you as some kind of second class citizen or indentured servant, like well, okay, so it’s nice and all that you don’t need benefits or you don’t need us to mail you out a laptop and an iPhone, that’s cool and all but you’re gonna camp out on that slack channel, and you’re gonna punch the clock and be button seat from eight to five. And we kind of need to know where you are and what you’re doing at all times. And it’s like, wait a minute, what it’s like the archetypal scene in a movie where the record skips at the party, and everyone just stops and looks like, are you stupid. And I understand you, I’m being a little bit sarcastic and salty here. I understand that some people just don’t get it. And it’s not malice. It’s just ignorance about what really is the difference between somebody who works freelance or independent contractor versus an actual employee of my company. So now I’m going to skip over to another section of investopedia.com, where they define independent contractor and that reads, an independent contractor is a self employed person or entity contracted to perform work for or provide services to another entity as a non employee. As a result, independent contractors must pay their own Social Security and Medicare taxes. In addition, an entity that uses the services of an independent contractor is not required to provide them with employee benefits such as health insurance and employer sponsored retirement accounts that the entity may otherwise provide to its employees. The payer must correctly classify each pay as either an independent contractor or an employee. Another term for an independent contractor is freelancer. And in their key takeaways box which again is sort of like TLDR they write independent contractors are not employees. nor are they eligible for employee benefits. They do not have taxes withheld from their paychecks, but must instead pay estimated income taxes in advance through quarterly payments. Don’t I know that freelancers can reduce their gross income through the use of allowed business deductions, thus lowering their tax bills, independent contractors must or must arrange for their own insurance and retirement, the category for independent contractors is very broad. And quote, yeah, so do you notice that in both of those definitions, the one for Freelancer as well as for independent contractor very clearly says they are not employees of your company. Again, not trying to really do this in a way that seems sarcastic or pejorative, I really just want you guys to understand whether you are a freelancer yourself, or whether you are a hiring manager listening to this, you cannot treat freelancers and independent contractors as though they are a W2 employee at your company. Now, again, that one suggestion that I would offer is if you have some type of temporary need or temporary vacancy. And you really do want somebody that’s going to plug in as an employee, they’re going to integrate into the team, and they’re willing to accept your equipment and they’re willing to camp out on a slack channel and get on 20 Zoom video meeting cowpoke round ups in a week, to serve you at your pleasure, I would humbly suggest that you utilize a temporary employee, rather than trying to force those standards onto a freelancer or an independent contractor. Most other freelancers, consultants, independent contractors that I know as well as myself very much included, you know, we left corporate America, we decided that we were willing to cover our own benefits and take on all of the risks of going out on our own because we wanted to escape those types of cultures, we didn’t want to be plugged in but in seat at a particular time, we didn’t want to have to camp out on Slack channels or Microsoft Teams or get on, you know, 100 excruciating zoom calls in a month we, we just opted out of that system. And so I think just speaking to the other freelancers who might be listening to this episode today, this goes back to no one rules if no one obeys, if we sort of all collectively as freelancers say, No, I’m not going to do that. I’m not going to camp out on Slack, I’m not going to punch a clock and report everything that I did to you every five minutes, or allow you to install screenshotting software on my laptop so that every 10 seconds, you can see everything that I did, you’ll here’s another dirty little secret, you have talked before about how those damn zoom calls can be used as a tool of discrimination and racism. Sometimes people will hire a freelancer that’s working at a high rate of pay, and they want them to do this screenshotting crap, because they want to essentially leave breadcrumbs for themselves. Now, what do I mean by that? So they want to be able to look at what you did to perform the project so that next time, they can outsource that work to somebody that’s making like five or six dollars an hour, you know, they’re typically on a site like Upwork, Fiverr, freelancer, and they’re getting paid pennies on the dollar in comparison to a really expert level individual. But this company, or this individual will give them screenshots of what you did and say, Okay, well, you know, we don’t want to pay that person 100 bucks an hour, we’d rather pay you five bucks an hour. And we want you to just like look at the screenshots and sort of duplicate whatever it is that this expert, did you