(Last Updated On: 06/06/2017)

A freelancer is referred to as a self-employed person who, on the basis of a service or work contract, carries out orders for an enterprise without being incorporated into the company. So the freelancer is not a classic worker. He or she does not exercise social security-paid employment. CareerThoughts.com mentions further specifications and special features as well as the pros and cons for employers and freelancers.

Definition of freelance work
Difference between freelance work and a fixed employment relationship
Narrow ridge to bogus self-employed
Typical industries for freelance work
Advantages and disadvantages for the employer

Definition of freelance work
Freelance work is mainly characterized by the fact that the freelancer, according to the Social Code, is not bound by his employer and is not involved in the organization’s work. This means that he can freely divide/allocate his work and is not compelled to carry out other job instructions from his client. The projects that a freelancer carries out are often limited in time. A freelance is self-employed and is not employed by a company. For tax reasons, he must be registered as a “self-employed person” at the IRS.
The term “freelancer” was coined in the Middle Ages, when freelancers were recruited as Armed Knights for individual wars.

Difference between freelance work and a fixed employment relationship
The following differences exist between a permanent employee and a freelancer:
A fixed employee receives a contractually stipulated salary.
He is employed by his employer for social insurance.
He is entitled to a cancellation protection (as soon as the employment relationship is at least six months and his employer employs at least five persons.)

A freelancer, on the other hand, does not receive a fixed salary (but a fixed pre-agreed payment.) He has to take care of his social security and has no protection against dismissal. Free employees are entitled to leave, according to the Federal Holiday Act, only if they are to be regarded as “employee-like” persons. They are not tied to the usual working hours and can freely divide their working time. Freelance employees also have the opportunity to work in parallel for several different employers.

Narrow ridge to bogus self-employed
Freelance employees can have the same field of application and similar tasks as the permanent employees in a company. But once an employee is dependent on an employer and has to execute the instructions, a “de facto employee relationship” can arise. Whether there is a so-called “bogus self-employed” is independent of what is in the agreement. The actual activity is decisive. This means that in a contract of employment it is possible that it is free cooperation. However, if the Freelancer has the same tasks as a permanent employee and is tied to his or her boss, there is a bogus independence.

If the social security or the competent tax office determines (also retroactively,) the fact that it has been a free cooperation for a fixed employment relationship, the employer must pay the contributions for unemployment, pension, and health insurance to the social security funds, and possibly even an additional penalty payment.

Typical industries for freelance work
Freelance employees are usually hired for certain projects. Free employees are particularly widespread in industries such as event management, advertising, and journalism. There, freelancers are hired for individual events, advertising projects, or reportages. As usual, freelancers are also hired in the gastronomy, the transport industry as well as in the artistic and cultural field, but increasingly also in technical professions.

Advantages and disadvantages for the employer
The use of freelance employees has both advantages and disadvantages for companies. Even if there are always some uncertainties in working with people, pros and cons can be weighed quite well, so that each employer can make a better choice.

The employer can engage the freelancer as required by the situation and use them flexibly. For example, they can set the hourly service contracts or a project (fixed amount of money for a limited work.)
Free employees are not entitled to a notice period. However, in a contract a notice period can also be negotiated with freelancers.
The employer saves the social security contributions. Freelance employees make an invoice so that the amount for the employer is grossly equal to net. For the freelancer there is a risk that the invoice will be paid late.
The disadvantage for the employer, however, is that freelancers can also be hired by other clients and are therefore sometimes not always available.
New freelancers must first get into the specific practices and requirements of each company before they can develop their full capabilities.
For tasks which do not fall within the scope of the freelancer, employers may, according to labor law, only appoint permanent employees
In addition, a freelancer receives a higher hourly wage; their loyalty to the company is less compared to permanent employees because they have a direct connection with the company.

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Adil Khan
Adil Khan is freelance writer and a Computer Engineer by profession. He started writing articles for CareerThoughts.com in 2016. He writes a opinion column for a local newspaper. He is yet to join Twitter!