Customer risks when working with freelancers

“The world is at a crossroads”, World Economic Forum President Klaus Schwab wrote in his book “Technologies of the Fourth Industrial Revolution” in 2016. He first coined the term “Industry 4.0,” which implies the global automation of business processes and the introduction of information technology and artificial intelligence (AI) into industry. Today we are witnessing how the business environment is transforming, labor organization models and forms of cooperation are changing. Even small businesses are looking to build cross-functional teams that are 50% freelance remote workers.

Pros and cons of working with freelancers

So, why executives want to work with freelancers:

quick search for specialists – you can find an employee through freelance exchanges;
favorable terms of cooperation – interaction can be easily terminated without a dismissal procedure by terminating the civil law based contract;
the optimal ratio of price and quality – the contractor sets the price himself, and the customer determines whether it suits him or not;
savings on staff maintenance, equipment and rental of premises;
the ability to attract industry experts for a short time.

When choosing a freelancer, the main plus for the customer is access to a wide pool of specialists. According to DemandSage, 73% of freelancers consider communication to be one of the important criteria, 53% say that the most important thing when working with customers is flexibility and the ability to adapt to specific tasks. Indeed, independent workers are more proactive, more often offering a fresh look and new solutions – unlike those who work in hiring and are forced to face the daily routine.

However, the disadvantages must also be taken into account:

difficulties with communication and quality control of work;
the need to select performers and prescribe contracts carefully, protecting intellectual property;
unpredictability in terms, cost, quality of work;
problems with payments and transfer of funds;
the need to control the tax status of the executors.

Before hiring employees for remote work, you need to weigh the pros and cons and assess objectively whether you have enough strength to manage a team at a distance, given all the problems with payments and maintaining documents necessary for tax office.

Remote team issues and solutions

The phrase “I manage a remote team” sounds beautiful, but in fact, it implies the leadership of a group of people whom nothing connects with each other except the Internet. Only thanks to digital platforms, can freelancers interact with high quality – working, communicating and receiving a salary. At the same time, managers face a number of problems. We will tell you what problems there are and how to solve them.

Communication within the team

Use reliable communication tools (for example, Discord or Telegram) with the ability to group communication and file sharing. Regular online meetings (synchronous sessions) are required not only for information, but also for project security. If the remote employee leaves the project, his quick replacement will become possible only if the team has all the relevant information and a complete understanding of the current state of the task.

Search for trusted performers

Customers spend one to three months looking for reliable freelance performers. To mitigate risks, many freelance platforms provide verification mechanisms, but fraud cannot be completely eliminated. It is worth being vigilant and recognizing common deception schemes:

creating fake profiles of performers and customers to cheat the rating;
a proposal to use external escrow services instead of those built into the platform;
insistence on immediate payment.

Therefore, be careful: in addition to exchanges and communities in social networks, use a proven method – word of mouth. Recommendations from friends, colleagues and acquaintances are a good way to find an intelligent specialist and get the result you expect.

Reliable payment system

I often hear from colleagues that difficulties begin at the end of work, when there was no agreement at the start, where and how to pay. And then it begins – “it doesn’t work for me like that,” “This is uncomfortable for me” etc. The project has ended, and the customer does not know how to pay the contractor for the work.

The best option is to use the escrow services built into the platform, especially when working with new performers. If the performer is verified, alternative payment systems can be considered, taking into account the geographical location of the freelancer.

Freelance challenges and what to do with them

Let’s analyze the main challenges that arise when working with freelancers and tell you how to solve them.

Freelancer tax status unknown

For business, cooperation with a freelancer implies partnerships, where the contractor is responsible for paying taxes and providing the necessary documents, minimizing risks for the customer. The key point is the correct tax status of the freelancer. There are two options:

Self-employed person (NAP payer). This is the minimum required status. Self-employed person independently pays tax (4% for individuals, 6% for legal entities), providing closing documents. This simplifies taxation for the company. However, self-employment has limitations: the absence of tax deductions and pension deductions and the need to fill out checks flawlessly, which is critical to avoid problems with the tax office for the customer. It is important to note: the transfer of funds to the card of a self-employed person must be accompanied by all the necessary documents (acts, checks). Otherwise, the company may be obliged to pay personal income tax and other contributions, as for an employee.
Individual entrepreneur (IE). This is a legal entity that provides a current account for non-cash payments. This is much safer for the company, as it excludes direct transfers to personal cards.

Checking the tax status of a freelancer is mandatory – for this you can use the services of checking counterparties and the website of the Federal Tax Service of Russia. Also, when concluding a contract, the company must request and store supporting documents, which will protect it in case the freelancer loses his status or receives tax claims from the state. The presence of these documents will prove the legality of labor relations.

The contractor is abroad

Many freelancers cooperate with Russian companies while abroad, but retaining Russian citizenship and tax residency. In such situations, transferring money to an individual from a legal entity to a bank card may seem completely impossible. For the customer, this means that it will be necessary to report to the tax authorities and look for ways for the contractor to provide supporting documents on the receipt of funds as an independent party. But it is now difficult to transfer money abroad: many large payment systems have left the Russian market, and banks charge large commissions for foreign exchange payments.