think you can handle that? Okay, great. Well, I mean, you’re sort of setting everybody up for failure. Because if you’re hiring an expert to do an expert level task, but then you’re saving the screenshots, because you’re hoping that somebody at more of a novice level can climb inside that experts head and do everything exactly the way that they did. That’s playing an awfully risky game. So I just I find the whole thing like weird and kind of shady. So that’s just sort of a PSA from one freelancer to another like Be careful what kind of information that you disseminate out there. And be careful who you work with and what you’re willing to tolerate, especially from like that big brother surveillance and kind of thing. But I would humbly suggest that a temporary employee is going to be a better solution to a hiring manager who feels like no, I just don’t think I can live without micromanagement and control. Like I kind of want to know what this person is doing every minute of the day. I want to see if their light is green on Microsoft Teams or on the Slack channel. I want to see if they log in at 8am sharp and then stay on until at least 5pm. Like I kind of need to know that. I mean most freelancers that I know anyway are gonna be like well, actually, no, you don’t. And if that’s the way that you run your company, then I I’m not interested in doing any work for you like I don’t. I don’t want to encourage other people to go to a company where they’re going to be micromanaged like that anyway. So what is a temporary employee? I’m going to read the definition that’s found on find law.com. temporary employees, sometimes referred to as temps are typically hired to cover for absent employees such as those who are on maternity or disability leave and temporary vacancies or to fill gaps in a company’s workforce. temporary employees may be hired directly or through a temporary staffing agency, in which case the temp is on lease with the staffing company, but is not an employee of the client company that uses IT services. Temporary agencies typically charge clients 15 to 30% more than the amount of compensation given to the temp employee. Though some temporary employees may wish to negotiate their hourly rate. temporary employees may be hired to perform work in a range of industries such as clerical labor, education, it healthcare, some temporary jobs may lead to permanent employment where appropriate, in which case, the temp agency may charge the employer fee. More often, however, companies hire temporary employees for a specific business purpose to avoid the cost of hiring regular employees in quote, a bowl and voila, you do have an option at your disposal, whether you want to bring that temp on as an actual temporary employee of your company, or whether you want to funnel them through a staffing agency so that the staffing agency can pay roll them and deal with workers comp or any other potential issues that may come up. So the option exists very clearly out in the marketplace that if you feel you need to have a temporary employee who sort of you know, I’m struggling, you can’t see me but I’m straightening up in my chair. And they’ll they’ll have like a rigid back, sir. Yes, sir. Ma’am. Yes, ma’am. And they’ll camp out on the Slack channel. And they’ll sort of sit down, shut up and do whatever they’re told, like, I would really suggest that if you need that you need to be looking at temp employees, rather than freelancers or independent contractors. Because it’s yucky energy to pretend as if you’re wanting to hire a freelancer to gig for you, like, Hey, I just need this done. I don’t care how it gets done. I don’t care if you work at 12pm or 12am. As long as everything’s done well and done the deadline, I don’t care. But then it’s like, oh, well, actually, what I really want is to pay your W2. And I also want you to camp out on that slack channel. Really? Do you really actually need somebody to do that? If so, then hire a temp. So if you’re a freelancer or an independent contractor, you’ve already gone out on your own and you’re nodding your head or applauding this audio recording? Like yes, 100% Yes, I am so tired of these clients that want me to plug in or integrate into their team, when that’s completely not my function and not what I want to do. What do I need to be looking out for here? Awesome. So I have an article that I want to read to you that appeared on medium.com and was written by Matt Williams, naturally, I will be dropping a link to all of these articles in the write up for this podcast. So you can check them out for yourself. Or if you intend to use any of them, maybe you have somebody that you’re dealing with that just genuinely does not understand the difference between freelancing versus plugging in as an employee, you might be able to retool some of these definitions to help them understand. So in this article, titled five indicators of a sucky client, Matt Williams talks about things that we can watch out for. So here are some of the red flags that he points out. Number one, they can’t pay that much. Sometimes a client will want everything you’re capable of offering, but they have a quote, limited budget. That was number one. Number two is they’ve got really grandiose ideas. Unfortunately, I’ve taken on clients because they got me excited. They say things like we’re going to change