HN Explorer

Ask HN: Whatever Happened To Freelancing?

201 points by tHrOwAwAyXXX900 ↗ HN
I'm trying to break into freelancing/consulting/contracting.

Following best advice on the net/podcasts/etc I'm contacting my past companies plus some new ones and all of them tell me the same exact story.

"No. We cannot hire freelancers directly. You must go through a third company (consulting firm/body shop) which we work with."

But why the heck would I even consider doing that? The whole point of freelancing (at least IMO) is being _free_ from the middlemen.

Anyway, humoring the idea of actually doing that I contacted one of these middlemen companies and was sent a hideous contract full of terms that -let's put it mildly- are not in my favor. (Liabilities fully on me, limitations on where I can go afterwards, Information asymmetry, need to support for long after project finish, etc).

So the question remains - is there any real freelancing still on? (I'm not talking platforms here - I wouldn't go there for several reasons).

Could it be that the specific market I've been looking at (UK/IE) is skewed like that and other markets are in better shape?

Thanks

191 comments

[ 2.3 ms ] story [ 218 ms ] thread
notahacker
Suspect it's more a case of "we're not interested in your unsolicited offer" than any absolute refusal to contract with individuals (or Ltd company representing an individual) ever. Companies aren't exactly short of people contacting them offering them development or marketing work
JonChesterfield
UK has some misc panic around IR35 still.

I found companies were much more willing to be invoiced by a limited company than by an individual, though setting up and maintaining that company is a hassle.

LatteLazy
It's doubly ironic as IR35 is specifically designed to ignore limited companies etc and force people into "employee" status despite them...
TamDenholm
To be clear, in the UK, setting up a Ltd company is incredibly simple and easy to maintain.

It costs £12 and takes about 20min to create. Then you get a bank account with startling/monzo which is very simple (easier than high st banks). All tax is done online which again is fairly simple. Sign up for freeagent (or another accounting package) and just keep on top of your accounts. When it comes to filing your annual accounts and confirmation statement, again its all incredibly simple and can be done yourself without the need for an accountant as you'll qualify for mico-entity accounts and freeagent handles it for you. Or you can pay roughly £1200-£1500/yr to an accountant and have them do it for you.

Its honestly not hard at all, happy to answer anyones questions on the matter.

ghostwriter
What are the ramifictions of a company that hasn't earned during a tax year? Are you still expected to pay anything at the end of the tax year (at least in terms of a salary to yourself)?
pjc50
You're not required to pay yourself anything in particular. If you do, then you have to pay NICs and tax; you may want to pay NICs even if you're not earning for tedious pension reasons, but that's not specific to the company structure.

You still have to file accounts even if that's just one page of "income 0 outgoing 0", for which there is a charge of £13. https://informi.co.uk/business-administration/filing-your-an...

TamDenholm
What pjc50 is correct, but might help to be more specific. If you literally mean its had 0 revenue and 0 expenses, then its basically a dormant company and you can file so.

However, if you've ran the company in previous years, even if you've taken a year off and had 0 incoming revenue, you may have other taxes to pay. There wouldnt be any corporation tax as theres no profit, but you may have some very small expenses like bank fees, maintenance of servers, subscriptions, etc that might be left over. So you wouldnt be dormant, you'd be a loss making company, but still active.

If you had a big chunk of money in the biz bank account and still paid yourself, there would be taxes on that, both on the company and personal side depending on how you paid yourself.

I wouldnt recommend setting up a Ltd company to literally do nothing with it though, 0 revenue and 0 expenses, you're not really benefitting for any reason.

ajb
That doesn't help with IR35, as the law looks at the practical situation of the individual and not the formal situation to determine if they are really an employee.
TamDenholm
And as long as you're running a proper business with multiple clients, your own equipment, your own hours, etc, then you dont fall foul of IR35. If you are however basically being treated the same as a PAYE employee would, 1 client, their office, their equipment, their hours, their conditions, etc, then you're dodging tax and thats the point of IR35.
Silhouette
As long as you're running a proper business you shouldn't fall foul of IR35. Sadly that won't stop a lot of risk-averse large clients insisting on paying you through an umbrella company. And it won't stop many other clients from insisting on money-costing and time-wasting IR35 assessments so they can take out insurance policies. And even if you don't have any of that to deal with it won't make you feel any better if HMRC decide for any reason to launch an IR35 investigation that will eat a shocking amount of your time and money even if you are eventually found to have done absolutely nothing wrong. All of this risk has a chilling effect on this whole sector of the economy.

