How To Navigate the Risks of Hiring Freelancers

You think working with flexible talent might help your team do great things — but you’re not quite convinced. More than half of businesses plan to increase their use of freelancers, drawn by a deep talent pool that opens the door to specialized skills and expertise, staffing flexibility, better cost management, and speed. And yet, you aren’t alone if you still have concerns.

What can your organization do to move forward with confidence? In this article, we’ll look at how teams can navigate some of the risks, such as:

• Assessing quality and reliability
• Ensuring confidentiality and data security
• Managing communication and collaboration
• Setting clear expectations and tracking milestones
• Complying with legal and regulatory requirements
• Handling payment and invoicing processes

Understanding the potential pitfalls, and how to mitigate them, can help you harness the benefits of working with independent professionals to innovate, grow, and adapt.

Assessing quality and reliability

The cost of a bad full-time hire is steep — estimated by many employers to be three to four times the position’s salary when you account for hard and soft costs. However, companies also face opportunity costs when they don’t have the skills or scale that they need.

Independent talent helps companies bridge that gap in a way that’s flexible, cost-effective, and faster than traditional hiring methods. And these individuals are committed to good work: 67% of independent professionals say they want to pursue work that they’re passionate about or find meaningful.

But how do you know whether an independent professional can deliver?

As a client, you have many different ways to find and hire freelancers, from work marketplaces like Upwork to word-of-mouth referrals. Whatever approach works best for you, the right strategy can help you predict quality and reliability performance through the process itself.

Prioritize skills and hands-on experience

Focusing on the skills you need for a specific project, rather than role-based potential, can be a shortcut to finding the best talent. For example, you can:

• Prioritize two to three must-have criteria. Look for qualities that will make your project a success — and ignore the rest.
• Watch for signs of experience. Look for similar projects in their portfolio, see if they ask particularly insightful questions, or ask how they’d approach your project.
• Start with a small test project. You don’t have to jump directly to business-critical work; engage talent for a similar paid task to see how they communicate and assess the quality of their work.  

“The paid writing samples really let me see which writers put attention and care into creating a finished product that read as a teambuilding.com article. It was also a test to see how they responded to the directions we gave them.”

— Angela Robinson, Marketing Coordinator for teambuilding.com

Learn more: How Upwork Talent Helps an Events Company Thrive in Virtual Spaces

Make the most of your interview

A proposal from an independent professional should cover the basics of who they are, what they do, and how they can help your project succeed. But it’s the interview that can bring that introduction to the next level — you can learn as much from what someone says as how they say it.

Ask questions about an independent professional’s perspective on your project logistics, their experience, and the work itself. Listen for responses that:

• Tap into insights gained through projects they’ve worked on in the past
• Show that they understand what you’re looking for
• Underscore the criteria you’ve prioritized for your project’s success

Leverage work marketplaces

On Upwork, for example, every independent professional has a profile that provides a snapshot of their experience within the work marketplace. It provides a summary of their skills and work history as well as:

• Job success score, a metric that reflects client satisfaction on Upwork
• Talent badges, which highlight professionals with a history of success on Upwork or demonstrated expertise
• Statistics that reflect their history on the Upwork platform
• Feedback from previous clients
• Portfolio samples

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Ensuring confidentiality and data security

The cost of any sort of cyber incident can be significant. Insurance provider Allianz Commercial found that companies rank cyber incidents as a top risk, citing concerns about business disruptions and cybercrime costs that are projected to top $9.5 trillion annually.

And it’s not just nefarious activities that can leave a business exposed; human error can be just as damaging. As a result, many companies have a foundation for remote work security already in place — which means extending security controls to include independent talent may not be a heavy lift.

First, create a talent engagement process that has best practices for data security built in. This process might include:

• Engaging talent through a trusted source, such as Upwork
• Conducting appropriate background checks on anyone who might handle sensitive data
• Asking the skilled professionals you might work with how they protect their clients’ data
• Getting all external collaborators to participate in data security training

Then compare your project requirements against the CIA triad, a framework that organizes information security into three categories: confidentiality, integrity, and availability.

