Freelance Contractors

 

Overview

The Realities of Wire Payments >

 

Enterprises and Freelancers

 

Large numbers of medium-to-large European IT, Technical, Industrial and Financial enterprises (known in the industry as the ‘Client‘ or the ‘End-user’) fulfill short to medium-term staff requirements by engaging ‘freelance’ staff, rather than taking on permanent employees.

 

There are significant benefits in engaging freelance staff for these enterprises because they save on, amongst others:

 

Holiday pay Staff benefits / perks Staff pensions

Employer’s social security costs Redundancy / termination payments

 

For the freelancer himself (known in the industry as the ‘Contractor’), although he loses out on these perks, and on job security, he is compensated by receiving a pay-rate significantly higher than he would were he to be engaged as an employee.

 

How the market operates

 

Challenges of employment regulation

 

The enterprises are not able to directly engage these freelancers under sub-contract, as if they did so they would run a high risk of being assessed as a ‘deemed’ employer under European employment legislation.

 

If they were found to be a deemed employer, they would be assessed retrospectively on the social security which had been avoided, and a number of other charges and penalties would be assessed. They tend therefore to look for Recruitment Agencies (known in the industry as the ‘Agency‘) to source the staff requirements and ask the Recruitment Agencies to contract the staff back to them.

 

Challenges of tax and social security legislation

 

The Agencies tend to have minimal or no experience in European Employment Legislation, nor in European cross-border tax and social security legislation, therefore the Recruitment Agencies tend to further sub-contract the contractor to management or umbrella organisations (known in the industry as the ‘Management Company’), usually run by firms of accountants who specialise in the area.

 

Therefore the usual contractual arrangement would look as follows:

 

 

Challenges of payment processes

 

The payment process would follow the same pattern, whereby:

 

End-User pays an agreed rate to Agency (based upon invoice from the Agency) Agency deducts a pre-agreed recruitment fee Agency passes balance onto Management Company (based on invoice from the Management Company) Management Company deducts a Management Fee Management Company passes balance onto the Freelancer (based on payroll calculation), usually after deduction of whatever tax and social security liabilities arise on the payment to the Freelancer.

 

The payments vary each month, as in the majority of cases they are calculated based on a timesheet and the monthly hours will vary.

 

 

The hyperWALLET Solution

 

 

With hyperWALLET, management companies receive the payment from the recruitment agency in a pre-contracted currency, and will pay out to the freelancer, normally in the same currency. hyperWALLET’s Payment Platform and Payment Network can dramatically reduce these payment costs.

 

Benefits for Management Companies

 

No need to record freelance contractor bank details. IT contractors can access the system and manage their own bank account details via Self Service. Freelance contractors can define the bank accounts they wish to receive funds into. No need to resource freelance payment queries; the system gives full visibility of payment online and via SMS notifications. Convert most international wires to domestic payments and slash bank charges. Reduce the need for FX Accounts and better manage FX exposure. Transparent FX Rate Remove all incoming wire fees for freelance contractors (this is either a cost saving to you because you pay it upfront, or a revenue opportunity) Manage Government Tax payments the same way. hyperWALLET runs activation and adoption for the freelance contractors on behalf of the Mgt Co.

 

 

Benefits for Freelance Contractors

 

No incoming Wire Fees Self-Service for setting up bank accounts that the Freelance Contractor wishes to receive their funds into. Freelance contactors can use the Pay Portal for managing their settlement options, notifications and reviewing transactions Payments are fast. hyperWALLET submits multiple times per day depending on demand in each country. This means payments are generally made same day provided the receiving bank processes the payments. Support for funding questions is easier because hyperWALLET is the only party managing the payment.