Hiring on the Web can be risky. You'll be dealing with strangers -- and, working with them from a distance, you won't have the benefit of encounters to build trust and communicate face-to-face. Despite these risks, Web hiring holds considerable benefits.

You can save money.
You might be able to find someone who will work for a fee lower than the going rate in your geographical area, for example. However, the equalizing effect of the Internet makes this increasingly less likely. Or you can hire someone from another country with an advantageous currency exchange rate. For example, if your company is U.S.-based, a Canada-based contractor could be a good deal.

You can gain access to specialized skills that might not be available to you locally.
And, there are now a number of Web sites that offer a highly competitive tendering process to buyers of services. These freelance work exchanges -- for example, freelance.com or Ants.com -- enable you, the buyer, to post your project and obtain bids on pricing from service providers from all over the country or the world. Conducting a tendering process of this kind offline would require much more time and effort than you'd want to spend.Online industry-specific directories or databases can also help you find the perfect contractor for the job.

Before diving in headfirst and hiring your next contractor via the Web, however, you need to be aware of all the practical details. First, is the project suitable for outsourcing? Second, can it be done effectively from a distance? Once you've answered these questions, you'll then want to find and evaluate a freelancer, negotiate a contract, and make payment arrangements -- including across international borders, if necessary. Read on for fuller considerations of these issues.

In or Out?

As a general rule, the projects you outsource should be either specialized or one-time. Developing a database or e-commerce back end for your Web site, for example, requires specialized programming knowledge. Hiring an expert contractor can be far more cost-effective than using in-house staff with a learning curve. Similarly, one-time projects such as designing a graphic illustration or creating a design template for a Web site don't require maintenance and work well for outsourcing.Other suitable projects include illustration, writing, copy editing, and back-end software development and programming. Note that these projects don't require an in-depth knowledge of your business.

In contrast, core business decisions should be kept in-house. While a freelance consultant might help you formulate your business plan, you should never rely wholly on an outsider for such a crucial job. Similarly, ongoing tasks, such as Web site maintenance, are better done either in-house or through the use of automated programs.For further guidance, see Should You Outsource Web Design? On useit.com's Web site. While this article focuses primarily on Web design, the basic principles apply to other outsourcing as well.

Consider the Distance

Can the project be done in the absence of face-to-face communication? If you're looking for a consultant for your business plan and marketing strategy, for example, you'd be better off with someone close to home. Complex consulting work is done best in person. Or if you need detailed specifications in order to proceed with the project, you'll be better off with local talent.

Simple, standard projects are safest for distance contracting. Determining exactly what you want and how long the task will take can be done with minimum interaction.

Finding Mr. or Ms. Right

Once you've estimated your project's cost and how long it will take, you're ready to find your freelancer. Using a freelance work exchange, you post a detailed project description and estimated fee, and call for bids from service providers. Examples of such exchanges include smarterwork.com, which caters to several languages and screens all contractors; NewMediary.com, which specializes in small projects; rfpMarket.com, the first horizontal B2B referral engine; ework exchange; Ants.com; Guru.com; FreeAgent.com; eLance; ICplanet; and eWanted.

Or if you want to try a professional directory or database, you'll search for a professional whom you then contact directly. Examples include ProSavvy, a screened directory of consultants in many fields; idac.com, a directory of consulting firms, indexed by expertise, key personnel, and names; Experts.com, a directory of experts in more than 900 categories, including consultants, engineers, physicians, professors, scientists, and more; Writerfind, a writers' directory, New Zealand-based but international in scope; ALMAL, for finding translators; RentAGeek, for computer consultants; and NuAspect.com, for computer programmers and software developers.

The primary advantage of using a freelance work exchange is your potential cost savings, courtesy of the competitive bidding process. To get the most out of the bidding process, you need to be highly detailed in your project requirements. This enables sellers to evaluate your project and place accurate bids.

A disadvantage of exchanges is the lack of opportunity to discuss your project and its requirements with prospective freelancers prior to posting. For this reason, freelance work exchanges are best used for clearly defined tasks. If your needs are complex, or require preliminary communication, you'll be better off approaching your freelancer directly.

