Freelance or Contract Paralegals
Paralegals can be self-employed, choosing to “freelance” or to work on a "contract" basis. They are independent contractors and provide their
services only to attorneys on a per-project or short-term basis. Many contract paralegals have years of experience and are specialists in their field. There are some states however,
like Arizona, that allow paralegals to undergo certification as a "Legal Document Preparer" or an "independent" paralegal and prepare documents for the general public, without
supervision of an attorney, so long as they provide no legal advice.
Contract paralegals are self-employed and, just like all other self-employed people, they must pay their state and federal income taxes (estimated quarterly payments) and
both the employee and employer portion of Social Security and Medicare (13.3%). In addition, as a business owner, you are responsible for your own benefits such as
medical insurance, life insurance and the like, and all of your overhead such as equipment costs, printer ink and paper, software upgrades, professional dues and continuing
legal education. Don't forget your automobile expenses (gas and repairs) and mileage. You may wish to incorporate based on your financial situation, your CPA can advise you
in making this decision. Before becoming a contract paralegal, it is important to consider ALL of your expenses when establishing your hourly rate. If your rates are too low,
you will not be profitable and may find yourself being taken advantage of.
Overall, contract paralegal rates range between $30 to $80 per hour, depending on experience and specialty. Typically, the hourly rates of non-specialty paralegals range
from $30 to $40. Specialty paralegals are often $45 an hour and up.
Independent Contractor v. Employee
Self-employed attorneys and law firms, like any other business, seek to increase their profits by reducing their overhead. If the employer can avoid paying the approximate 7%
employee payroll tax, workers compensation and state unemployment tax, it has effectively increased it's profits. Therefore, you will often see attorneys advertising for a "full
or part-time paralegal with NO benefits," "1099 paralegal" or a "full-time contractor paralegal." While paralegals can be hired like any other supplier, their work, unlike the
computer technician, must be done under the direct supervision of a licensed attorney and must comply with the IRS rules for independent contractors. The IRS has prescribed a
detailed set of guidelines that define independent contractors as opposed to employees (see irs.gov "Independent Contractor (Self-Employed) or Employee" advisory article). "The
general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it
will be done." Not every off-site or part-time paralegal can be classified as a true “independent contractor” for tax purposes. A good example of this is who decides what days
you're going to work and what hours.
Be wary of the independent contractor paralegal job position, it should raise a caution flag.
Understand that your rate of pay is gross, and not net, and that your tax and
overhead expenses are greatly increased as an independent contractor.
BE INFORMED AND DON'T BE TAKEN ADVANTAGE OF!