Freelancer

A freelancer is a self-employed individual who provides services to businesses or individuals on a contract basis, rather than as a permanent or hourly employee.

Homebase Team

Min Read

What is a freelancer?

A freelancer is a self-employed individual who provides services to businesses or individuals on a contract basis, rather than as a permanent or hourly employee. Freelancers often work independently, set their own rates, and control their own schedules. They may be hired for one-time projects, recurring work, or long-term collaborations, but they are not on a company’s payroll.

For small business owners, freelancers offer flexible, on-demand access to specialized skills—like graphic design, writing, marketing, or IT support—without the long-term commitment or overhead costs of hiring a full-time employee. When managed correctly, freelancers can help businesses stay nimble and scale as needed. And with tools like Homebase, employers can streamline the hiring process and stay organized with proper documentation and classification.

Freelancer vs. employee: Key differences

It’s essential to distinguish between freelancers (also known as independent contractors) and W-2 employees, as the classification affects tax obligations, benefits, and labor laws.
Freelancer (Independent Contractor)

Works for multiple clients
Sets their own schedule
Uses their own tools/equipment
Paid by project or milestone
No tax withholding by client
Not eligible for benefits

Employee

Works for one employer
Employer controls schedule
Employer provides tools
Paid hourly or salaried
Employer withholds income/payroll taxes
May receive benefits like PTO or insurance

Misclassifying an employee as a freelancer can result in penalties, back taxes, and legal claims—so it’s important to classify workers correctly based on how the work is structured and controlled.

Common roles freelancers fill

Small businesses often turn to freelancers to fill skill gaps or take on non-core work. Common freelance roles include:

Graphic designers and illustrators
Copywriters, editors, and content marketers
Web developers and IT consultants
Photographers and videographers
Virtual assistants or admin support
Social media managers
Bookkeepers or accountants
HR or legal consultants

Hiring a freelancer allows a small business to access specialized expertise without hiring a full-time team member.

Pros and cons of hiring freelancers

Benefits:

Cost-effective – No payroll taxes, benefits, or long-term salary commitments
Flexible – Hire as needed, based on project or seasonal demand
Access to talent – Tap into skills your current team doesn’t have
Scalable – Add or reduce workload quickly based on business needs
Low overhead – Freelancers typically use their own tools and work remotely

Drawbacks:

Less control – You can’t dictate hours or methods like you would with an employee
Limited availability – Freelancers may work with multiple clients at once
Onboarding time – Even temporary help needs training on your brand or systems
Confidentiality risks – Be sure to use NDAs or contracts to protect sensitive information
Compliance challenges – You must ensure proper classification and tax reporting

Legal and tax considerations

When hiring a freelancer, you are not responsible for withholding or paying payroll taxes (Social Security, Medicare, unemployment). However, you do need to:

Collect a W-9 form from the freelancer
Issue a 1099-NEC if you pay them $600 or more in a calendar year
Avoid controlling their work like you would an employee
Use a written agreement outlining payment terms, scope of work, and deadlines
Ensure compliance with state and federal laws on contractor classification

The IRS uses several criteria—like behavioral control, financial control, and the nature of the relationship—to determine if someone is truly an independent contractor. Misclassification can trigger audits or legal claims, especially if the freelancer works exclusively for you or is subject to strict direction.

Best practices for managing freelancers

Use detailed contracts for each project or engagement
Set clear expectations around scope, deadlines, communication, and deliverables
Track invoices and payments for tax season
Protect confidential information with NDAs when necessary
Respect their independence—don’t treat them like W-2 employees
Build a bench of trusted freelancers you can rehire for future projects

How Homebase helps streamline hiring and documentation

While Homebase is designed primarily for managing hourly employees, it can also help you stay organized when working with freelancers and independent contractors. You can:

Digitally collect and store hiring documents like W-9s and contracts
Track hours or deliverables if you're paying based on time worked
Centralize team communications in one place
Stay organized with tax reporting and deadlines
Transition freelancers to full-time hires more easily if needed

Freelancers can be a vital part of your business’s growth strategy—especially when you manage the relationship professionally from day one.

Explore Homebase Hiring & Onboarding to simplify your hiring process, stay compliant, and build a flexible workforce that grows with your business.

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