Even if they're determined to keep IR35 the government could at least clarify their intent for people like contractors who work with a single client but for a limited time. Right now I have the sense from my own network that there are a lot of games being played in that sector to try and avoid being caught by IR35 because no-one really knows if they're supposed to be. If the government wants to charge people who are working as flexible labour through a PSC the same taxes as permanent employees then they should at least be honest about it and accept responsibility if that flexible workforce then shrinks and economic damage results. Or if they want to incentivise the flexible workforce then they should give clear guidance on how long is considered to still be "temporary" and won't be treated as disguised employment (even though the "employee" probably lacks any of the job security and benefits of a real employee as most contractors do) to remove the risk for many genuine short-term workers and increase the efficiency of the contracting market.

gadders
And we're only seeing it from the IT sector point of view. IR35 also wrecked the HGV driver market and is one of the reasons for the shortage of drivers.
TheOtherHobbes
Basic tests for IR35:

https://www.brooksonfaq.co.uk/knowledge-base/what-are-the-ir...

It's obviously a minefield, especially substitution. If you're being hired for specific niche in-demand skills, why should you be expected to provide someone else?

What seems to happen in practice is the Revenue occasionally has a spasm and decided to investigate a selection of freelancers. This ends with a lot of confusion, plus various tribunals and court cases, because the reality is not clear and many freelance situations can be argued either way.

The simplest option - not infallible, but very helpful - is to have multiple clients and work mostly from home on fairly short projects. That makes it very hard to argue that you're an employee.

If you're on-prem and exclusive for an extended period for a set number of hours, supervised by management and using equipment supplied by the employer, it gets much harder to convince a court that you're genuinely freelancing.

LemmyInThePub
> Or you can pay roughly £1200-£1500/yr to an accountant and have them do it for you.

Any half decent accountant will probably be able to SAVE you more than this; mainly by optimising your tax affairs (assuming you have a modest turnover).

It's money well spent.

moralestapia
Can you do that as a foreigner (to the UK)?
dejv
Yes, but opening UK bank account is not that easy without your presence there.
marcus_holmes
This is the reason.

If they contract with a freelancer directly, and that freelancer has no other gigs, then the freelancer will be considered as another employee for tax, benefits and liability purposes.

If they contract a freelancer from a consulting company, the consulting company takes the employment burden.

You can get around this by creating your own company, but there are lots of complications for it.

I'm not sure if they still exist (been a while since I did this) but you used to be able to join an "umbrella company"[0] which was set up and managed by an accountancy firm and employed a small number of contractors/freelancers, which worked well.

[1] https://en.wikipedia.org/wiki/Umbrella_company

santoshalper
Mostly it's a way for their HR team to have fewer vendors to deal with. That means less administrative overhead and potential risk compliance issues for them to deal with. I agree, as a worker, it sucks.
logicalmonster
I can't quite tell if companies you're trying to work with are locked into some exclusive provider contract with a firm or not, in which case there might be no way for you to work directly with them.

But you might have better luck approaching companies as a consulting firm rather than a freelancer.

Create a website for yourself to use for business as a small consulting firm.

Then approach the same companies offering the same exact service: you instantly seem more credible.

Make it clear if asked that you're not the freelancer. In fact, you can tell them you have a pool of expert freelancers and consultants ready to go for their own projects.

llampx
Where does it go from marketing to lying?
cwillu
“Make it clear if asked that you're not the freelancer” is that point.

I'm not sure if it even crosses over to fraud: “Material Misrepresentation means an act of intentional hiding or fabrication of a material fact which, if known to the other party, could have terminated, or significantly altered the basis of a contract, deal, or transaction.”

logicalmonster
> “Make it clear if asked that you're not the freelancer” is that point.

What's the actual difference between a freelancer and a consultant?

If you call yourself a freelancer, you're a freelancer.

If you call yourself a consultant, you're a consultant.

You're not a freelancer by virtue of you labeling yourself as a consultant.

