A company I know of recently started using an employer of record to deal with American freelancers. They wanted to hire a foreign freelancer, but instead of putting her on the third party’s payroll, they instead put her on the company’s payroll just like a regular W2 staff employee. I think there were legal complications using third parties for foreign freelancers because of the requirements of her visa.

Her rates didn’t change, she’s still free to leave when she wants, and she’s avoided the extra taxes and fees from the third party.

http://www.cnn.com/video/#/video/politics/2010/02/18/sot.cpac.obama.jokes.cnn?hpt=C2

http://www.nytimes.com/2010/02/18/business/18workers.html?pagewanted=1&em

It seems the point of the article is that classifying workers as employees protects workers through paid overtime, sick days, vacations, etc. And of course, the government is hungry to collect on employer taxes.

I don’t have a problem with workers being given overtime, sick days, and vacations, or even companies paying their dues. This is generally a positive thing for worker rights.

However, I have a huge problem with MBO and Yurcor, because they enable companies to protect their bottom line at the expense of the freelancers. Rather than improving the working conditions for freelancers, they’ve managed to offload expenses that should be paid by the employers onto the freelancers through creative accounting.

These expenses and taxes outweigh the costs freelancers previously paid, which were already very high.

MBO and Yurcor are also confused about the classification of the freelancers that sign up with them (see MBO response). This indicates that they themselves are out of touch with the laws. MBO’s demonstrated ignorance and fancy footwork around issues can’t possibly shield companies in the long term from employer responsibilities.

Freelancers get paid a higher rate because they lack job security. Companies should not expect freelancers to pay for their operating costs just because companies never had to in the past.

Finally, just because companies hire third parties does not absolve them of their responsibility to pay the employer taxes. To quote the IRS “The employer is ultimately responsible for the deposit and payment of federal tax liabilities.” The key word being PAYMENT of federal tax.

http://www.irs.gov/businesses/small/article/0,,id=176943,00.html

even the potential savings on SE taxes if you decide to file your taxes as an S-Corp don’t outweigh the fees stated above.

it seems to me that having freelancers incorporate is just a way to pass the overhead costs of the studio to the artist, unless someone can show me otherwise.

http://www.linkedin.com/groups?about=&gid=2762465&trk=anet_ug_grppro

Please join and help me out on this!

Eric

In any case, it makes me wonder what I would do if I were to travel to the USA for work. How does this situation affect international freelancers? The US freelancing market suddenly become a whole lot more confusing to me…

“the fact a worker is incorporated has little or no effect at all in determining worker status.”

Check it out …