the game or disrupt the industry or some form of we do everything for everyone. Basically, they’re salespeople, and they want your skills to make up for their lack of knowledge rule of thumb, the more shit they talk, the less likely they know what they’re doing in quote. I love that. And it’s funny because those people actually repel me. If I get on the phone with with a prospective new client, and they use anything about disrupting the industry or changing the game or they want to talk about how all of their competitors suck and they’re the greatest thing ever. I’m just like, Oh my God, I need to run in the opposite direction. As the old yarn goes with age comes wisdom and I think if you if you do this thing, right, then you have some experiences early in your life. You’re like, Oh, God, I need to stay away from that. Number three on his list, their business practices are questionable. It seems obvious not to take on a company with questionable practices. And it is however, this often coincides with grandiosity, which can be blinding. You may not see the forest through the trees right away. If someone starts throwing out big names and big numbers but has very little evidence to back it up, start digging and use your instinct for their product is bad. This is less about the client and more about your reputation. I work with singer songwriters and musicians a lot. I’ve gotten to work with some really great ones. But I’ve also worked with some where it blows my mind that they even got someone to record their ratchet voice. That’s funny. Number five, they never seem happy. This is more common than one might think this is the client that dislikes everything you bring to them no matter what. Other times they are way too picky. That’s something freelancers tend to deal with. But sometimes they are trying to screw you over and quote, yeah, they are. So you definitely want to be careful of Mike the micromanager, Ned, the needy, Nancy, the NIT picker, any of those clients that make you feel like nothing you do is good enough, or well, we hired you and for the rate that we’re paying you, you know, we really wanted you to turn water into wine like Jesus. And so now that you weren’t like, able to do that for us, we’re super butthurt. Like, okay, well, I mean, how many freelancing opportunities have you had, from Jesus himself offering to turn water into wine for you for the hourly rate? I mean, has that happened? I’m gonna guess probably not. Now, Matt has a part two to this article. And I want to read some of that as well. He talks about having a system and a contract in place. This is so very important. You want to make sure that you have your own scope of work or a service agreement, make sure that it’s very clear what what the deliverable is, and what the payment terms are. And the way that I have my scope of work and services written, like whenever I talk to my attorney about it, I said, I want this to be super clear, like a 10 year old child could read this document and understand exactly what’s going to happen. What is the deadline? What’s the deliverable, and what’s the rate of pay and the due date for the pay, like I would want a 10 year old child in elementary school to be able to look at this and to understand clearly what’s going to happen, I don’t want page after page after page of 10 point legalese font, that no one’s even gonna freaking read anyway. I mean, you have to always remember gang that we live in the times of the Apple Terms of Service where these things go on and on and on. And if you actually sat and read them, you would be at the computer forever. So I think it’s really important to have a scope of work that anybody can understand where it’s super, super clear what’s going to happen, when who’s doing what, and how are you going to get paid for it. That also talks about setting expectations and the value of your time, which I think is a mazing. You always want to make sure that you communicate that your time is valuable to you. You’re holding yourself in a high place. And in a high regard, don’t get on the phone with these people and grovel, for the love of God, please don’t do that. Don’t beg for their business. Oh, oh, Mr. Client, it would just make my entire universe if you would bequeath this one poultry project to me, I will do anything. Ah, no. When you get on the phone, and you’re giving off vibes of desperation, even if you don’t think it’s obvious to the other person, believe me when I tell you it is and some of the bad actors in this world will take advantage of that. They will see you as an easy mark, and they will wring you out. So don’t do it. Matt also talks about not over promising, don’t promise them the moon in the stars and then have them get upset because they feel like you presented false expectations. Do your research, don’t work with just anybody that comes along, especially if they’re blowing a lot of hot air and just shit talking everybody like you want to be careful there. Also make sure that you’re clear what it is that they do and what they want you to do. Stay away from places that have a bad reputation and also price out your bad clients. He quotes Seth Godin in this article saying price is a story. It’s not an absolute number, which is to say people are buying experiences names, feelings, prestige, a Tiffany’s diamond is negligibly better than the