Should Your Business Hire Freelance or Full-time Employees?

Freelance vs. full time employees

What is the difference between freelance vs. full-time?

For many businesses, the decision to hire a freelancer or a full time employee can be very difficult. While both types of workers may have the ability to provide the same services, they have a few differences. Knowing these differences can help businesses make the best hiring decision.

Let’s take a look at the differences between a freelance vs. full-time employees:

Permanency

A freelancer provides a particular type of service at a negotiated rate for a specific period of time. Usually, the business owner and the freelancer will sign a contract stating the details of the agreement. After the completion of the job, another contractual agreement may be made or both parties may decide to terminate the working relationship. On the other hand, full-time employees are hired for a long-term position and have better job security and stability.

Payment Terms

When hiring a freelancer or a full-time employee there will likely be a salary negotiation, however most freelancers have a set rate they charge for a project. You may have to pay a freelancer a higher salary than you would a full-time worker, but it’s for a shorter period of time. On the other hand, you need to make sure your business has the resources to consistently pay the salary and benefits of a full-time employee for years to come.

Employment taxes

Employers are responsible for their employee’s taxes, including the exact amount of taxes owed before paychecks are issued to them. Freelancers are responsible for paying their own income tax and self-employment tax. Failure of a freelancer to make payments of the correct estimated tax could lead to a penalty.

Employment benefits

In 2014, employers had to pay $79 million in back wages to more than 100,000 workers who were determined to be employees, not independent contractors. Unlike full-time employees, independent contractors i.e. freelancers, are not entitled to employment benefits. They do not receive vacation allowance, paid maternity or sick days. They are also not eligible to receive medical insurance and retirement benefits from your company.

Flexibility

One of the major differences between freelancers and full-time employees is their work schedules. Full-time employees will typically work regular office hours, while freelancers can work when and where they want, and as a business owner cannot dictate how a contractor gets their work done.

By 2020, 40 percent of the U.S. workforce is expected to be independent contractors. However, this does not mean that hiring freelancers is the right choice for all businesses. While there are many advantages, it also has a number of downsides. Let us take a look at some of the pros and cons of hiring freelancers.

Pros of hiring freelancers

  • Reduced Cost: If you have employees that work remotely, you reduce the costs of running an office and staff maintenance. Unlike a full time employee, a freelancer is not entitled to certain employee benefits. By hiring freelancers who are working from home you save yourself from paying employment taxes and workers’ compensation benefits like health insurance, retirement benefits, social security, etc.

  • Reduced Risk: Most businesses that hire freelancers fill in positions on a per-project basis. Since freelance work is not full time employment, contracts can be easily terminated if the freelancer does not deliver a quality job. This is particularly helpful within states with laws that provide exemptions to at-will employees. Hiring a freelancer reduces employers’ risk if things go wrong while increasing business productivity maximizing cost-efficiency.

  • Easy Hiring Process: There are several online freelance marketplaces that make it very easy to source for freelancers. You can find IT personnel, designers, marketers, academics, assistants, writers, accountants, and several other professionals that do freelance work with a small budget spend. The process is fast and reduces the cost of a traditional recruitment process. Once you find the right freelance worker and agree on work terms, the project can commence ASAP. There is also no geographical limit. You can get access to experienced professionals around the globe since they can work from anywhere.

  • Improved Job Quality: Freelancers need to do quality jobs in order to retain their customers. With the abundance of platforms, competition amongst freelance workers are high. While the performance of your full-time employees may have highs and lows, freelancers strive to deliver top-notch services, especially since their contract is mostly subject to renewal. This also gives you the chance to be very selective to ensure you only choose the best.

Cons of hiring freelancers

  • Lack of Proper Management: Hiring freelancers can help you to reduce cost, but if your remote team is not managed efficiently, it could cost you more in the long run. There should be a project manager with the competency of supervising all talent, both remote and staff members (if any), to ensure a seamless workflow. Such a manager needs to understand the individual jobs of all the independent contractors and be equipped with the tools and skills necessary to coordinate different teams. Finding such skilled managers can come at an extra cost. Depending on your business project, proper management of your freelance workers may also require that you upgrade your business software. This upgrade might be quite expensive.
  • Difficulty in Building Company Culture: There may be difficulty in developing a company culture with freelance workers as supervision is very minimal. While a freelancer may want to keep you as a long term client, such worker is not likely to be totally vested in your company’s success since it is not their full time job. Most full-time employees have career goals that may include promotion within your company and are therefore more eager to put in their best.
  • Unavailability: The work hours and time zones of freelancers may differ from that of your company. Unlike a full time employee that reports to the office within a specific period of time, this is not always true for freelancers. Therefore, working hours need to be properly scheduled to ensure they are available when they are most needed. You may also need to have a backup if these freelancers are unavailable or unresponsive.

Hiring a freelancer is not the best for all positions or businesses. Freelancers are mostly suitable for short-term projects, one-off tasks and infrequent work. However, if you have a consistent workload and are interested in building a strong team as well as benefit from good company culture, full-time employees are often the best choice.


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