Free-lancer or Employee?

In the initial phase of a start-up a lot of people are required for the growth. However, the company needs to be flexible regarding the number of staff too.

The question is whether to hire a person as an employee or as a free-lancer (independent contractor). The easy answer is that the employer can decide what suits better. BUT employers do not directly decide whether a person is a free-lancer or an employee, that is a legal question. The answer is based upon many variables, e.g. how a person interacts with the company, performs work, gets paid, and other factors.

The companies need to distinguish between these two types of arrangements:

An employee is somebody who works for the company, under supervision, for a salary. The employer has significant control over how the employee performs the job.

A free-lancer is providing specific tasks independently on his own risk and responsibility for specific price.

The reasons to hire free-lancer:

  • skilled, independent partner (usually)
  • no reoccurring obligations (budgeting and staff flexibility)
  • no payment of tax, insurance and social security payments
  • liability and responsibility stays with free-lancer

The reasons to have employees:

  • more control over the work
  • fixed labour hours
  • easier access to the copyright
  • no work for competitors

You put your business at risk by trying to label an “employee” as an “free-lancer”.

However, in case you you’re engaging people as if, legally, they are employees, then they are still employees. Masking employees as a free-lancer only leads to a risk of substantial fines and other legal complications in the future of your business.

If you need a chat regarding this issue feel free to contact me!