Individuals who provide services to companies without establishing an employment relationship with them are often called contractors. There is no literal translation of this word into Serbian, so in practice, you may often hear terms such as “service provider” or “contractor”. In order to prevent any misunderstandings with this linguistic ambiguousness, in this blog, the contractor is an independent individual who provides services, whether they are officially registered at the Serbian Business Registers Agency as an entrepreneur, or whether they offer services as natural persons(colloquially known as freelancers).
Lately (for various reasons), the term freelancer is brought up in the public more often, although, in tech-savvy circles, this kind of work engagement is known for a long time, and is even more dominant than the traditional employment relationship. The reason for this is the sudden development of tech businesses in the Serbian market, as well as the rapid increase in the number of independent IT professionals (caused by the aforementioned development). As a result, we often see that besides formally employed individuals, there are a number of independent developers hired for certain projects or provision of particular services who are also working for the same company.
Same as with any other form of business cooperation, the relationship between the company and the independent contractor hired to work on particular projects is twofold, so its benefits and drawbacks can be looked at from two angles.
- By engaging contractors, IT companies can drastically increase their productivity and profit, since they achieve the most desirable effect by hiring independent IT professionals: new products and services are created and placed on the market but in a less costly and more efficient manner. The benefit, in comparison to establishing an employment agreement, is that the client does not have any financial obligations as they do with employees, such as payment of taxes and contributions, securing a place and means for work, payment of reimbursement for leave from work, and other things, which significantly reduce the operational expenses.
- On the other hand, the contractor is more flexible since it is hired by multiple different clients, it is not “bound” to one company. This allows them to do business with multiple companies simultaneously. Those companies can even be each other’s competitors (in which case, one should pay attention to the possible non-compete clause). Since, from the legal point of view, the contractor is often a registered entrepreneur, they can always perform their business activities independently, without acquiring the status of a formally employed individual.
In addition, contractors are not obliged to provide their services to one company only, which leads us to the question: what stops the hired independent contractor from disclosing client’s confidential information to third parties, and compromising their whole business?
We have already covered the topic of the importance of NDAs, but this time, we are highlighting another scenario, where an all-encompassing NDA concluded promptly will provide you with adequate protection and prevent various risks and dangers in which your company may end up.