How the freelance market works abroad: everything you need to know if you want to work for foreign companies

How the freelance market works abroad: everything you need to know if you want to work for foreign companies

| Self-development

Working for a foreign company, being paid in dollars or euros, and spending it in your national currency, whether roubles or even the more stable dirhams, is the dream of any freelancer who knows a foreign language.

It is a highly advantageous situation: because the dollar does not fall at the same rate as the Turkish lira. It is great for a company, as hiring a domestic freelancer is nearly always more expensive than hiring a foreigner. Furthermore, it is really simple: all you need is the essential skills and knowledge of the English language to do the job.

This article outlines the key facts that you should know about the freelance market abroad. If you have worked for companies in other countries and would like to share your story about your collaboration, please send them to our editorial email; we will be happy to publish them with comments from the leading HR experts in the market.

The economics of the freelance market

One of the important things you should know about freelancing abroad is that it is widespread and well paid. Sure, you still need to be an expert to attract the client. In 2020, the freelancing market in the US alone increased by 20%, and the overall payouts for deals exceeded $1 trillion. Employees who have switched to freelancing earn the same as those who work in an office, or are paid even more. And only 25% of freelancers do not enjoy the same income level as in a "regular" job. Freelancers currently work full-time without losing the flexibility that appealed to them initially with this type of employment. Freelancers come from all professional groups, regardless of age and occupation: they can combine several jobs, doubling or tripling their income and even saving them from unemployment, which is more common in more traditional sectors of the economy. Judge for yourself: by the end of 2020, one in three Americans was a freelancer! And that is just from the official survey numbers.

How does the employer benefit from this idea? It's all about taxes! Suppose the freelancer is officially registered and is not working cash in hand. In that case, freelancers pay their own taxes, which are lower than the contributions that employers pay for staff employed with a contract. In Russia, for example, an employer pays for a full-time worker about half of their salary or even more. In contrast, a self-employed person (officially registered as a freelancer) pays 4-7% tax on each contract, depending on the amount of their earnings and the company or person to whom they provide their services. In Europe, where certain countries demand taxes of up to 50% of a person's salary, the situation with self-employment is roughly the same. However, unlike the former Soviet republics, in Europe, companies are less inclined to avoid taxes - the employer can be sued. And the chance of winning the lawsuit is much higher there!

Why is this beneficial for freelancers? Well, in the event of hiring someone under an employment contract, Western companies most commonly demand their employees stop working "on the side" or running their own business. Even a revenue-generating blog with five thousand subscribers is considered a business. So, if you do not have an employment contract filled with strict conditions, you can earn money from anything. In addition, freelancers can make even more money than full-time employees, simply because their fees do not include VAT and other deductions required for salary transfer payments under an employment contract.

The freelance market in the USA

The freelance market in the USA

We have identified three features that distinguish the freelancing market in America from its counterparts in other countries (and on different continents).

Firstly, there is an extremely high level of competition.

It is even higher here than in Europe! It is understandable: American companies frequently pay more money than European or Asian ones. As a result, there are twice as many jobs from local companies than firms from geographically different markets. Likewise, American employees became the very driving force behind the freelance economy that has brought this method of employment to prominence around the world. So now, generally, all fairly large firms that want to save on operating activities and payroll funds order services from outsourced professionals (non-staff professionals.) As a result, approximately 100% of the total number of companies offer certain jobs to freelancers.

Secondly, agencies are quite common in the US.

Agencies are intermediaries who represent freelancers for clients. The agency may include makeup artists, photographers, copywriters and editors, video editors and producers, lawyers who work in specific fields, accountants, etc. As you can see, the American "free" labour market is not just limited exclusively to creative professions. All intellectual jobs provide money with small tasks here and there. When an agency represents a person, it is easier for them to find work: the agency places their profile on its website, enables the potential employers to contact them, and offers their application for closed projects. For its services, the agency receives a certain percentage of their representee's earnings. Usually, the commission does not exceed 10%, but reputable agencies may require even 30%.

Thirdly, there is some confusion in the laws.

