In many industries, it makes perfect sense to hire freelancers and contractors, especially in software development. You may need to scale up or down very quickly, and in some cases, you might need to contract out key parts of your business that are not directly related to the main product your business produces. Contractors have much more autonomy, allowing you to be more hands-off.
However, for those who have long-term relationships with contractors, treating them like employees can provide significant benefits.
The IRS considers three categories when determining whether someone is an independent contractor or an employee: behavioral control, financial control and relationship. However, it generally boils down to whether an employer can control what will be done and how it will be done, not just the end result.
This is important. If the IRS determines that someone who was considered an independent contractor is an employee, the business is then liable for back taxes and could be fined. However, it is still possible to give independent contractors substantial benefits without the IRS classifying them as employees.
Discounts and Services
You can give anyone a discount or a free service, regardless of whether they are an employee or not, and this can provide a significant incentive to keep everyone happy, including your contractors. This can include access to an employee shop, a set percentage off merchandise or a few free bits of merchandise thrown in.
These create goodwill, regardless of whether the contractor uses them or not. It also helps turn a freelancer into a proponent of your goods or services.
Be a Good Communicator
Communication is key to the success of any project, and employees typically have easy access to their supervisors and those making the decisions. If you give that same level of access to contractors, you let them more easily produce the results you want and reduce frustration at all points in the process.
✓ Clear milestones
✓ Clear vision documented in language that’s appropriate for the project
✓ Clear clarification when requested
Consistency is particularly important. Changes — especially when it comes to software — cost money and time, and projects with an inconsistent vision drag on, missing important dates, driving back launch cycles or reducing the time available for quality assurance. Even inconsistencies in brand guidelines can cause major issues as different project managers want different things. Your contractors should be able to push back on these inconsistencies and request clarification from the principal stakeholders in the same manner that an employee would be able to. This helps them achieve the vision that you’ve set for your software or app.
Pay on Time
A surprising number of projects fail or are delayed because businesses don’t pay their contractors. While state and federal laws require employees to be paid on time for the hours that they’ve worked (or time frame, if they are exempt), contractors do not always have the same amount of protection. Around 29% of freelancer invoices are paid late, adding significant costs and time to chase up, and this results in a reduction in time contractors can spend on your project.
If the payment is late enough, it causes significant frustration and results in lower productivity. In addition, it makes freelancers and contractors reluctant to prioritize your work, as they are unsure whether they will get paid for it. Paying on time makes you stand out and makes your software developers happy to work for you long-term.
This is one area where you have to be a little careful, as offering training can be considered the mark of an employee rather than a contractor. However, offering it for a nominal sum (say $1) as a benefit may get around this, although the usual “take legal advice specific to your state as required” disclaimer applies here.
The majority of software developers are valued for their skills and knowledge of specific languages and situations rather than formal education, and adding training to the mix can help your freelancers work for you more effectively. Offering training as a non-essential benefit for a nominal sum can improve freelancer loyalty and ensure that they have the skills you need — vital in a competitive marketplace.
Share Your Goals
Ultimately, you need to share your goals regardless of who you are working with. This way, you can ensure that your contractors are aligned with your business goals and are working toward the overall vision you have for your company. They also may be able to suggest ways of achieving that goal more effectively through their specialization through their knowledge of systems and how they work. This enables you to leverage their knowledge and provide a more rounded view of your current situation, even if you personally do not have the skills that you are paying for.
What About Using a Software Development Team?
This provides the best of both worlds in many cases. Management of the team is devolved to the company providing it, and you can simply concentrate on the output. You also get verified freelancers who have proven themselves, and you can exert or as little control over the process as needed. You get a contractor who has a personal relationship with you, and you also get a team that works on your schedule.