Two Contractual Pitfalls To Avoid In Your Next Freelancing Gig
Us remote folk may all look like the same haggard creature to some, but our financial realities can be starkly different. If you freelance, here are two acronyms to avoid the pitfalls of exploitation in your next contract.
As is well known, the world of remote employment is opening up at a dizzying pace. Companies are getting more comfortable with hiring full time talent based in other countries. While there are plenty of details left to be figured out (cross-country healthcare, taxation), this is, broadly speaking, an excellent thing.
In an indirect sense, it’s also probably fair to say that this dynamic draws its inspiration — at least in part — from the freelancers of this world.
We were sort of the scrappy V1 slaving away in coffee shops and doing our thing before working remotely was kinda oddly cool (who’d a thunk it?).
When it came time to present the feasibility study of remote working to you corporate big-wigs, we’d like to think that we featured on your deck. With our jaded expressions and bags under our eyes hopefully gracefully Photoshopped out of existence.
You see these grizzled souls — they include the author lest you hadn’t guessed — have been doing this kind of thing for years now.
Zoom and Zoom burnout are both old hat to us — we’re several iterations past those neophyte concerns. We’re happy to welcome this new crop of digital nomads to the fold. But don’t assume that we’re one and the same.
The problem, you could say, is that the memo hasn’t reached everybody in the hiring chair yet — and sometimes us humble freelancers are won’t to say ‘yes’ a little too easily. We may have expedited the problem. But we didn’t spawn it.
So here’s the short version:
Those of us who choose to structure our businesses as freelance concerns are not the same thing as full-time remote employees even if we both work out of coffee shops and have the unmistakable worldly air that comes from talking about time zones in reference to UTC while you’re ordering your fourth latte of the morning (“Dave’s on two hours past Zulu. The project can’t wait that long! Let’s sync up on Zoom NOW!”)
The simplest distinction is this: those folks get benefits but in exchange for those benefits they typically forego some of the convenience that we enjoy.
Let me offer two simple contractual terms that might seem trivial from your perspective (Mr. or Ms. Remote Employer). But which can be oddly pernicious from that of remote workers trying to avoid picking up the wrong end of a bum deal.
Ready? Here they are.
Full Time Equivalent (FTE)
FTE does what it says on the tin.
A full time job has an FTE value of ‘1’. Let’s take ‘1’ to be the value of the salary attaching to that job.
And something less than that is a fraction of the whole.
FTE as a concept is totally fine. The problem arises when those trying to save themselves a dime start trying to cut freelance contracts based on the FTE value.
This is problematic because — in freelancing-land / consulting land / The Land of the Self Employed (it’s adjacent to Narnia, I’m told) — what those vaunted characters who receive benefits get is completely irrelevant to our meager existences. We’re not one of them. We weren’t chosen.
If you want somebody to work one day a week, then you can’t offer them the FTE of 0.2.
Why not, you pout?
Because the full time person gets benefits. It’s all based off an initial number of somebody that does. So the divisors based around that don’t compute for us.
Otherwise put: if you’re not prepared to offer benefits and are looking to hire somebody who doesn’t get them that’s fine. But you’re going to need to hire them on a different framework. That framework is one of non-salaried employment. And the provider of such services typically needs to work those benefits they’re not receiving into their rate. Which — much to your chagrin — typically makes them “expensive.”
I can’t understand why FTE has any merit whatsoever in fixing freelance contract rates.
Because freelancing and salaried employment are two separate beasts, it would make way more sense to let the freelancer proffer an offer rather than try to negotiate around some anchor that represents something they’re legally precluded from achieving: benefits.
Because for both parties merely mentioning “benefits” — much less factoring it into calculations — is dangerous territory, it’s best avoided entirely. FTE may have some merit but it doesn’t make sense for self-employed resources.
Paid Time Off (PTO) (Esp. Of The Unlimited Variety)
Unlimited paid time off (PTO) is stupid.
There, I said it.
Tell me how many days per year I’m not expected to be working and I can plan my off-time around it.
The evidence supports me.
My experience supports me (mini-vent: the last time I tried to skip out on a 30 minute meeting at an organization that supposedly offered unlimited PTO I was asked if I really needed to skip it or just sort of needed to skip it. The unlimited PTO policy also mysteriously vanished when I was asked to send a closing invoice with only the days that I actually worked).
The other embittered ones in the audience can hopefully agree with me that unlimited PTO is contrary to human nature (Daniel’s Law Of Finite PTO states that humans will remain at a permanent state of leisure until such time as economic hardship or the exigencies of employment require them to emerge from that indefinite state of leisure and holds that anything contrary to this arrangement — like a nebulous PTO entitlement — is thus nonsensical).
But we can hopefully agree that it makes sense to leave this particularly bad concept — like the other foolish things of corporate life — to those unenlightened ones who haven’t yet made the transition to our side of the divide. With its unyielding financial stress and endless trips to Starbucks.
Truly, though, this point is merely a derivative of the above point.
For if we can agree that predicating any contractual freelance term by reference to something intended to govern full-time employment relationships is bad, we can also agree that unlimited PTO has no place in contracts with freelancers.
So although I can’t rewrite the past. I can rewrite a recent contractual encounter with the responses that I should have offered.
— -
Daniel: OK, so $1,000 is the rate that you’re offering. You’re insisting on basing this on an FTE value. But I need to work that figure up to my usual freelancing rate. I have to factor in things like the vacation I don’t get and other benefits so that I can make sure I’m covering enough here.
Client: Vacation? Ah, so some good news here. We actually offer unlimited PTO. So there’s no need to work that into your calculations.
Daniel: Well, that sounds like a crock of [expletive]. It’s fine that that’s what you do with your employees. But I’d be joining your team as a contractor. Hence that’s totally irrelevant to me. I need to factor it in anyway.
Client: But … money… !
The present ones are dangerous times for freelancers. Remote work is on the rise. So is freelancing. Many rookie hiring parties — over-represented among them, as usual, are startups — may fail to understand the very significant differences between contractors and employees.
Frameworks that attempt to graft employee remuneration onto compensation packages paid to part-time resources such as contractors are liable to be hugely exploitative.
They’re also fundamentally at odd with best practice in freelancing — which calls for a diversified pool of clients. But freelancers can’t always be relied upon to protect their own interests. And so many — who am I kidding, I’ve been there?! — have jumped at simplistic FTE-based formulae to be part of remote teams without first thinking whether they were fair deals.
Perhaps they were blinded by the glitzy — though eminently illogical — promises of unlimited PTO.
Employees get benefits. Freelancers don’t. Know which side of the divide you and your business falls out on. And conclude contracts that are fair reflections of that reality.
