The problem when employees are freelancers on the side.

Your employees are working full time for your company but also provide freelancing work (exactly the same service) on the side. Here are some common examples:

  • your Graphic Designers create some logos on Fiverr during the weekend,
  • your Web Developers code for his own clients in their free time,
  • your Cleaners do baby sitting and house-care services for a family in the evening,
  • your Teachers are private tutors,
  • Doctors working for hospitals and having private cabinet,
  • Chefs being involved in some private events,
  • etc.

For Employees who are freelancers on the side, the benefit is clear. They have a stable recurring income at your company and some additional flexible revenues. Doing extra work on weekends or evenings for example can be a very good way to increase your monthly income and if you’re good at it it can even become a small business. Moreover, they can learn different things, maybe provide some other services that they cannot offer at your company, etc.

The threats for your company if that happens:

  1. The employees might just earn more money on the side and leave their full time job,
  2. They might provide cheaper services and then directly compete with your business,
  3. They can disclose some confidential information such as; your clients, the projects they work on, reuse some techniques or information shared internally…
  4. They could also work for these clients during their working hours,
  5. Etc.

So let’s see what could be the problem here and how to prevent this and if that happens, how to eventually face the situation and find the agreement that could make everyone happy. This article is a quick reflection from an entrepreneur, a manager and an employee point of view (yes, today I wear these three hats at the same time).

Let’s define the underneath issue here…

When the “trust” is broken.

The first thing that matters in business when you start to partner with other people is “trust”. Trust is the currency of business. When employers hire their employees, both parties put their trust into it to make it happen. And when you discover that your employees are actually freelancing aside from their full time contract it is probably very frustrating and you might feel cheated. There are so many risks for your company…

First of all, above all the risks mentioned above, there is an issue where if you find out that they are freelancing, you might simply stop feeling comfortable giving them responsibilities or access to so many sentisive information by fear that they could steal it and reuse that for their own small business.

The sencond thing I see is that you have actually no way to know exactly what people do outside of their working hours and outside of your control. So many times, I have myself some private conversations with friends and I am struggling to know if what I share with them about my job should remain private or not. It’s difficult to controle this as a company and you must respect your employees’ privacy.

How to deal with this situation.

How to protect your company while being “cool” with employees that offer freelancing aside their job?

First, ensure the labor contract is clear about this matter regarding unfair competition or disclosure of confidential information.

In your labor contract, you should mention:

  1. Non-compete clause: that employees should not conduct any private competitive activities against the company during the validity of the labor contract (and maybe after the contract ends). For example to work for competitors or provide services / sell products that compete directly with the company.
  2. NDA clause (Non Disclosure Agreement): that the information they have access might be confidential and under the umbrella of some intellectual property rights. So they cannot share the information they see or have access to.

And you should explain what consequences it has if this is not respected:

  • cut in their salary / bonuses / allowances…
  • termination of their labor contract without notice,
  • penalty / fines,
  • trial in court,
  • simple warning, etc.

Why? Because if the employee disclose confidential information, the company might need to pay a compensation to its customers or this might affect its image. So the employee at fault might also have to pay the consequences of this.

Second, communicate with your team about confidentiality and unfair competition.

Most people do not know what is “private and confidential information” or not. And it’s also very hard to judge to who you can share what information. I would recommend that after hiring new people in your team, you conduct some trainings on security, confidentiality and unfair competition. Your team needs to know the rules; even if the rules are written somewhere in a contract they signed when joining.

Some people are willing to take screenshots and share it from one customer to another without knowing they are breaching the confidentiality agreement.
Some others might just use your equipment or tools for their own private purposes.
And you may see some people downloading a confidential document on their computer then this document is not deleted properly when they leave the office.

I would provide training and ensure my team knows how to protect themselves and how to protect our company. This way if a problem occurs, it’s easier for you to enforce your policies as well.

Third, add reminders a little bit everywhere when needed:

  • at the bottom of emails,
  • on company documents,
  • when sharing some information; remind orally that it’s confidential,
  • sign handovers eventually,
  • etc.

Fourth, how to be cool with it…

Let’s be realistic, more and more people are taking two jobs at the same time. Companies will need to adapt to this and by protecting themselves they also should consider accepting this reality.

I would personally encourage my employees to do freelancing on the side if they want to. Or at least I would not discourage them to do so.

Why it’s beneficial for the company to hire employees who are also freelancers on the side? I see at least 3 good reasons!

Not all employees will want to do this, but the ones who do are expecting more; maybe more revenues, but also learning more or exploring more:

  1. Allowing them to do this will benefit your company: they will consider your place of work as their primary source of income and enjoy their stable situation.
  2. They can also re-share what they learn; you can measure this by the quality of their work or by the new ideas they bring into the company.
  3. And also, if they are freelancers; they might understand better the “entrepreneur” perspective as they may face problems very similar than yours.

What if they leave or what if they do not respect our policies?

I would offer them to leave the company if that’s what they want, before they start stealing or before any serious problem happens. Your company deserves to work with the right people, meaning people who stays for the good reasons not because they don’t dare to quit. It might be painful to recruit new people but all you can hope is that the company remains aligned with its policies and clear with its employees.

Being a freelancer can lead to become a business owner. And between earning some small extra income and managing a full business, the journey is very long. There are reason why we chose to be self employed or work for someone else, and there are different challenges in both cases. Your employees, as much as you, should always keep this in mind and keep talking about this. Personally, I am very happy working for a company that provides stable personal income at the moment and helps me not “stress” about the entrepreneurial aspect of owning a business.

In a future article I might redefine what are the differences between being an entrepreneur (solopreneur) and a business owner (director, manager, CEO).

Quick conclusion:

My personal opinion is in this article today. Tomorrow I might face a different reality and change my mind. But part of my core values is “acceptance” and to me this means: “letting go of any form of resistance, flow, “be like water” and follow the reality and where it brings me. The earlier I accept, the easier it is to trust myself, trust others and be bold, be confident and sure.”

It’s your company so it’s your rules. You can choose different policies or a different approach. And also deal with this topic on a case by case basis.

But my best experience with teams was when I was helping them to grow and to understand themselves. That’s where true opportunities are. Maybe you will find out that this employee wants to work more for you or that you can offer him a greater position because they learned a lot from their freelancing experience. I always prepare for the worst, but expect the best.

Also, if you check carefully, the structure of this article is a “fear setting” which is a small exercise that I encourage you to do if you still have fears for your business.

And if you are interested in becoming a happier entrepreneur, I have created a 3 days free challenge that will provide 3 key tools you can use to be more relaxed, more in control of your time and start smiling everyday as an entrepreneur. The link is here.

So what do you think? Did you ever had this issue? What did you do, how did it unfold? Please share in the comments below, I am interested to listen to others stories.