To solve this problem, businesses are increasingly turning to intermediary services that help transfer money to performers abroad. Unlike freelance exchanges (many of them also left Russia), they provide closing documents to both parties – both the contractor and the customer.

The intermediary service works as a link between a freelancer and an employer, working through a European legal entity and having a voluminous database of bank accounts around the world. For the customer, the service acts as a B2B partner, for the freelancer it acts as a buyer of services, so that labor relations between the contractor and the customer do not arise (which is also important in the context of Russian labor legislation).

It is difficult to estimate the cost of work adequately

Customers often use freelancers to optimize costs, but it is important for both parties to assess the cost of work adequately. The customer seeks to save money, and the freelancer seeks to pay fairly. In order not to overpay and not to make it cheaper, you need to follow basic safety rules.

Carefully check the competence of the freelancer. Do not limit yourself to talking about working with well-known companies or successful projects. Request previous customer contacts for feedback or request a completed portfolio. This will help make sure the performer is qualified and avoid disappointment.
Pay attention to pricing. Rounded amounts (for example, 50,000 rubles) or, conversely, prices like in a supermarket (499 rubles per thousand characters) should alert. Rounding may indicate the absence of a reasonable cost calculation, and inflated prices may be an attempt to manipulate.
Mark the speed of response. Long pauses between messages at the stage of coordination (without prior warning) are an alarming sign. This may indicate potential communication problems, missed deadlines, delays in work, which will ultimately affect the cost of the project.

Freelancer inflates price

Experienced freelancers usually follow market trends and try to adhere to competitive rates. Their priority is project work with clear goals and specific results. If the task requires non-standard solutions, experiments, or several iterations – the freelancer is likely to request additional payment for edits and improvements.

This is what you need to do to calculate the cost of the task correctly and to build a constructive relationship with the freelancer.

Consult with experts. Contact experienced colleagues or specialists familiar with the freelance market for information on market prices for projects similar to yours.
Compare quotations. Request several quotes and estimates, taking into account the experience and qualifications of each contractor. Consider that beginners – freelancers tend to offer lower prices but require careful portfolio checks and reviews.
Estimate potential profitability. If you work in a narrow niche with limited information about prices, calculate the expected profit from the project and determine how much can be allocated to pay for the services of the contractor.

It is difficult to assess the professionalism of a freelancer

Assessing the professionalism of a freelancer online is not always easy. Due diligence is best.

Explore his portfolio. Evaluate the quality of work, compliance with the style and requirements of your company. For example, if you need a copywriter to write longreads, it makes sense to look at examples of longreads in the first place, but other texts can also be indicative.
If the freelancer has a poor portfolio, and non-disclosure agreements (NDAs) are cited as an explanation, be careful. It cannot be ruled out that the performer has no relevant experience at all. Make sure he has some work that even remotely resembles your project.
Look for reviews and ratings if you are looking for specialists through platforms. The large number of positive reviews is certainly credible. However, it is important to analyze the content of feedback and highlight those related to tasks similar to yours. For example, if you have a complex and multi-stage project, pay attention to the feedback on the long-term cooperation with this performer.
Request contacts from previous customers. Communication with them will allow you to obtain an objective assessment of the professional qualities of the freelancer, assess his ability to solve complex problems and predict the success of your cooperation.

Important: pay attention to communication with a specialist. Already the first response of a freelancer to your task can say a lot about his approach to work. Typical template responses may indicate the use of bots, a formal approach to work, or lack of responsibility. In the process of further communication, evaluate the speed of reaction, accuracy of answers and willingness to ask questions. Already at the stage of negotiations, you can determine whether the freelancer is interested in your project or seeks to complete it as soon as possible.

Difficulties while negotiating a project

Successful interaction with freelance specialists is based on a clear understanding of goals and mutual expectations. This requires:

Extremely clear project objectives. Describe the desired result, set deadlines and outline key work requirements.
Joint definition of quality criteria. Explain what parameters must be met in order to consider the work successful.
Regular feedback. Schedule meetings or online calls to discuss progress, share information and make adjustments.

It is extremely important to fix all agreements in writing: draw up a contract and simultaneously talk about the main points in the mail, chat or in a separate document (for example, in a stylegide or in the terms of reference). Clearly stated expectations and criteria for acceptable outcome serve as grounds for payment or non-payment of fees, and also protect the contractor from unreasonable claims that go beyond the initial agreements.

Intermediary services make it easier for customers to work with freelancers, regardless of where they are located – in Russia or abroad. Specialized platforms take on complex issues of payments and document management, ensuring legal purity and tax reporting. Business can focus on projects and quality of work, rather than accounting and international transfers, increasing the effectiveness of cooperation and spending energy on finding truly qualified performers, including for long-term cooperation.