This is because laws differ from state to state. In California, for example, you can be certain that local employers are posting ads with actual salaries. The amount listed in the vacancy may be irrelevant in any other state. In some areas, freelancers are protected. In contrast, sometimes, you can't even find understanding from your lawyer. It can be difficult for a professional who grew up outside the American freelancing market, whose rules were only formed in the last few years, to understand the intricacies of vague and not-so-vague formalities. So, we advise you to start with larger websites. You can use Indeed (you can sometimes find freelance jobs here) and Upwork (this service no longer "cooperates" with Russian freelancers, but no one can stop you from registering on it by using a VPN service).

The freelance market in Europe

The freelance market in Europe

What about the freelance market in Europe compared to the United States? Everything is about the same here, although with certain regional variations.

Firstly, knowing several foreign languages is highly valued here.

It makes sense since they speak different languages here, and not everyone uses English, which is obligatory for a local freelancer. In addition, you may need German, Spanish, and to a lesser degree - French and Italian. Spanish will also cover Latin America, so most foreign market specialists advise taking this language as a second foreign language. You will hardly need your native Russian (or any other language from the former Soviet republics). Unfortunately, most companies no longer need to localise their content for Russian-speaking users, and marketing activities in Russia have been suspended.

Secondly, due to different laws, you have the chance of falling victim to double taxation.

It is just like with investments: you miss something, and then you have to pay income tax both in the country where you live and where you purchased the asset operates. With foreign exchanges in a very tight spot, freelancer sites do not plan to lose an entire segment of Russian-speaking users. Be careful: you are a Russian tax resident if you live in Russia for 183 days a year (in a row, and not in total). If you live there for 182 consecutive days or less, you do not have to pay taxes here. In practice, it turns out that self-employed Russian freelancers pay a tax of 4-7%, regardless of whether they live in Russia or the Bahamas. Naturally, provided that they issue invoices to customers using the My Tax application or simply register their earnings on it. For a foreign client, a piece of paper with a QR code and a text in Russian will not make a difference to them; therefore, more often, freelancers working within European jurisdictions, registered as self-employed in Russia, and paying tax on professional activities, simply indicate their salary in the application. However, if you plan to work with a large company in another country, you better check the legal requirements for tax deductions on earnings.

Thirdly, fees vary from country to country, and there is no single benchmark.

A benchmark is a quality standard, an indicator that determines the state of affairs in any activity area. Benchmarks can be found in real estate, financial services, or any commercial activity. So, for example, the benchmark could be the industry's "generally accepted rate" of pay per hour or the minimum fee for a particular kind of service in freelancing. However, the European industry does not have such a "quality benchmark," so rates here are as volatile as the dollar exchange rate. Moreover, they might not depend on the dollar at all!

If you do not want to find out one day that you have been paid shockingly very little, do your homework before getting off the boat. Then, invest a few hours of your time researching offers from customers, look up the salary information on Glassdoor, and get an idea about what is considered a decent rate of pay for the number of services you offer. Believe me, thinking they will pick you because you are happy to take a lower fee is not a great idea, even if you are new to the freelance market!

What about Asia?

What about Asia

Everything is entirely different here. China is one of the biggest distributors of jobs for those with excellent skills and a willingness to earn. Only professionals from China most commonly work domestically on portals like ChinaHR, 51job, and Zhilian. Less than 5% of the total workforce involved in outsourcing jobs reaches the foreign market. Getting into the domestic Chinese market is quite easy if you have access to the internet and a translator. However, the work will be more challenging: you will not be able to get by with just English alone or without a relatively good knowledge of Chinese, so if that is not the case, do not even try. If you have already mastered Chinese, register as soon as possible. Still, look at the interpretation of laws for working as an "expat" in the domestic market. They are not extremely strict, although it is helpful to know them.

You can find representatives from other Asian countries on any freelance platform. However, no interesting exchanges offer higher fees for simple tasks. We do not recommend looking for a diamond in the haystack because the chance of finding it is close to zero. Instead, you should look at other markets; for example, the freelancing industry in Canada or Mexico is booming right now and could be an exciting addition to your already diverse income streams. At Lectera, we have an entire course dedicated to relocating to Canada for work! It is great for freelancers who want to understand the local market.

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