one you get from a mom and pop shop down the street but six times the price. Why? Because it’s Tiffany’s and quote. He also talks about you know, if somebody really wants the cheapest option that’s out there, they’re going to go find that and those usually are sucky clients. People that want that bottom of the barrel. Uh, yeah, I just want somebody to do this real quick for five bucks an hour like, okay, normal stay these be on to you go do that. But like, I’m not gonna do that for you. And then also he talks about using your instincts and you guys all know I am huge on trusting your own gut instincts. Don’t get desperate and don’t get blinded by the promise of money. You know, that’s something else that I think you have to be cognizant of. It’s not just people that shit talk all their competitors and they use all this Hypebeast talk about oh, we’re changing the game. We’re disrupting the industry raw. Like, it can also be people who promise you some insane amount of money, you know, and be really careful with any of those people. And I see a lot of them on those freelancing websites like, No, this is an easy job. I just need somebody to do x y&z and I’ll pay you a lot of money for it like I would do it myself, I just don’t have the time. Like, there’s no telling what you could be getting yourself into if you take on a project like that. But it usually winds up being a complete time drain and the person is unfeasible because they’ve already decided that it’s just so easy. It’s like those GEICO commercials. It’s so easy. A caveman can do it. It’s like really well, then, why haven’t you done it yourself? I mean, if it’s so damn easy, how come you’re posting it online and promising a lot of money for somebody else to do it. I mean, just trust your gut on that. That kind of beggars common sense to me. Now, if you’re listening to this episode, and you are a hiring manager, or an HR professional, the very first thing that I want to say is if you’re treating anybody, whether it’s a W2 employee, a freelancer or an independent contractor of some type, as a second class citizen, you’re micromanaging the ever loving shit out of them. And you want to know everything they do all day long as though you are the warden at a prison, and they are your inmate, stop it. Stop it. That is not the way to treat people, especially in light of the great resignation and Striketober of last year and people feeling more empowered than ever, they’re not going to stick around and put up with it. I saw a post it was a little bit cheeky, but I really believe that it was accurate. This person in HR was talking about how they paid attention to their competitors. And anytime their competitor said, Okay, we want you all to come on back to the office, it’s time to be buttoned seat again, all your play time of working from home is over with, they would go after their staff members. And they had picked up no small number of like engineers and IT professionals from other companies by simply calling them up and saying, Hey, we noticed that your company is wanting everybody to come on back to the office. Well, we don’t do that. We’re completely 100% remote, there’s never going to be a point in time where you have to travel or quote camo and back to the office. So are you interested in having a dialogue and exploring the possibility of coming to work for us. And they were laughing about how easy it was to recruit people away from these places that want everybody to come back full time, or they want to do one of those goofy hybrid models of sometimes you get permission to work from home, and sometimes you have to come back to the office. So if you think that mistreating people is going to get you anywhere, it will not so please stop doing that. The second thing I will say is you really need to understand the difference between someone that works freelance or independent contractor versus someone who’s willing to take on a temp assignment. And I’m not knocking people who work on a temporary basis, not everybody wants to be self employed. Not everybody wants to freelance and cover their own taxes and their own benefits. Some people just have like, oh, you know, they have a real fear about that. Or they may not for whatever financial reason be able to cover the cost of their own benefits. So it’s to their advantage to become a temporary employee. They like going from place to place and being able to plug in on a short term basis, that part of it they enjoy, but they don’t want to cover their own benefits or they enjoy working for different temp agencies. That’s cool. There’s nothing wrong with it. And I feel like you if you’re hiring or you’re in HR, you need to understand that that is always an option at your disposal. But what you don’t want to do is engage with a freelancer or an independent contractor and then try to treat them like they’re a second class citizen or they are a temp employee that needs to take your laptop and camp camp out on Zoom and slack and be at your beck and call and punch the clock from eight to five. And to all the Freelancers out there. I’m gonna say it one last time before I leave you. No one rules if no one obeys. We hope you enjoyed today’s episode. If you haven’t already, please take a quick second to subscribe to this podcast and share it with your friends. Thanks for tuning in. We’ll see you next time.