Freelancers are increasingly being engaged for one-time and long-term projects. This format of cooperation benefits both companies and the freelancers themselves: employers save on taxes and social contributions, while specialists gain the freedom to choose projects and set their own schedules. However, the question arises: how to formalize employment relations with a freelancer, what needs to be considered, and which legal norms must be followed to avoid fines and other consequences.
How to Formalize Employment Relations with a Freelancer Using a Civil-Law Contract
The most common way to formalize freelancers is through a civil-law contract (CLC). This document regulates the performance of specific work or the provision of services without establishing formal employment relations.
In a CLC, it is important to specify:
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The subject of the contract (the specific service provided by the freelancer)
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Work completion deadlines
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Payment amount and terms
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Responsibilities of both parties
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Contract termination conditions
The employer is not required to provide paid leave or other social benefits but must pay insurance contributions and withhold taxes. It is crucial that the CLC does not include elements of an employment contract; otherwise, it may be reclassified, leading to additional tax obligations.
It is also important to understand the risks of tax issues, which you can read about in our article: “How to Avoid Tax Issues: Tips for Entrepreneurs“
A civil-law contract allows for flexible collaboration with freelancers, but it is crucial to ensure it does not contain elements of an employment contract.
Fixed-Term Employment Contract
If a freelancer’s work is regular, requires them to perform duties at specific hours, and involves the use of company resources, a fixed-term employment contract may be the best option.
Self-Employment and Sole Proprietorship
Another option for working with freelancers is to formalize them as self-employed individuals or sole proprietors.
Self-employed individuals are those who work for themselves and pay a professional income tax (4% on income from individuals and 6% from legal entities). Employers do not need to pay insurance contributions for them—just sign a contract and transfer payment to their account.
Working with self-employed individuals and sole proprietors reduces a company’s tax burden and minimizes bureaucracy.
How to Formalize Employment Relations with a Freelancer to Avoid Legal Issues
To avoid problems when formalizing freelancers, several key aspects must be considered:
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Choosing the Right Type of Contract – Determine which form of cooperation suits your situation to avoid reclassification as an employment relationship.
Formalizing employment relations with freelancers is a straightforward process if you follow legal regulations. The choice of contract type depends on the nature of the work, frequency of collaboration, and legal requirements. With the right approach, you can avoid risks and create comfortable conditions for both businesses and contractors.
