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How to get paid as a freelancer in 2021

Changing careers is on the minds of a lot of people in 2021. After over a year of adverse effects due to COVID-19, over 1 in 4 women are considering changing their career, according to a MetLife survey

By working at home, many people have separated their work from the place where they do it. Many have realised that the place and people are what they like, not necessarily the career. 

Solutions range widely on this issue, from re-training to so-called “returnships.” Companies know that change is needed, so they are spending to enable employees to change positions without leaving. 

Some employees are deciding to leave their companies to seek more suitable jobs for themselves. Basically, starting their own freelancing business and being their own boss.

Freelancing can be a stop-gap effort to do while searching for a permanent position or a permanent position in itself. It adds a level of difficulty because you must perform your manager’s job and your own, but, that being said, you can still use freelancing to construct a rewarding career.

As more people join the freelancing market, companies can hire talent more effectively for specific jobs. Companies can hire freelancers rather than hire an employee to complete particular tasks, projects, or duties. 

Hiring freelancers allows for the dynamic scaling up or down a company’s size and handling larger projects without incurring the monthly costs of hiring full-time employees. 

Many online freelance sites gather freelancers together, promote them and evaluate their skills to give employers better quality assurance.

What is a freelancer?

A freelancer is an illustrator or a graphic designer that gets paid by various people to do custom projects. A freelancer is a programmer who charges by the hour to help different teams in their specific field of expertise. A freelancer could be a consultant who works for a couple of weeks to coach individuals on their businesses.

Freelancing can be a genuinely freeing style of building your career. It’s intimidating, though, because at first, you’re probably wondering, “how am I going to be paid?” 

It’s a step-by-step process, but once you get the hang of it, it allows you to do almost anything and get paid for it.

What’s the difference between a freelancer and an independent contractor?

Employee, independent contractor, or freelancer – what’s the difference? An employee is someone who performs duties, which are less well defined. They work regularly and are routinely paid by the same person or organisation. 

An independent contractor can be paid regularly, perform regular tasks or get paid upon the successful completion of a project or achieve specific milestones. Independent contractors can be either people or companies, but they can also be freelancers if they’re individuals. 

A freelancer can be a type of independent contractor, but in general, a freelancer is a person (not a company) who performs specific tasks or completes a project for certain amounts of money. 

It’s also common for a freelancer to bill time and to agree only on an estimated number of hours at a particular hourly rate. 

When time is billed, freelancers still need to estimate and agree on the hiring party’s costs. The contract should include the estimated time, price, project tasks, schedule and other details.

Protect yourself with well-designed contracts

Designing your contracts in a particular style, without leaving out any details, can benefit both parties. Especially for freelancing, you should pay special attention to the contract preparation. One of the best ways to do this is by starting with a reliable contract template. 

An independent contractor template is a great place to start on your freelancing contract as it will often contain many different options for how to charge your client. 

Although first-time clients often don’t agree to do it this way, prepayment is the safest option for a freelancer. Some small amounts, like ½ up-front, 30% up-front, or similar prepayment and post-payment schedules, are reasonable. Jobs that have a higher level of risk should require higher prepayment amounts. 

Performance fees are another useful tool. Costs can be calculated on a performance basis, such as if you make a particular deadline. These fees can be “pot sweeteners” for the client because they offer a discount if you don’t meet the performance qualifications. 

If you have a performance fee as part of your overall project compensation, it can be accompanied by a base fee. Commissions or performance fees can add to the success fee and are lower-risk payments that the client may be willing to agree to. 

An important thing to note for freelancers is that these success fees look smaller on paper than they end up being at the end of a contract. 

Because they’re usually expressed in small percentage points, they can allow you as the freelancer to negotiate more money. 

Part of the risk is absorbed by the client paying an up-front percentage, and the other amount of the project risk is absorbed by the freelancer in making fees contingent on the project’s success.

Platforms offer the highest security

Contract templates can help, but you want to introduce additional clauses and protections for freelancing. For example, you can include a limitation on prepayment, verification of work or escrow (usage of a third-party to hold and disseminate funds). 

Suppose your contracts are of a specific size. In that case, you can freelance with large multi-service online freelancer hubs like Upwork or Fiverr, or more specialised freelancer hubs like The Content Panel for freelance writing gigs or SoundBetter, if you’re a freelance musician. 

Platforms enable the freelancer to do work conveniently and charge by the hour or in terms of a project fee. The bi-directional rating system protects both freelancers and hirers. 

Using such an online platform for freelancing allows you to have more secure payments using escrow. 

Escrow is when the payment system retains the amount from the hiring party in advance. The sum is then paid to the freelancer after the hiring party confirms that all the tasks have been completed. 

The freelancer and hiring party can also use the platform to solve disputes. Freelancers can record their screen and provide proof of work, further enhancing their payment process’ security. 

Secure payment is perhaps the most challenging part of becoming a freelancer, so it’s super useful to have options like Upwork on the market.

People have many misconceptions about payment online – that it isn’t secure or fully legal.  It depends on the country you work in, but almost all EU countries have small business options or special rules for low-income businesses (such as yourself as a single employee). 

You’ll need to do your own research, but some countries have much more paperwork than others. You can also consider joining a cooperative or an umbrella company that completes the paperwork for you – known in France as “portage salaries.” 

Contract signing is done with electronic signature applications like DottedSign. Then the payment is transferred using banks, just like writing a check in-person.

Today, contracts signed with electronic signatures online are just as valid as contracts that are physically signed in person for many scenarios. 

Although you should always consult a lawyer to be sure, freelancing is one of the most common scenarios where electronic signatures are commonly used.

Electronic contracts still need to have the same components as paper contracts, and platforms will automatically generate the agreements as if they were written on paper by a lawyer. 

When you enter your information and click “accept job offer” or something similar, the fine print usually involves quite a lengthy electronic contract and signature.

Know your licensing rights

When you’re offering your services as a freelancer, you need to understand that the copyright is held by the creator and is not customarily sold when you create works like photography, videos, and original visual content. Instead, it’s typically licensed. 

Licensing is defined in EU copyright law, although it varies slightly from country to country. In general, the rights protected are defined by the World Intellectual Property Organisation (WIPO) Copyright Treaty.

By licensing one, all, or many options, you can limit what is done with your content. You can also market your work differently and charge more for more exclusive licensing.

Exclusive licenses are often where the license is offered to one party for a set amount of time and can not be offered to others. 

Such licensing can be more valuable than the non-exclusive type so that companies may make more money. Exclusivity can be dangerous, though, potentially limiting your content’s exposure to a smaller audience.

Non-exclusivity clauses are often used to reinforce contracts where the “work” is not licensed with exclusivity. These works can be sold or displayed by the creator a second time. 

By including non-exclusivity clauses, you as the freelancer can insulate yourself from future disputes about the licensing and who can make money from your work or product.

Use secure, convenient payment systems

Many tools allow payment outside of a freelancing platform that includes plenty of useful features. PayPal, for example, includes invoicing and the ability to attach files to an order or to scan a card in-person and send an email receipt. 

Although scanning a card in person is useful for some work, online freelancers need to make their payments as easy as possible. For example, by using email and SMS payments, making things easy for users no matter where they are in the world. 

You can accept credit cards directly from Google Wallet, but this can be risky. Keep in mind that the card provider will protect the payer if they have a dispute, not you, the vendor. However, if you use an escrow service or platform, they will provide a certain level of protection for you.

International payments might be necessary for your freelance work. While common, you need to make sure you’re aware of the fees. It’s normal to pay 1-3% for transfer fees, but not much more. 

Any time you are changing currency, you’ll need to pay a conversion fee. These can be large, so it makes sense to maintain a common currency account in Euros. 

Transferwise, for example, will allow you to create a Euro account for international payments to pay into, without any conversion fees.

Register your business

Check the country where you reside. Most countries require you to become an employee of an umbrella company or to form a small business of some form. 

You can look up specific details for creating a business in your country of residence here.

Don’t get bitten by taxes

As a freelancer, the government considers you to be an independent contractor, and jurisdictions have different rules. 

You’ll need to pay a certain percentage of your gross income into taxes. It’s usually around 12-15% for small businesses, but you’ll still need to purchase your own health insurance, which won’t automatically be provided unless you opt to use an umbrella company.

A business license helps you balance liability. If damages are owed, or the company is owed money, it is easier to reclaim without going to court. Taxes for freelancers are not usually costly and are often much cheaper than penalties.

Conclusion

In 2021, freelancers are in abundance, with many people becoming more comfortable with remote work or working multiple online jobs. 

There are more freelancers than ever now, but the market is also growing, so many more companies are hiring. Work for freelancers is becoming more profitable, varied, and enjoyable. 

Although 2020 was a challenging year, here’s looking forward to a more vibrant community of freelancers in 2021 and the future.

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