Q: I work as a full-time employee for the company owner, who is my direct boss.
He has asked me to work on a project outside my job description and he offered to pay me as a freelancer in lieu of giving me a raise. He also told me I could do the freelance work during my regular work hours. My gut feeling is that it's a bad idea. How should I handle this?
A: Flexibility and creative workplace management by employers and employees is not necessarily bad news in our new economy. According to "New York Super Lawyer 2017," Patrick J. Boyd of The Boyd Law Group, New York, "There is nothing unlawful on the employee's part in accepting money for freelance work, even when it is given by the regular employer. The employee just needs to report that portion of earnings as income (likely Form 1099 income). There could even be tax benefits if she can put the pre-tax money towards retirement or similar tax deferred vehicle. But as an independent contractor, she would likely be responsible for many extra taxes on the earnings due because no taxes would be removed by the employer. Freelancers often forget that if they are being paid, for example, $40 per hour, they are not likely to bank that full amount, as they are liable for income tax and other taxes employers usually cover in a traditional payroll model. If she were instead to receive a raise for the additional work, the funds would be subject to taxes taken from her paycheck for her regular job. In this context, the employee might be best by calculating his/her financial and career goals and openly discussing this freelance work opportunity with the employer to best suit her own economic needs and desires.
This arrangement is not such a bad deal if the boss is asking her to continue in her current job and pay and will pay extra for the additional work. Boyd says, by law, employers are not required to honor a job description (unless there is a contract that specifies and restricts them on the type of work conducted) and legally, the boss could have asked her to do the extra work without offering any additional pay (assuming it had no overtime implications in the case of an hourly workers).
On the other hand, if the boss was thinking for the future that she stop being an employee and become a freelancer, accepting freelance pay instead of a raise may be opening this worker to a very different change in employee classification and tax treatment. Freelancers often lose out on important benefits like paid vacation, paid medical leave, sick and personal days, and health care coverage. Contractors also are more easily terminated, as they are not as readily entitled to the job protections — from acts like discrimination and retaliation — which protect regular employees under laws like Title VII. Changing from a regular employee to an independent contractor could also lessen her ability to negotiate for a severance in the event the company no longer needed her services. Boyd has observed a noticeable trend towards the freelance or contractor economy. Tens of millions of American workers are currently freelancers according to reputable sources (see Forbes for verification) and some choose to be freelance as opposed to having it imposed upon them. Freelance positions allow greater flexibility in work schedules and often the ability to work from home. The Boyd Law Group now represents many freelancers that are quite successful. These freelancers were often former employees who chose to start their own businesses so they could work with multiple employers to establish additional revenue streams. They can search for and work on more than one project, service multiple clients at a time, and do not have their economic fate tied to the instability a solitary job might have. It is important to be careful, but certainly not closed-minded when considering changes in the traditional employment models these days. Boyd. Sometimes it can work quite well.
Email [email protected] with all your workplace experiences and questions. For more information, visit www.lindseyparkernovak.com and for past columns, see www.creators.com/read/At-Work-Lindsey-Novak.