With a directory or database, you can have full communication with your candidates. The main disadvantage of these resources is the time and the effort required to locate the right person, as you'll be seeking out the contractor (in contrast to work exchanges, where contractors seek you out). Moreover, the process of comparing prices and quotes for your project can take much longer, as you'll be approaching each contractor individually.

Directories and databases are best used if the work requires a high degree of specialization or expertise, the kind of task that does not command a standard price in the marketplace.

Post Wisely

The online tendering process usually involves posting a request for proposal (RFP). You, the buyer of services, are seeking bids on a project from sellers, the contractors, who view your RFP.

An RFP normally consists of a description of the project, along with an estimate of the time it will take and how much you think it will cost. You also can specify a time limit for the bidding process.After you post your RFP, contractors might bid either higher or lower than your estimated starting price.

Be Realistic

When posting an RFP, be sure to name a realistic price. If the price posted is very low, the better contractors probably will pass, leaving only the bottom feeders. Also be sure to supply as many details as possible. This enables contractors to place well-researched bids and time estimates.

Note than an RFP is usually considered just a guideline. It is not fixed in stone; your project and your estimated price or time requirements can be adjusted if necessary. In some cases, it might be best to leave out a price estimate, for example, if you want to test the market and find the going rate for your type of project. Finally, posting an RFP does not commit you to accepting any of the bids you receive.

Is the Person a Pro?

There are several ways to evaluate your candidates' work. First, some freelance work exchanges and freelancer databases screen freelancers for quality of work and professional standards -- for example, ProSavvy and smarterwork. But even if you do use a screened source, it's always a good idea to confirm the contractor's reputation.You can check out the contractor's work on the Web. Often you can find examples of a candidate's work -- in addition to whatever has been sent to you -- by using search engines. You can also contact the contractor's previous clients. In addition to checking out the references you're given, likely to be the best ones, you can search for and contact other clients on the Web. Some types of freelancers will be easier to track down than others -- for example, writers are easier to find than legal consultants.

Sign Here, Please

Once you've chosen your contractor, you'll need to prepare a formal contract that sets out mutual expectations regarding the quality of work, when the work or its installments are to be submitted, what will happen if the contractor does not deliver on time or to expectations, and what is to be done if either of you decides to terminate the project before it is completed.

Following are some of the most important points you'll need to consider when creating the contract:

  • Deposit. Are you going to include a deposit; and, if so, how much? If the freelancer does not know you, he or she might require deposit -- a percentage of the fee -- to demonstrate good faith.
  • Additional expenses. What else will you pay for? For instance, the job might require phone calls, couriers, international postage costs, or other items. You should specify exactly who will cover these costs.
  • Performance standards. What if the freelancer does not complete the project? What if he or she becomes ill or does an unsatisfactory job? You need to protect your professional expectations -- and your money.
  • Payment arrangements. What is the time frame for payments? Will you pay in installments as major subsections of the project are completed; or will you pay a lump sum when the project is completed? Will the amount paid be a flat fee or calculated on an hourly rate basis?

You might find it useful to review a sample independent contractor agreement, contract forms, and general advice and information on contract law.

Paying Up

When hiring via the Web, you need to make a payment arrangement that offers security to hirer and contractor. One option involves using an escrow service, a neutral party that holds aside the funds allotted for the task until it is completed. This guarantees the contractor that the money will be there, while assuring you that no money will be paid until the job is done to your satisfaction. Some work exchanges, such as smarterwork, offer this service online.Paying foreign contractors calls for additional arrangements. Fortunately, many freelance work exchanges provide solutions to ease the process, including clarifying tax regulations. If your contractor has a merchant account, you might be able to send payments directly to that bank. If not, you have several other options:

  • International wire transfer. This method ensures fast transfer of funds -- a great advantage for the contractor -- although bank fees will be required.
  • International check, sent by mail. This check can be drawn on a foreign bank in the contractor's native currency. This will speed up processing at the other end.

    Alternatively, if the check is drawn on your country's currency, this saves bank fees for you but will involve a longer process for the contractor. The primary advantage of this method is saved bank fees for you and the contractor; the disadvantage is the time taken by postal mail.
  • Credit card. If your contractor has a credit card merchant account, you can pay by credit card. However, this is the most costly option; credit card companies typically charge between 3% to 5% commission.

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