How is it a lie to say you're not a freelancer if you're calling yourself a consultant?

cwillu
There's a difference between deciding whether you're a consultant or a freelancer today, and deciding that you're an agency of multiple people trust me bro I'm not even the freelancer that might be assigned.
logicalmonster
How is it a lie to, if asked, say that you have access to a pool of consultants and freelancers? Is this not true?

It might be a lie if you say "I've worked with them 20 times before and trust them with my life and they're all currently on my payroll" but that's not what I suggested to say.

cwillu
You can argue how many grains of sand make a pile, but that vagueness doesn't mean that one grain is a pile, especially when you _know_ and are _banking_ on the other party not sharing that meaning.
Smeevy
As soon as you're saying something that isn't true.

The guidance to "present yourself as bigger than you are" isn't bad, but it's not going to take any adult long to figure out that the same guy who responds to technical questions is the same one who submits invoices and receives tax paperwork.

That sort of "fake it 'til you make it" manipulation is part of the value that these middlemen provide. The hiring company gets a disposable individual contributor and the middleman puts up with silliness like what's described here.

If someone lied to get your business then you can be confident that they'll lie to keep it.

JohnFen
> In fact, you can tell them you have a pool of expert freelancers and consultants ready to go for their own projects.

Don't lie. There's no need for this one, anyway. If your company presents as professional and competent, people will assume this. What you need is for your company to get a couple of initial gigs, and to get permission from the clients to mention them in marketing efforts. (That's the hard part, and it can take time if you're starting from zero. But it's only hard at the very start.)

Then do that. Potential customers aren't thinking "I wonder if they have a staff", they're thinking "I wonder if they can do the job properly". Being able to point to prior happy customers goes a long, long way.

logicalmonster
It's not a lie unless you word your statement very poorly.

You have the exact same access as other consulting firms to 3rd party websites to find freelancers, if needed.

Do you know what these firms often do? They take any paid jobs they can get even without having the staff in place to do a project. If they need extra help, they scramble to find people at the last minute.

JohnFen
> It's not a lie unless you word your statement very poorly.

It is entirely possible to lie without uttering a single statement that is technically untrue.

kmoser
Most companies don't care whether your company has one employee (you) or a million. So it doesn't matter whether you call yourself a freelancer or a consultant or a contractor or anything else. What matters to them is whether the entity they will be contracting with is a person or a company.

And as others have pointed out, this is usually for tax reasons: if the company contracts with an individual, the company is more likely to be viewed by the IRS (at least in the US) as your employer, and are thus subject to paying unemployment and payroll taxes.

alex_suzuki
In my experience, if what you can provide to a prospective client is genuinely valuable or even unique, arrangements can usually be made. Having an LLC is very handy though, as it simplifies procurement for your client.
darod
I’ve heard the issue in the US historically has been tax related. Some freelancers didn’t pay their taxes and the government went after the hiring company. Also business insurance is another line item that certain freelancers never invested in and companies seem to want to have that from all their vendors. Get a LLC / S-Corp if you’re serious about wanting to freelance
richiebful1
The benefits of an LLC are already worth the paperwork, so I highly recommend this to anyone with a significant amount of income outside of traditional employment.
lowercased
I had a company insist I carry employer practice liability insurance (epli, iirc). If my employees sexually harass someone, or get fired, there may be lawsuits, and epli will supposedly cover this.

I'm a single person company. I have no employees. More than a couple insurance brokers I contacted said "we don't have anyone who will write an EPLI policy unless you have employees".

Contracting company was insistent I had to have it. But... if I didn't want to get it, I could w2 through them. I bought the insurance anyway (expensive, though I've since found cheaper options for it). I had done w2 through them before and ... I'd forgotten how much taxes get withheld - months without having access to my money or ability to pay my own taxes. And... they messed up some paperwork filing a year before which took ... my own time/money to correct.

fxtentacle
DE and US are pretty open to just hiring people directly as consultants. Must be an UK thing.
rqtwteye
When I did freelance all big US companies forced me to go through an “approved vendor”. Most of them offered only W2 and would take a huge 30% or more cut. In the end I found one vendor that only took a 3% cut and otherwise left me alone. I think for the big companies it just makes accounting easier if they go through less vendors.
danielh
From my experience in DE, it depends on the company size. Larger enterprises probably will go through an agency, probably to (try to) cover themselves against accusations of false self-employment (Scheinselbstständigkeit).

Anecdotally, the two contracts I had through agencies were still the most lucrative financially, despite the middleman taking a hefty cut, simply because large enterprise pay higher rates.

jagermo
Even in DE, there are issues around "Scheinselbstständigkeit" if you don't have a UG or something. Most companies prefer to work with other companies, even if those have just one employee.
chadlavi
In the US most freelancers have their own LLC and technically that company is contracted and pays them as an employee to do the work. Not sure what the equivalent in UK is, but that's maybe what these companies are looking for?

TLDR be your own third party/middleman

blamazon
I've seen this in the U.S. in the corporate world -- I.e. Look at the third party company they want you to use, and copy what it does to your own LLC. If you can make your LLC appear to be a larger entity than it actually is, (e.g. perhaps hire a virtualized assistant service to answer calls) all the better. It's sort of a compatibility layer.
Doctor_Fegg
It's a limited company in the UK and yes, it's absolutely standard practice for freelancers to set one up.
jghn
A former employer had to comply with a variety of federal hiring compliance rules. Any contractor they hired also had to comply with these rules. Thus we could only hire contractors from pre-vetted contracting companies as it was seen to be too much risk otherwise.

Exceptions were made for very unique skillsets, but unless one is in the range of several K/hr, it is unlikely they'd fall in that bucket.

rcarr
Get a copy of this book:

https://amzn.eu/d/4pq5X0M

And you'll gain an understanding as to why companies are doing it. The companies are covering their arses as much as possible because there have been instances where they've also been stung when the contractor has been caught out by the tax man. The middleman company is basically playing the role of insurance for the corporation.

The author also runs this website which you might find useful:

https://www.contractorcalculator.co.uk

sdf4j
Please always paste the name of the book/author as courtesy for the readers. Some try to avoid driving to amazon as much as we can
cjm42
It is: Contractors' Handbook: The Expert Guide for UK Contractors and Freelancers (3rd Edition; 13 Nov. 2017) by Dave Chaplin (ISBN-10: ‎1527216039; ISBN-13: 978-1527216037)
rcarr
my bad, will make sure to do this next time
BigglesZX
UK web dev freelancer here. I think it very much depends on the kind of organisations you want to work for. I went solo in 2016 as a self-employed person and never had any trouble accessing clients, who in my case are typically a mix of small digital agencies and small non-technical businesses with no in-house technical resource. I incorporated a company last year in order to firewall my work from my personal affairs, and you may find some companies that will only work with limited companies, but I haven't had that problem so far. If you want to work for big corporations I expect you will run into such issues or the problem you describe yourself. However it's definitely worth approaching different shapes/sizes of business. As another commenter mentioned, you should definitely be aware of the ramifications of the IR35 regulation as this will probably shape the sort of work available to you. Some people work with "umbrella companies" in order to be able to fit better within the constraints of IR35.

All told I've never looked back after ~7 years of doing this, and while job security can obviously be an issue, the comparative flexibility and freedom over your work/life balance etc more than makes up for it. Good luck!

l1silver
Can I ask, what was your first step into freelance exactly? Was it working with a past client, or something else entirely?
jkestner
For me, it’s been almost completely personal relationships. Either people I know from school, previous work, or made acquaintance after presenting at a meetup. All of these environments allowed me to demonstrate that I can get shit done.

Part of the freelancer’s job is to maintain those relationships, and often these are people that I want to go get a drink with anyway, so it’s not just opportunistic.

[deleted]
(comment deleted)
Silhouette
Some people work with "umbrella companies" in order to be able to fit better within the constraints of IR35.

The point of umbrella companies is for clients to make sure the work falls outside the scope of IR35 while dumping the corresponding massive tax hit and extra paperwork on the contractor/freelancer instead of paying what they're explicitly supposed to be paying themselves. It's basically industrial scale tax avoidance by large clients but since HMRC still gets its tax anyway the government doesn't seem to be in much of a hurry to fix it.

Of course this is the same government - or at least a lot of the same politicians forming a government - that seems to be in denial about the results of the recent IR35 changes while simultaneously complaining about how we have no growth in our economy and we need to support industries like science and technology more. Really? Go figure.

pythonbase
I have worked with several US & European companies as freelance / outsourced resource. Had to sign some documents confirming that I am not the resident of clients' countries. There were no issues whatsoever in payments or anything else.

Maybe it is your tax status that's causing the issue. Have you considered forming an LLC (or equivalent in your location) and applying through it?

ramphastidae
What incentive do these companies have to circumvent their standard hiring procedures for you? I freelanced for nearly a decade. My guess is that they’re just not that interested in you. If you bring something valuable to the table, they will go out of their way to hire you as a freelancer directly on your terms. If you go to them and say “hire me, except FYI I’m working on my own time, schedule, and fee structure” but don’t bring much much more to the table than their FT folks, why should they?
ejb999
You'll find almost no big companies are going to deal directly with a one person shop. I used to be able to do it all the time, now they a) don't want the hassle of dealing with a 1-person company, and 2) they don't want the risk of having you reclassified as an employee after they have been paying you as a contractor - you can thank the IRS (in the USA) for that one.
giancarlostoro
> they don't want the risk of having you reclassified as an employee after they have been paying you as a contractor - you can thank the IRS (in the USA) for that one.

Can you or anyone who knows provide more context about this? I had no idea this was a thing, how recently did this become a thing?

jabroni_salad
https://www.irs.gov/businesses/small-businesses-self-employe...

It's always been a thing, but it's been a very high profile thing when it turned out "ride share" apps actually had a lot more control over the drivers than they should have.

Look up "permatemps" and you will see articles going back decades about companies using contractors that are actually some other company's w2 employees.

psiops
This is my experience too in the Netherlands. I do sporadically hear stories of people initially being hired through a recruiter, then leaving, then coming back as a true freelancer. It's a sad state of affairs because these recruiters add very limited value. They basically try to match every freelancer with every position and leave all but the most basic filtering to the recruiting process. All while extracting a hefty percentage, often for the whole duration of the contract. Supply-demand matching could be done more effectively through a web application, but recruiters seem to be thoroughly entrenched.
mandeepj
"No. We cannot hire freelancers directly. You must go through a third company (consulting firm/body shop) which we work with."

I was told the same. Try reaching out to smaller companies or find a connection either with executives or who can introduce you to them.

rossdavidh
I don't know the reason in UK/IE, but in the US sometimes they want me to have at least an LLC so that it is clear legally that they are not just pretending I'm a contractor in order to avoid labor rules. If it's a contract between companies, even if one of them is a company of one (me), that satisfies their legal department that I won't come back in a year or two and say "hey, I was actually an employee and you owe me stock options that you gave to other employees", or whatever.

So, I have an LLC, and if the company wants to use that, they do. Not everybody requires it, but I notice that the ones with a legal department are more likely to.

Not saying that's the issue in UK/IE, but it may be something analogous. To prove (to them and the gov't) that you're actually a freelancer, perhaps you need to make your own company? IANAL, just an idea to check into.

djha-skin
I contracted for a company once and know another guy who does a lot of freelancing. I was W2 for the contracting company but the company did a lot of work with contractors.

GET AN LLC. Companies are a lot more willing to work Corp to Corp. An S-corp along with the LLC will allow you to pay yourself a salary. Even these middlemen are a lot happier working Corp to Corp, and should give you more wiggle room. Nobody likes a 1098-T worker. If you're concerned about anonymity, getting a corporation in New Mexico allows you to create a corporation relatively anonymously.

haspok
Poster is in the UK (or Ireland). Recommending going to New Mexico sounds funny :)
etothepii
The same points apply, most it contractors (and there are many in finance) have an LTD. Never met anyone working as a sole trader. IANAL but most of the liability gubbins falls away too, since you and the company are legally distinct entities.
jaywalk
In the US at least, a sole proprietorship/single-member LLC doesn't do much to shield you from liability. You can't really say "it was the company's fault!" when you are the company.
zharknado
But it provides a strong backstop against the consequences of liability. E.g. if your house and your car aren’t assets of the corporation, they can’t be seized and liquidated to satisfy debts or settle litigation.
etothepii
IANAL. Yes you absolutely can, the whole reason why businesses should NOT want to do businesses with an LLC and why you have to put the letters LLC/LTD on letterheads etc is because the person you are dealing with will have no recourse to assets beyond those owned by the corporation.
sgt
Maybe he should do it, as ridiculous as it sounds. Going from a place called "Stratfordshire upon " something to ... the NM or better yet, AZ! Imagine the adventure.
esperent
I did it. From the same area as OP, I traveled and worked as a freelancer for several years before settling and starting a business in Vietnam. I've been doing it as a sole trader and never experienced any issues but maybe that depends on the area (setting up an LLC is probably good advice though).

