Finding, hiring and managing virtual employees

Hiring contract workers online is a booming business. The freelance employment platform Elance boasts more than 140,000 businesses and 1.4 million registered contractors with collective earnings of more than $500 million. Elance predicts that by the year 2020, one in three people will be hired online.

This is good news for business owners and employees who may someday decide to work for themselves. It’s ideal for stay-at-home moms wishing to work from home or those who live in isolated areas, who may enjoy a lower cost of living, enabling them to easily compete with other freelance workers. A 2011 survey of Elance members found that 69 percent of its workers had a bachelor’s degree or higher.

Small businesses can hire workers for short-term projects, commissioning a web designer for a one-time site design, for example, or even a sales expert to generate a list of leads.

Long-term workers can also be found through online job sites. According to Elance’s survey, 40 percent of businesses say online talent beat the talent in their local community. An additional 29 percent reported online talent was as good as local talent, and 22 percent were unsure. Since online sites allow businesses to shop around, many have discovered they can save money by finding talent online.

Many of the same rules apply whether you’re hiring an employee or a contract worker.

1. Write a clear and detailed job description. A poor job description will attract the wrong people.
2. Manage your contractors. Don’t assign someone a project and then not take the time to make sure the contractors are delivering the work you need them to do.
3. Take things slowly. It’s best to start with a small project and see how it goes. This way, you can solve problems before they turn into disasters.

So where is all this online work found? There are so many sites, it can feel overwhelming at times, but here are some of the more popular ones.

Elance

Founded in 1999, it’s fitting that Elance’s name was inspired by a 1998 Harvard Business Review article titled, The Dawn of the E-Lance Economy. The site tends to attract professional freelancers, many of whom command American wages. This is significant, compared with sites like oDesk that have become popular with businesses interested in outsourcing to other countries.

One of the best things about Elance is its escrow system. Before the freelancer starts work, Elance requests funds be placed in an escrow account by the client. That money is held until the work is completed, at which point the client releases it. If the client doesn’t release it, it automatically releases after 30 days. If the client has a problem with the worker’s final product, that client must dispute it, with Elance working as the mediator. This could be problematic for picky businesses, intent on a certain level of quality.

Elance’s high fees also tend to turn some people away. The site takes a 6.75 percent to 8.75 percent fee on each job. The worker chooses either to pay the fees or put the fees on the client when he or she places a bid – but ultimately, the client decides by choosing from the bids placed.

oDesk

oDesk has tools that set it apart from other sites, including an extensive training program that helps employers know they’re dealing with someone who is an oDesk professional. oDesk is set up mostly for hourly work, with optional tools that allow businesses to monitor how long a worker is idle during that hour. The tool will even make periodic screenshots to prevent personal surfing on work time.

Because of this tracking capability, oDesk is ideal for hiring talent for laborious administrative tasks and applications development work. The technology is a great example of how the “virtual office” of the future will work, with many businesses able to employ workers from home without worrying about not being able to monitor those workers.

oDesk’s fees are even higher than Elance, at 10 percent per job. Like Elance, the bidder determines who pays the fees when the bid is placed, but the worker chooses which bid to accept. For workers trying to make an American wage, oDesk is less than ideal, with workers frequently being told bids of $5 an hour are too high. But, the site is ideal for workers trying to gain experience before raising rates or moving onto other sites, as well as workers in countries where $1 an hour is a livable wage.

Craigslist

Craigslist has replaced the local classifieds as a place to buy and sell goods and services, as well as find employment. For freelance workers, Craigslist can be a marketplace for obtaining work for as much as $20-$40 an hour. Some Craigslist freelance ads redirect workers to other job sites, where fees may be charged.

While Craigslist can be difficult to navigate, professional workers are well aware that the site can connect them with businesses looking for true professionals. Since Craigslist doesn’t charge fees, it’s a great option for both businesses and freelancers. However, Craigslist offers no protection against scams. So, on the worker side, a freelancer may make twice the money as they’d make on a site like Elance, but they also run the risk of never receiving payment. Clients have nothing in place to guarantee work will be delivered in a timely manner, even if a contract is signed by both parties.

One of the best tips for newcomers to the game of online hiring is to pick one site at first and give it a try. You’ll build a reputation and grow comfortable with the rules imposed by the site. Keep in mind that while freelance hiring sites are a great way to find workers, the ideal goal is to foster a long-term working relationship with a freelancer your small business can rely on.