Outsourcing to Freelancers & Consultants: 5 Tips for Getting it Right (and Lawful)

No longer regarded as a temporary back-fill for open staffing positions or one-off projects, outsourcing to freelancers and consultants has now become a regular practice among small and large businesses alike.

And the benefits are obvious - outsourcing to trusted freelance workers can give you quick access to specific skill sets, industry-knowledge, and technical-proficiencies that you might not otherwise have on staff. It also allows you to adjust to spikes in demand, maintain a nimble talent pool, all while keeping your payroll outgoings at a minimum.

But working with freelancers is quite different than hiring and managing a team of in-house employees.

It essentially involves, outsourcing functions of your business to an outsider; which brings with it a whole host of concerns. For example, how do you find the right freelancer? Can you trust them with your sensitive data and should you let them interact directly with your customers? What functions should you outsource anyway? And last, but by no means least, what are your legal and regulatory responsibilities as an outsourcer?

Here are some tips to help you navigate the process of finding, hiring and managing freelancers, consultants, and independent contractors.

1. How to use Freelancers

Freelancers are business owners too, and as such they usually offer and specialize in a very niche service. Commonly outsourced business functions include graphic design, web developers, marketing consultants, writers, social media experts, accountants, HR professionals, and so on.

If you are considering outsourcing, identify the gaps in your current staffing makeup. Try to align your employee- workload core business functions and perhaps consider freelancers for project-based work.

2. Finding the Right Fit

The tried and true method of finding freelancers and consultants is to use word of mouth and referrals from your network. Ask around. Use LinkedIn or Facebook to solicit recommendations from friends and acquaintances. Another alternative is to use online freelance 'marketplaces' or 'bidding' sites built solely for freelancers and the people who want to hire them- although if you are looking for a trusted resource, start your search with people you know or trusted referrals.

3. Draw up a Consultant Agreement

This agreement formalizes the basic terms and conditions of the working relationship between you and a freelancer, consultant, or independent contractor. Items to cover include a description of the professional services delivered, quality expectations, termination conditions, invoicing terms, tax reporting requirements, non-compete language, and an intellectual property agreement.

You can find basic templates for such agreements on the Web or from business acquaintances who have also worked with freelancers. But i's also a good idea to talk to your lawyer to ensure you have covered the salient terms of your agreement and are not in violation of the law.

You should also be prepared to expect that many freelancers will draw up their own scope of work or project contract. This article explains the purpose of these documents and the type of information many freelancers include: Setting up a Client Contract' Must Know Information for Freelancers.

4. Protect your Business with an NDA

A Non-Disclosure Agreement (NDA) is a legal document that establishes the confidentiality of shared knowledge or materials and restricts third party access to such information. An NDA can protect your business by restricting the ability of outsiders such as partners or consultants from speaking about or divulging information that they have access to. To determine whether you need an NDA and what type of information to include in it, read:'Make Sure Your Business Information Stays Secret with Non-Disclosure Agreements.

5. Follow Correct Hiring, Tax Reporting and other Labor Requirements

Hiring an independent contractor (tha's government speak for a freelancer) is quite distinct from hiring and managing traditional employees. And i's important to understand what this distinction is and how it affects what you do to stay compliant with the regulatory and tax requirements that come with hiring independent contractors. If you do misclassify an individual who is an independent contractor as an employee, and vice versa, you open yourself up to investigation by the IRS or the Department of Labor' a process that the government has ramped up considerably in recent years.

You'll find a lot of useful and easy-to-understand advice on the legal and regulatory factors that you must consider when working with independent contractors in the following resources:

• 5 Things to Know About Hiring Independent Contractors
• Guide to Hiring Independent Contractors
• Reporting Independent Contractors Compensation: A Guide to the IRS 1099 Form

Related Articles

• Staffing your Business - Four Flexible Options to Consider as you Start-up and Grow

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed.