Question: My workplace is experiencing some budget cuts and they offered me a choice between leaving the company or switching to freelance. I enjoy my work and I’m not sure how easy it will be to find a new job. Should I agree to freelance and what pitfalls should I look out for?
Answer: Switching employees to freelance is a common strategy for saving money. This is because, despite the higher rates freelancers usually command, the company saves on paying for vacation days, sick days, Bituach Leumi, pension and severance pay.
This strategy can unfortunately be used to avoid giving employees their rights, by calling them freelancers but continuing to treat them as if they still work for the company. In order to prevent this from happening, the law recognizes freelancers as employees if they are treated that way. This can include:
- Filling an essential role in the company
- Reporting directly to a boss
- Using company office equipment
- Having no other income
- Working in the company’s offices
In cases where a freelancer was treated like an employee, the worker can sue the company and may be awarded the employee rights he was previously denied.
All this is to say that if you switch from an employee to freelancer, it must be done with the proviso that you are going to be treated as a freelancer. This means that you are responsible for your own work hours and the quality of your work, and that you have the ability to freelance for other clients while working for your former employer. It also means that you have the right to send someone else to work in your place if you are unavailable.
If your former employer agrees to these terms and you think you will enjoy the advantages of freelancing, don’t forget to renegotiate your rate. You will now be responsible for paying VAT and your entire Bituach Leumi and pension contributions, as well as your vacation and sick days. Your new rate needs to take all these expenses into account.
Switching from employee to freelancer can be a great opportunity if it’s done thoughtfully and on your terms. It allows you to maintain your relationship with the company while enjoying the flexibility and potential growth that freelancing offers. However, it’s crucial to set clear boundaries and ensure you’re treated as a true freelancer—not an employee in disguise. Renegotiate your rate to reflect the additional costs, and make sure the arrangement works for you both financially and professionally. With the right approach, this transition can be a stepping stone to greater independence and career growth.