By Mara Thorne
M Thorne Consulting Ltd
M Thorne Consulting Ltd
So Fides Media
has taken the plunge and put Ali Clarke on the payroll. Brilliant move! But
wouldn’t it have been simpler to retain her on a freelance basis?
In an ever
more complex world, we yearn for simplicity. Many businesses think hiring
employees is complicated and onerous, so they use freelance contractors. Just
find a self-employed person with the right skills, agree a price, shake hands, and
write a cheque at the end of the project. No need for contracts, PAYE, NICs,
and all that malarkey, right?
Wrong. There
are plenty of pitfalls for the unwary business making use of freelancers.
For a start, a
self-employed person has to cover their own tax and NICs, and make a living, so
if they’re any good they’re likely to be more expensive than an equivalent
employee.
If they’re
good they’ll be in demand, so next time you need them in a hurry, if they’ve
got a more lucrative project on the go, you may have to join the queue.
And you really
do need a written service agreement for freelancers, to protect your intellectual
property, avoid tax liabilities, and even prevent industrial espionage. A
freelancer can work with anybody they please, including your biggest
competitor. At best, that could lead to a conflict of interests; at worst, they
could give away all your trade secrets...
If their laptop
gets stolen, along with all your client work, you’ll want to be sure they’ve
got insurance and backup systems in place. And if they’re in contact with your
customers, you’d better be able to stop them offering their services direct and
cutting you out of the equation.
There’s even
the risk that your freelancer may be deemed by the powers that be to have employee status: if they spend most or
all of their time working for you, if they use your equipment, if you exercise
significant control over their work, and if you don’t want them sending a
substitute. And that’s bad news, because the taxman may come after you for unpaid
tax, and your “freelancer” may be able to claim employment rights to unfair dismissal
compensation, holiday pay etc.
It would be
nice if life were simple. But it’s not, so think carefully before sealing the
deal with anybody on the basis of a handshake alone.
