The Ultimate Freelance Payroll Solutions Guide: Everything You Need to Know

December 15, 2023
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Globally, tech layoffs are fueling the freelance movement. In the US alone, more than 50% of workers will be freelancing within the next five years. The newer workforce does see freelancing as a viable career option. Fiverr, a freelance platform, also found that 67% of GenZ workers are either already freelancing or planning to. As an employer, this signifies one substantial benefit: flexibility. The ability to hire from anywhere, scale up or scale down easily and have fewer administrative tasks. 

Although freelancers reduce administrative work, they always notice one warning sign: delayed payments. A study by Barclays on UK freelancers, consultants and small business owners revealed that over 80% would turn down a job with a potential client if they had a history of late payments.

If you are planning to get more freelancers on board, you definitely need freelance payroll solutions. But, what are freelance payroll management options and how do they help you retain the best freelance talent? Let's find out! 

What's Different in Managing Freelance Payroll?

Firstly, why do you need a solution for managing freelance payroll? What's different about managing freelancers than employees?

1. Multiple Payment Schedules

Since freelancers are independent contractors, they might not follow the payment terms you establish for employees. Some freelancers may expect payment biweekly or monthly while others expect advance payments (for example, 25% of the project to be given at the project's beginning and 75% at the project's completion). To pay them, you must first set up a system to monitor their payment schedule.

2. Multiple Pay Rates

Different freelancers can quote different amounts for the same kind of service, depending on their experience. You also have to keep track of the billing rate at which every freelancer was onboarded.   

3. Multiple Ways of Tracking Billing

 An additional technicality in billing tracking is that it varies based on the freelancer's way of working and the project. There are three common ways to track billing:

  • Hourly billing: Some projects may demand hourly billing, where you follow the hours spent by the freelancer and compensate accordingly. 
  • Fixed-fee arrangements: Some contracts may expect you to pay for the entire deliverable at once.
  • Milestone-based payments: Payments can be split into parts for projects with longer duration. For instance, you could pay 25% upon the delivery of the first module, 30% upon the second, and 45% upon the final module for projects involving three modules that can take four months.  

4. Multiple Currencies

Dealing with freelancers from different countries will involve dealing with a variety of currencies. Meaning, you have to pay in the currency freelancers can accept.

5. Multiple Modes of Payment

You must check with freelancers what mode of payment they can accept. Common modes of payment include:

  • Wire transfer
  • Online payment service providers
  • Payroll software

6. Newer Compliance Obligations

Lastly, what are the government regulations for freelancer payments? For example, Indian companies are expected to withhold 10% of freelancer payments as advance tax.

What are Freelance Payroll Solutions?

A freelance payroll solution helps you pay freelancers effectively as per the rate, schedule, currency and billing method agreed upon initially. The most popular freelance payroll service platforms are:

  • Freelance marketplaces: These platforms connect freelancers with clients looking for specific services and also manage payments. Common marketplaces are Upwork, Freelancer.com and Fiverr. One downside with these marketplaces is that they take a commission on payments. Also, they are a third-party portal you can't integrate with your internal HR management systems.
  • Payment providers: Online payment providers like Paypal, Wise and Payoneer allow freelancers to receive cross-border payments. These platforms are just a means to send payments. This is not the place to manage freelancer details. For example, you will need separate project management software to track the freelance hourly rates and how many hours they spent on the project.
  • Accounting software: There are accounting software like Quickbooks, FreshBooks and Wave that provide features to work with freelancers, like time tracking, tax calculations, project management, etc. However, this software primarily focuses on small businesses only for now.  
  • Employer of record: An employer of record (EOR) helps you onboard talent in a country where you don't have a legal entity. They onboard talent on your behalf and become the employer on paper. Then, EOR becomes primarily responsible for handling payroll, HR operations and benefits. An EOR can take care of freelancer payments as well as compliance requirements. 

Why Choose an EOR to Manage Freelancer's Payroll?

All the freelance payroll management options, such as freelance marketplaces, payment platforms and accounting software, have their cons. Either the extra cost, lack of time-tracking features or scalability issues. 

Here is why EORs are the best choice to manage freelancers, especially if you are expanding in a new country:

1. Handles Onboarding to Offboarding

EOR will take care of contract creation, background checks (if needed), onboarding freelancers and other HR activities till offboarding. 

2. Provides a Centralised System for Managing Payroll

This gives you access to all freelancer data in one location. You can get all the information in one forum rather than keeping track of every detail across several platforms.

3. Supports Global Payments

You can pay freelancers in the currency they accept. EOR services enable payments in numerous currencies so freelancers can receive compensation in their local currency.

4. Tracks Timesheet

EORs like Rapid provide timesheet tracking features to avoid manual record-keeping for hourly projects. 

5. Assists in Compliance

You get support for contract creation, payment handling, tax and compliance support. You are not left on your own to figure out all the rules and regulations. 

Benefits of Using Freelance Payroll Solutions

1. Reduces Administrative Burden

You save time on contract drafting, invoice review, payment terms verification, and manual processing.

2. Avoids Lapses

EOR ensures that the freelancers get payments based on terms written in the contract and on the predetermined frequency—no more manual lapses. 

3. Helps in Retaining Talent

Related to the point above, timely payments win freelancers' trust. Delayed payments are one of the biggest red flags for freelancers. So, timely payments will help you build a better employer brand and retain top talent. 

4. Assures Compliance

While compliance requirements are definitely less for freelancers, they still pose huge risks, especially misclassification issues. EORs help you maintain payment compliance and assist in other compliance requirements to avoid ending up in hot waters with authorities.

How to Choose the Right EOR for Handling Freelance Payroll

The EOR market is oversaturated. So, how do you pick the ideal one for you? Check the below parameters to find out the EOR:

  • Does the EOR have expertise in handling freelancers for your target country?
  • Does the EOR help in creating locally compliant contracts?
  • Does it have an easy-to-use interface for both employers and freelancers? 
  • Does it offer IP protection and data security? 
  • Does the EOR provide a timesheet tracking feature?
  • Is the pricing transparent with no additional set-up, tax or termination fees?
  • Is the customer service efficient and provides support in your local language? 
  • Do the past testimonials reflect expertise in that region and industry?

Manage Freelancers in India With Rapid

Avoid the messy loophole of compliance. Work with Rapid, an EOR with deep expertise in India. Managing freelancers gets easier with us as you get:

✅Customised contracts: Our platform helps you create customised contracts compliant with local laws by simply filling in a few employee details.

✅Smooth onboarding: You can onboard freelancers in less than 5 minutes simply by uploading documents to the self-serve platform. 

✅Timely payroll processing: You can easily set up payroll based on freelancers' terms and project requirements, plus get tax support.

✅Intellectual property (IP) protection: Assures 100% control of intellectual property.  

✅Customer support: Provides a fast turnaround time to resolve customer queries

✅End-to-end talent management: You can track timesheets, give rewards, manage expenses, handle freelancer support queries and complete offboarding. 

Book a demo now to start hiring freelancers in India.

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