Employing Freelancers from Online Work Marketplace

prince_capri · Post by **prince_capri** » Fri Aug 05, 2011 8:59 am

Hi,

I am currently consulting for an online marketplace work agency (see http://www.freelancer.com, http://www.odesk.com, http://www.elance.com). These companies have noticed a proportionally high demand from employers within Nordic countries (and Australia). I am investigating why this could be.

Basically, within these marketplaces, a company can hire a freelancer (online only) for any period of time, and pay them competitively (which in this case means less than usual pay, as there is a lot of competition for these jobs). Employers from Countries like Sweden, Finland and Denmark have started to increasingly use these portals. Could anyone please tell me why this is?

I have following theories:
- The Labor laws within these countries are relaxed and perhaps promote online employment?
- These employers going for freelancers in developing countries because the labor in their home country is too high.
- There is a lack of technical talent in these home countries (such as Web Development, Database Management etc.)
- These Employers are evading some kind of labor laws within their home countries?

It is important that we understand this issue properly. I welcome any comments/criticisms/discussions.

Kiitos!

P.S: The above not only apply to Finland, but feel free to speculate for other countries if possible!

**Sponsor:**

Upphew · Post by **Upphew** » Fri Aug 05, 2011 10:51 am

Labour laws are surely not relaxed in Finland, quite opposite. Thus the hiring can be quite a big step for small(er) company. Employment is employment, most companies prefer that applicants apply online or with email. I'd say when offshoring the companies don't necessarily see that they hire freelancers, they buy a service. And that is probably reflected in accounting too.

Price of work... that is certainly a big motivator for offshoring?

There is always lack of people who have experience and who can just jump on board and start to produce... Finland should have enough talent now: http://blogs.wsj.com/tech-europe/2011/0 ... nds-gains/

prince_capri · Post by **prince_capri** » Fri Aug 05, 2011 11:53 am

Thank you Upphew.

How about Tax and VAT? Are employers evading any taxes by outsourcing their work online? Consider an example (this is very hypothetical, not even sure if it is correct...), if a client pays company X through Paypal and company X decides to pay its outsourced freelancers through Paypal, would they be evading taxes? The money coming in should be shown as revenue, but could small employers be cheating the system (if at all it is possible?!?)

rinso · Post by **rinso** » Fri Aug 05, 2011 12:04 pm

Are employers evading any taxes by outsourcing their work online?

VAT is payed over the things you sell.
If you buy things you can get the VAT back (if any was payed)
I think you cannot get anything back over taxes payed abroad.

prince_capri · Post by **prince_capri** » Fri Aug 05, 2011 12:59 pm

Cory, yes, I am trying to find a loophole. But only because I want to stop others using it, as it is detrimental to the credibility of my clients (consider me a bounty hunter!

)

As for calling Vero, I am not even in Finland at the moment, so it would be difficult for me to call them, and dare I say, expensive!

b.morales99 · Post by **b.morales99** » Sun Aug 07, 2011 2:52 am

Asia countries are being outsources a lot in these freelance sites and its both an advantage and disadvantage.Advantage since it means less unemployed people but disadvantage since most of freelancers don't pay taxes.

Mook · Post by **Mook** » Sun Aug 07, 2011 9:05 am

I wouldn't say it's exploiting loopholes. My take on it is that it's aimed at people who don't work - stay at home mothers. The rate of pay is maybe 15 euros an hour, which is low.... but, if you pay low taxes your take-home pay is about the same as any other job. Provided that you only do 10-20 hours a month. There's also convenience to consider - you can do it at any time rather than being tied to a fixed schedule.

prince_capri · Post by **prince_capri** » Mon Aug 08, 2011 8:03 am

Morales, yes, it has its pros and cons. Truth be told, the quality of content originating from Asian countries is not very high, which is down to English being their second/third language.

Mook, 15 Euro per hour will be considered a good pay in an online marketplace. I think it would take someone 2-3 years of constant freelancing online to become credible enough to charge that. People in Philippines earn $1ph, its a pittance if you ask me!

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