It's not for everyone of course and there have been hardships. But this has and continues to be the adventure of a lifetime. When I hear about people working a decade in an office and then think about the last decade that I lived I would never change it. Stability is overrated.

Bonus: I have way more personal savings and investments than I could have had by staying back in crazy expensive Europe.

Side note: the only time I had a frustrating experience as a freelancer, from a legal perspective, was when working for a UK company. The UK seems to have a crazy amount of rules and regulations around this. Fortunately I was able to get out of the project within a few months and I made a personal rule of "no UK clients from now on".

yread
Why are you against platforms? They give both sides some trust.

I work with a few freelancers: a friend of mine, a guy i met on a platform (and we decided it's not necessary to do follow up business through that platform) and freelancers on a platform.

If I get a cold email no matter how warm and personal they're trying to make it sound I'm assuming it's from someone who emails 1000s of companies and the email goes to spam, even if I need such service because spam shouldn't pay off.

wahnfrieden
Platforms take rent
yread
and provide value
[deleted]
(comment deleted)
everyone
I think it's like any job (or practically everything in life). It's about who you know.

I'm a game dev who's been freelancing for years. All the work I've done has been through friends and acquaintances and people I've met at industry events n stuff.

swader999
Go through the third party still but ask for flow through rate. This typically is ballpark about 5%. Whenever I find the work or it finds me without the help of a recruiter I demand this.
jabroni_salad
death by paperwork. The reason they are doing this is to minimize paperwork. i.e. only having to pay a bill to a single entity instead of dozens.
disgruntledphd2
> "No. We cannot hire freelancers directly. You must go through a third company (consulting firm/body shop) which we work with."

But why the heck would I even consider doing that? The whole point of freelancing (at least IMO) is being _free_ from the middlemen.

So(at least in Ireland, where I'm based) this is an issue with the taxation authority. I'm currently fake contracting (company has no EU based entity), but the reason that they generally want a legal entity is to ensure that all your tax gets paid, as otherwise the company can be held liable for the unpaid tax.

I currently work with fenero.ie, and pay them 130 per month (which comes off pre-tax income) to use an umbrella company which deals with accounts, registration and taxation for me.

I _think_ that you could set up a company yourself, but if you're just getting started I'd recommend using a middleman for now.

I think the body-shop approach through a middleman is where most people start, but figuring out how and when to move on from that is trickier.

AndrewKemendo
I've done a ton of freelancing with US companies over the last decade (I'm in the US) and have literally never had anyone ask for this.
jagermo
we can't/won't onboard individual contributors and it is a pain. If you can set up a company, like a LLC or something, we can onboard. It sucks and costs us way more in overhead but these are them rules.

But as other said, only hiring companies instead of individuals protects you from potential lawsuits around social fraud.

faster
In a certain range of company sizes, this works. I have been contracting since 1998 and have had a C corp since 2000. I'm currently doing work for a Fortune 100 company and they were quite unwilling to hire my company; I have to work through an agency as an individual.

My experience is that when a company is big enough to have a legal department, they invent a bunch of terrible scenarios and then create policies to protect the company from the things they imagined. Yes, there can be real problems hiring contractors directly (but I think it's fairly rare), and it's a lot easier to have one or two agencies that you pay instead of dozens (up to thousands like the company I'm working for now) of separate contractors.

Billing the big corps (when it's possible to contract corp-to-corp) has been a pretty awful experience too. Adobe wanted to see my company's client list, tax returns, and marketing materials AFTER the work had been done, for an invoice under $20k. I said no, and it took over 2 months to get them to pay. That was a while back though, so maybe things have changed.

alex_suzuki
Why did they want to see your client list? Genuinely curious. What a turn-off.