Confidentiality

Ensure that sensitive company information, such as project details and client data, is accessed only on a strict need-to-know basis and is protected from unauthorized disclosure. Organizing projects by level — such as sensitive, confidential, private, proprietary, and public — then setting access criteria can be a good first step. You may also want to leverage other measures such as data encryption, use of virtual private networks (VPNs), and authentication as well as contractual agreements, such as a non-disclosure agreement (NDA).

Integrity

Protect the accuracy and consistency of your company's data so it can’t be improperly altered or damaged during the course of the project. Measures such as version controls, checksums, and user access permissions—which can be turned off when the project wraps up — can help protect the accuracy and reliability of data.

Availability

Provide access to the company's data and resources, without any undue interruptions or delays, when it’s needed. To protect against disruptions, you can incorporate redundant systems, regular maintenance, backups, business continuity planning, and network bandwidth management.

Do you have the right protections in place to bring an independent professional on board? Work with your company’s information security team to address any gaps you’ve spotted.

Managing communication and collaboration

Your team’s performance revolves around its ability to share information, ideas, and feedback. One study estimated the annual cost of poor communication to be $1.2 trillion due to:

• Ineffective use of time and money
• Reduced engagement and productivity
• Higher employee stress, burnout, and turnover
• Decrease in customer satisfaction

Some of the most common challenges for remote workers impact their ability to communicate, such as scheduling issues, inconsistencies, and creating productive connections at a distance. By incorporating tools and best practices for remote work — regardless of whether they work in the same office or on different continents — your team can take control of their work. They’ll be better positioned to be productive, adaptable, and aligned with each other.

One of the most powerful changes you can make is to embrace asynchronous communication, a method of communication that happens over a period of time, often through written messages or recordings. This simplifies communication when a group of collaborators isn’t available at the same time, whether due to different time zones or conflicting commitments.

Related:

• The Top 17 Collaboration Tools
• 14 Ways To Improve Remote Team Communication

Setting clear expectations and tracking milestones

A well-crafted job post is often the first step to establishing expectations, boundaries, and requirements as a healthy base for your relationship with independent talent.

“Sometimes companies are general in their descriptions, rather than providing the detail of an opportunity or role that could help top talent know when to opt in or out,” Sasheen Murray, an independent customer experience consultant, explained in her tips to help clients attract top talent. “[More detailed information] is helpful and also tells me the company has been thoughtful and clear about what they are looking for and that sets me up for success.”

If a job post is a signpost that points toward a project’s destination, the contract is a roadmap to keep you and an independent professional together along the way. A good freelance contract can make that happen by confirming:

• Scope of work. The project scope and statement should detail exactly what the independent professional is being engaged to do. The more detail, the better, to help prevent misunderstandings as work moves forward.
• Payment terms. Define how much the independent professional will be paid — including whether payment will be hourly or fixed-price — when they should invoice you for their work, and when they will be paid.
• Deliverables and deadlines. Clearly outline not just the types of project deliverables the independent professional is responsible for but also any deadlines or milestones they need to meet.
• Copyright or intellectual property rights. Describe who owns the deliverables and at what point ownership transfers over, if relevant. For example, while it's typical for clients to own project deliverables, the ownership may not transfer to them until after the final invoice is paid in full.
• Confidentiality. A confidentiality clause is crucial if the independent professional will be working with sensitive company information.
• Conditions for termination. Explain the process to follow if either side chooses to end the contract, as well as any conditions for termination.

A well-structured contract is the framework for your working relationship, a source of truth that lays out what’s expected, when it’s expected, and how you will interact.

“I just give the talent lots of details and we communicate openly, so they know what’s expected. We’ve found success across the board, to the point that we’re still reaching out and using the same people on the platform.”

— Cathy Bissell, Founder, BISSELL Pet Foundation

Learn more: How the BISSELL Pet Foundation Saves Animals

Complying with legal and regulatory requirements

One of the most important considerations when working with independent talent is the issue of worker classification — determining whether a worker should be classified as an independent contractor or an employee. This has no uniform easy test, since the criteria can change by location and context. However, the legal and financial fallout from getting this classification wrong can be significant.

Despite the gray area, you’ll want to keep the general differences between employees and independent workers in mind.

Independent professional or employee?

Note that a yes or no to a single question may not alone determine classification status.

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Learn more: Worker Classification: Employee vs Independent Contractor

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Legal and tax implications vary by jurisdiction — and are prone to change — so you’ll need to comply with any obligations that apply to your specific circumstances. This may include reporting payments to tax authorities or withholding taxes.

