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Hiring freelancers can be a great way to keep costs down. Freelancers are an alternative to hiring full-time employees that appears to be growing in popularity.

If you’ve never hired a freelancer before, there are some dos and don’ts to maintaining a good working relationship. One area that often needs addressing is payments. Here are some common mistakes to avoid when paying freelancers.

Classifying workers incorrectly

One of the major mistakes businesses make with their freelancers is classifying their working status incorrectly. Is this person a freelancer? Are they an employee? It’s not always clear-cut so it’s best to spend some time establishing things.

IR35 is a law anyone who has freelancers/contractors needs to look into. This law aims to cut down on “disguised employment”. This is where a business hires someone as a freelancer/contractor but treats them like an employee. In this case, businesses get out of paying employee benefits including National Insurance because the worker is officially a freelancer.

Make sure you read up on IR35 to see whether it applies to you and your freelancers. If you are under IR35, you will need to change the way you pay freelancers. Instead of simply paying invoices each month, you would need to put them through PAYE instead as employees.

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Not keeping bookkeeping records

Any time you pay a freelancer, this needs to be entered into your bookkeeping records as an expense. This is important for when you come to do your taxes as it can be subtracted from your profit figures. This way, you don’t need to pay more tax than you need to, so it’s in your best interest to have these records accurate and up to date.

Not establishing an invoice schedule

Late payments are sadly a common part of doing business. However, if you want to keep good freelancers on side, they will appreciate a consistent invoice schedule. Most freelancers will invoice at the end of the month for regular work. Many have to wait months for an actual payment though, with numerous emails in between chasing up payment.

Having a set payment date or a 14 or 30-day deadline ensures consistency and makes you a much more reliable client to work with.

Not establishing a point of contact

When it comes to getting invoices paid, it helps if freelancers have a point of contact they can get in touch with for questions. A lot of the time, the person responsible for paying the invoices will be different from the person they discuss work with.

It may be beneficial to keep just one point of contact for all work and invoicing. However, if this process doesn’t appear to be working, it could be worth introducing the freelancer to whoever handles the invoices too. This could simplify the conversations between the freelancer and the business.

Learn more about how our online accountants can help you and your business. Call 020 3355 4047 for a chat with one of the team, or get an instant quote online.

About The Author

Christopher Jones

Forensics graduate-turned copywriter and blogger. I love turning complex topics into easy to understand, yet engaging pieces of content.

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