Moving on from the Freelancer Model

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Many Australian companies have engaged freelancers to perform back office administration on a permanent basis. As their business grows and expands, at some point there may be a  need to have a more structured offshore model and bring all the distributed work-at-home freelancers under one roof. The reasons include:

A need for better security

Having freelancers work from home is a definite security risk. You’re never sure who will be in the room watching the computer as your freelancer works. Personal computers will always be a shared resource at home. Someone else in the family will be using it, installing unlicensed software, playing games, disabling firewalls and virus checkers.

Home PCs tend to have lower specs and may become sluggish when running a virus checker. Even if you insist that the PC runs a virus checker, someone is going to turn it off.

Furthermore, even if you use Terminal Server or Remote Desktop technology, a keylogger malware or virus is going to record every single keystroke, every URL and every password typed. Viruses may even grab screenshots of the Terminal Server window and upload them to servers accessible by hackers.

Adding Voice Function

You might want your freelancer to perform inbound or outbound calls – this is hard to do professionally if your freelancers are working from home. You get dogs and roosters in the background which hardly sounds professional to your customers. “I’m sorry I cannot hear you” is not very good customer service. Furthermore, home internet connections are unreliable and tend to have poor quality.

Infrasture (Internet and Electrical)

In the Philippines they call power blackouts – brownouts! There is nothing brown about them, when the power goes out, everything turns black. You can of course buy your freelancer a UPS (Uninterruptable Power Supply).  The problem is that most of the Internet infrasture is not on UPS. When there is a brown out in an area – the Internet stops working – even if you have a UPS – the reset of the Internet does not.

Agility

It is hard to be agile with a distributed freelancer workforce. However, having everyone in one location will easily help you get new process rolled out or get immediate feedback from staff on how a current process is working. Cross training staff to backup other employees is a lot easier when people are sitting next to each other.

Culture

It is not easy to build a real team culture with a distributed freelancer workforce. There should exist activities that would stir camaraderie and rapport within your outsourced team. This, in turn, can make them work together with ease. Stirring up team culture in the workplace is normally achieved by occasional BBQ parties, beers on Friday, little treats like shakes or a free massage.

When you decide to move from a distributed freelancer network to a central team model there are a number of things to consider.

The Big one is Tax!

Many freelancers do not pay tax. They should but they don’t.

Let’s say, you are paying your freelancer $6 per hour and you want to move to a central team model with proper work agreements etc. With this, your employees need to start paying taxes and other associated government charges like health, housing and pension.

Furthermore, you have to make allowances for bonuses, paid holidays and sick leave. Considering this, you have to adjust the salary of your freelancers.

Your first option is to ensure they receive $6 per hour after tax and benefits costs. Sounds simple enough. The problem with this though, is that you will be pricing yourself out of the market. The going rates for that position might be $7 per hour and you are now paying $9.This will become the benchmark that all current employees will want and new hires will demand.

The other option is to tell the employee that they will not be taking home the same amount as before because of taxes. This usually ends in anger and tears. There is also the risk of the employee going rogue and disrupting your business.

Location

After salary and tax, location is the next big issue. It’s a big change going from walking to the PC to spending two and half hours on a bus or train just to get to work. While there are transport allowances, the adjustment will not be easy for the employee.

Relocation is an option that many employees are willing to consider if you are willing to pay for it.

Success

The only way for this to work is by a one-on-one basis with each staff member.

It needs to be planned and coordinated properly. You also need to have a backup plan.

All communication needs to be done in a language they understand to ensure that there is no miscommunication.

Moving from a freelancer model to a central workforce is not as easy as it first may seem but it is necessary if the business is growing and needs to maintain agility.

Plan Now

If you are presently using the freelancer model, you had better consider these factors and plan.

When you hire someone, make sure they pay taxes. If you are hiring from the Philippines, make sure your freelancers secure their own business permits issued by the Bureau of Internal Revenue (BIR)

Make it clear that you will be paying them for their salary inclusive of the taxes and other bonuses or allowances.

This way, it will be easier and a lot simpler when it’s time to move to a centralized team model.