Elance Payroll Services

Elance enables you to manage independent freelancers and employees on a single platform. Elance Payroll Services helps you engage freelancers as employees cost-effectively, while minimizing your exposure to freelancer classification risks.

As a client, you can use Elance Payroll Services to employ freelancers you find on Elance or you can bring your own. With fees of only 20% of the bill rate, including employer taxes and fees, Elance Payroll Services offers a substantial cost savings over traditional staffing models while servicing the needs of both you and your freelancers.

Client Benefits:

  • Minimizes risks associated with freelancer classification
  • Provides greater visibility of work in progress
  • Saves money over other staffing and payrolling options

If you think an existing or future freelancer may pose a classification risk, contact Elance Payroll Services to discuss how we can help you evaluate and address the issue.


Under this scenario, the freelancer receives $20 per hour and the client has elected to increase the bill rate to cover the additional employer taxes in an employment relationship:
Bill rate to client
Less: Payroll fees and admin charge
Less: Employer taxes
Gross W2 wages
Less: Employee FICA
Wages (Net of FICA)
Bill rate to client
Less: Admin charge
Gross 1099 earnings
Less: Self employment tax
Wages (Net of self-employment tax)

Frequently Asked Questions

Q. What is freelancer classification risk? Why is this issue so important today?


Misclassification occurs when a company improperly classifies a worker as an independent freelancer when the relationship should be deemed an employer-employee relationship.
  • Independent freelancers are exempt from paying unemployment tax and workers compensation insurance. In contrast, in an employer-employee relationship, the employer must pay unemployment tax and workers compensation insurance. The difference has created increased scrutiny by the government.
  • If a company is found to have misclassified a freelancer, they can be held liable for penalties, interest and back taxes.

Q. How can Elance help me mitigate the risks of freelancer misclassification?


For those freelancers where there is classification risk, Elance Payroll Services provides an integrated, web-based solution that can mitigate your risk.

Q. Who determines whether I should 1099 or W2 my freelancers?


You are responsible for determining the employment classification of your freelancers. Independent freelancers work under a 1099 relationship while employees work under a W2 relationship. Below are some key resources that can help guide you in your decision.

Q. How do I determine if my freelancers should be classified as employees?


While there are not specific guidelines on hours per week or duration of the job, the government often uses three basic questions to determine if an employment relationship exists:
  1. Is there direction and control of the freelancer?
    1. Is the freelancer being supervised by the client?
    2. Does the client provide training or instruction to the freelancer?
    3. Has the freelancer been a previous employee of the client?
  2. Is the work consistent with freelancer-type work?
    1. Are there current employees of the client performing similar tasks?
    2. Is the work considered an ongoing need for the client’s business?
    3. Is the work a core function of the client’s business?
    4. Is the freelancer independent?
  3. Does the freelancer have specialized expertise necessary to complete the work?
    1. Has the freelancer made any investments in their business for equipment or resources?
    2. Does the freelancer have the ability to work with other organizations?

You can find additional information on the IRS website or if you’d like to consult with experts for more detail on how to classify freelance workers, please contact us at 1-877-535-2623.


Q. Are there specific red flags the government looks for?


Actions by freelancers that can cause a "red flag" for an audit include:
  • Failing to pay appropriate taxes.
  • Freelancers lacking the appropriate liability insurances to protect their clients.
  • A freelancer filing an unemployment or workers compensation claim.
  • A freelancer claiming eligibility for employee benefits.
  • A freelancer working as both a W2 employee and 1099 freelancer with the same company.

Q. What is Elance Payroll Services?


Elance Payroll Services is a turn-key, employer of record solution available to clients and/or freelancers who are focused on eliminating freelancer classification risk and remaining compliant with state and federal agencies related to management of their US-based workforce.
  • In addition to providing employer of record services, the Elance platform also allows you to source freelancers, manage projects and track time and expenses in order to easily leverage a remote workforce.

Q. What services are included in Elance Payroll Services?


For Elance Payroll Services approved jobs, you receive complete employer of record services including: on-boarding and pre-screening of your freelancer as an employee, payroll services, tax withholding and filing, insurance coverage, unemployment and COBRA administration, benefits administration and more.

Q. How much does Elance Payroll Services cost?


The cost for Elance Payroll Services, 20% of the bill rate, includes all employer taxes, payrolling costs and Elance fees.
  • Four states (CT, HI, NM and PA) charge additional sales & use taxes that may result in a slightly higher cost, depending on the location of your freelancers.

Q. How does the cost of Elance Payroll Services compare to the costs of a staffing company?


Staffing companies typically charge upwards of 25%. On Elance, you can find, hire, manage and pay employees at the click of a mouse for a total fee of 20% (slightly higher if your freelancer is in CT, HI, NM or PA).

Q. How does the cost of an independent freelancer relationship compare to Elance Payroll Services?


In an employee relationship, there are several additional employer taxes that provide added protections for both your company and the worker you hire. Given the added compliance protection of a W2 relationship, we generally advise clients to increase the bill rate slightly when converting a job from 1099 to keep your freelancer’s take-home pay equivalent to that under a 1099 relationship.

Q. Can I use Elance Payroll Services to employ freelancers I didn’t find on Elance?


Yes. Elance’s platform supports freelancers found on Elance or brought to Elance by employers. Our account management team can help you easily invite and on-board your existing freelancers to Elance.

Q. How do I get started?


To contact an Elance account representative to discuss your options and get you started, call us 1-877-535-2623.