Payrolling is a common business arrangement you may encounter as a freelancer. It involves a third-party company managing your payment and legal compliance for a client.
What is Payrolling?
Payrolling is a service where a specialized firm, a payroll provider, acts as your employer of record for a specific client. You perform work for the client, but the payroll company handles your contract, invoices, and payments. This structure is often used for long-term freelance engagements.
Why is this important?
Understanding payrolling is crucial because it affects your working relationship. The client uses this service to manage compliance and avoid misclassification risks. For you, it means your formal employment contract is with the payroll company, not the end client you actually work for.
How does it work?
You agree to a contract with the payroll provider, not the end client. You submit your timesheets or invoices to the payroll company. They then process your payment, handle tax withholdings, and ensure all employment laws are followed for the duration of the assignment.
Pros and cons
Key advantages include streamlined, on-time payments and reduced administrative burden for you. Potential downsides are that you have less direct contact with the client on contractual matters, and your pay rate may be adjusted to cover the provider's service fees.
Conclusion
Payrolling is a standard practice for integrating freelancers into corporate structures. It's important to review the contract from the payroll provider carefully. Knowing how it works helps you navigate these engagements smoothly and protect your interests.
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