Certain industry-specific requirements — such as health and safety standards or specific certifications — may also need consideration.

Data privacy laws, such as the General Data Protection Regulation (GDPR) in Europe or the California Consumer Privacy Act (CCPA) can be complex. Both you and any independent professionals you work with need to be clear on the rules so any sensitive information can be handled correctly.

Handling payment and invoicing processes

Predictable payment and invoicing are the backbone of relationships between clients and independent talent — and a significant risk to both sides if anything goes wrong.

As a client, you need to minimize administrative burden while accounting for tax considerations, internal approvals, payment cycles, and cash flow management. For the independent professionals you work with, getting payments that are accurate and on time isn’t just a financial issue — it’s essential for maintaining trust and shaping your organization’s reputation.

Keep this critical process on track by establishing a clear process from the beginning. This may include:

• Clear payment terms. The contract you and the independent professional agree to should spell out rates, invoicing frequency, and payment deadlines. If your company operates with set net terms, it can be helpful to establish expectations upfront and preempt potential misunderstandings.
• Standardize your processes. Independent professionals have their own invoicing processes, often using small business software to help manage back-end requirements. Finding ways to standardize this process, such as using a common template or platform for the professionals you work with, can help ensure better financial tracking and consistency.
• Establish a reliable workflow for approvals. Make sure payments go out on time by setting up an efficient approval workflow for invoices that keeps everything moving smoothly.
• Be picky about your payment method. You can choose many different ways to pay the freelancers you work with, from Venmo to electronic funds transfer (EFT). Consider whether the method you currently use has the security services, escrow accounts, scalability, and features to keep payments in line.
• Ask for feedback. Nothing upends a great process more quickly than finding out it doesn’t work the way it should. Check in with the independent professionals you work with from time to time to see whether they have any issues to bring to your attention.

Related: Payroll Liabilities: Basics, Examples, and How to Calculate

Minimize disruption with a reliable freelancer network

The average full-time freelancer works with 10 clients in a given six-month period, a roster that may spark concerns that you’ll find a great independent professional only to discover that they’re never available.

Running a successful small business means that many independent professionals are adept project managers who are happy to accommodate repeat clients. However, there’s always a possibility that a specific professional won’t be available on your timeline.

To offset this, many teams build their own virtual talent bench — a team of experts who get to know your work and your company through repeat projects.

“Because we have our Upwork talent bench, we can say in our proposals that talent on Upwork is a key part of our last mile build strategy. I can be confident that we’ll have all the needs for a project filled in under two weeks. That pretty much beats out 98% of the other vendors.”
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— Michael Contreras, Founder & President, Ensemble Consultancy
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‍‍‍How Flexible Talent Helps a D.C. Firm Save Its Clients Millions

You can build long-term relationships with talent by laying the groundwork with a few key principles — many of which are the foundation for any positive business relationship. This includes:

• Clear communication. Establish that you’re organized and easy to work with
• Flexibility. Recognize that effective collaboration may take some compromise
• Appreciation. Find ways to let them know that their contributions toward your success are valued
• Mutual respect. Acknowledge that you may have a clear vision of what’s best for your business while they have the knowledge and expertise to help you get there
• Trust. Trust is pivotal to any relationship; working with independent talent is no different. Having confidence in each other’s reliability, integrity, and ability helps you work together to achieve great things

Leverage Upwork to help mitigate the risks

“What’s the value of a project going out on time — and what’s the impact if it doesn’t? Without independent talent, would we have been able to deliver the same quality? Would we have had the right skills on the team? There’s an opportunity cost when you can’t get the talent you need into place.”

— Alfie Callan-Shropshall, Head of Talent for Crownpeak‍

What a SaaS Company Gained by Rethinking Talent Acquisition

Upwork is designed to provide a safer and more efficient experience that helps businesses find and hire the skilled professionals they need. We help you manage the risks of working with independent talent, including classification assessment and badges for top talent on Upwork.

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We make it easy for you to keep your business operations on Upwork with multiple ways to engage talent, built-in collaboration tools, and features that support trust and transparency, such as payment protection and Message Center.

Ready to engage top talent that can bring your next project to life? Get started.