Independent Contractors in Game Dev- Why and How to Do it Right

Video games are a multi-disciplinary art form. While there are a few examples of games that are truly developed by a single person, such as Stardew Valley which was entirely developed by Eric “ConcernedApe” Barone, most games are created by several people with a variety of talents, since one person typically doesn’t have all the talents needed for a finished game on their own. Especially for smaller or solo developers, it’s not uncommon to use an independent contractor in game dev.

While Stardew Valley was developed entirely by one person, including the art, sound, code, and music, most people don’t have all the skills necessary to do all of these things.
By Eric Barone – [1], Fair use, https://en.wikipedia.org/w/index.php?curid=49878992

When a studio1 is working with an artist, it’s not uncommon for a contract (you do have a contract, right?) to specify that the work they do is a work made for hire. In addition, it is generally better for a studio to have an artist working on a specific project be classified as an independent contractor rather than an employee of the studio. Let’s take a look at why this is important, and how you can make sure that your independent contractors are exactly that, and not actually employees. 

Why Independent Contractor Status is (Generally) Preferable for Game Developers

When you’re a smaller game studio or individual developer working with a freelance artist for a specified period of work, like on a specific game or aspect of your game, then it’s often better to make sure that they’re an independent contractor.

When someone is hired as an employee, there are a lot of state and federal rules that have to be followed. There are state and federal wage laws including overtime, insurance benefits, and more. In addition, hiring employees can often require matching social security payments and Medicare taxes, as well as paying unemployment tax on wages paid to the artist. An independent contractor doesn’t have to worry about most of that. They’re hired for a specific job, then they move on to the next project. 

For most small studios, this is preferable. If you’re hiring a pixel artist or a musician for a specific project, you have them do the requested assets however they want in terms of time and schedule. After that, you include it in your game. Similarly, if you’re hiring a studio or developer to make a game or app for you, it’s not usually important what hours they work to get it finished.

Things like employment rules add extra costs and labor that most small studios, particularly otherwise solo developers working with freelance artists to finish their games, aren’t equipped to handle.

Of course, there are situations where an employment status may be preferable. If you’re hiring somebody to work at your studio for a longer period of time and you anticipate it more like a job where they come in for a specified period of time and get things done, then it starts to sound like you should be hiring them (and treating them) as employees.

With the distinction in mind, let’s look at how courts view the distinction between employees and independent contractors. It’s not enough to specify that an artist is an independent contractor in the contract, you have to treat them like one.

Employee vs Independent Contractors: Treating Collaborators Correctly

Courts and other regulatory agencies will evaluate certain facts to determine whether a person is an employee or an independent contractor. Note that whether they’re under a contract that assigns the label of independent contractor or whether they use a business entity like an LLC are not factors that are weighed. Again, you can’t just say someone is an independent contractor, the facts have to support that they were actually treated as one!

Individual states may look at different factors in evaluating an independent contractor’s status, but they generally look at some common factors. These usually boil down to the degree of control that the studio has over the independent contractor’s work, meaning that you’ll generally have to give up some control over the how and where of your independent contractor’s work. 

For simplicity, we’ll look at the main types of control that the IRS focuses on.Note that I’ll use the term payer here to refer to the employer or the contractor, basically the person who is paying for the work to be done. That way we’ll be avoiding the use of the word employer when talking about an independent contractor.

Behavioral Control

When looking at this category, you generally focus on whether or not the payer has the right to control what the worker does and how they perform their job. In other words, you’re looking at how the assets are made and what degree of control the payer has.

An independent contractor will usually have a large degree of freedom with how and when the work gets done. If an artist decides to do their work late into the night, that’s an aspect of the work that an independent contractor must have control over, rather than an employee who may be required to come in during specified hours. How the worker is evaluated is also a factor. If the worker is measured on the details of how the work is done, then that looks like an employee relationship. If they’re only evaluated based on the end result, that tends to look like an independent contractor. Providing training also lends toward an employee relationship.

Of course, there are some instructions that a studio can give to its artists without them being considered employees. What sorts of assets are to be created, what the specifications are for the assets, feedback on specific aspects of the work for revisions, and even specific deadlines are all reasonable things for an independent contractor to work with. Just be aware that you will have to give up some control over how the work is performed in order to keep an independent contractor status.

To put it simply, an employee is told what to do and how. An independent contractor is given a set of assets to create and given a large degree of freedom over how they are created.

Financial Control

This category looks at whether the business aspects of the worker’s job are controlled by the payer. This generally involves the payer making an investment of some form in the worker, or the other way around.

If a payer has made a significant monetary investment into the equipment or software that the worker is using, that tends to start looking like an employee. Generally, an independent contractor artist will purchase their own software and tools. Likewise reimbursing expenses regularly will tend to look like an employee. This also means that an independent contractor may have an opportunity for either profit or loss if they spend too much on software, tools, or other equipment. 

Whether or not the worker is available to do other work for other projects is also a factor here. If an independent contractor is working exclusively for a single payer, it’ll look like an employment relationship. Note that this doesn’t concern whether or not a worker is actually working on other projects, only that the payer has the right to control whether or not they work on other projects.

To put it simply, if you’re paying for the software or other tools used by someone, they start to look like an employee, while an independent contractor will tend to pay for their own tools, which they can then use on other projects as well.

Type of Relationship

This final category of control focuses on what type of relationship the worker has with the payer. This is where written contracts come in, but can also evaluate factors such as benefits like vacation pay, sick days, and insurance. The more it looks like employment, the more likely it is that the worker will be classified as an employee.

The permanency of the relationship is also a factor evaluated here. If the worker is hired indefinitely, rather than for a specific game or project, then it will start to look more like the relationship between an employer and employee.

The types of services provided by the worker will also be evaluated here. If they are a key part of the studio’s business – like management or other tasks concerning the day-to-day operations as opposed to creating assets for a specified project – then they’re more likely to be found to be an employee of the studio.

Conclusion

When you’re working with a freelance artist, it’s important to know if they are your employee or an independent contractor, and then you need to treat the relationship accordingly. While maintaining an independent contractor status might involve giving up some control over aspects of the work such as the time and place that the work is done, I tend to believe it’s ultimately worth it to avoid the difficulties that come with an employment relationship when you’re only working together for a limited project.

  1. Note that sometimes a studio may be contracted to work on the game. For simplicity, we’ll use the word “studio” to refer to the person or group that’s hiring an artist, and artist as the independent contractor (or employee) ↩︎


Leave a Reply

Your email address will not be published. Required fields are marked *