Freelancers vs. Full-Time Employees: What You Need to Know
The economy is changing rapidly.
New technologies have empowered many of us to work wherever and whenever we want – as long as we have an internet connection. Employers are becoming increasingly comfortable with remote work arrangements. They’re assembling teams across different time zones and even different continents.
More of us are freelancing (or hiring freelancers) than ever before. Some experts call this the rise of the “gig economy.”
As employers, we’ve never had so many hiring options. But should we be staffing up with freelancers or full-time employees?
Keep reading for the most important things to think about before you decide!
Factors to Consider
Here are a few key factors to consider before deciding to hire a freelancer or full-time employee.
Cost and Work Efficiency
One of the first things you might notice when researching freelancer, is that their rates sound high. When you’re used to thinking in terms of annual salaries, it can be quite a shock to see an IT expert charging 150 or 200 dollars an hour.
These rates become more reasonable when considered in the context of all the things you don’t have to pay for.
With full-time employees, it’s your responsibility to foot the bill for paid vacations, benefits, retirement matching programs, and possibly employer-sponsored insurance. Payroll taxes are another consideration.
There are also “soft costs” involved like renting or buying office space, and keeping that space stocked with supplies so your full-time employees can do their best work.
In light of all that, it makes sense that freelancers would charge higher hourly rates. Michael Solomon estimates that not paying typical full-time employee expenses (vacation, retirement, benefits, etc.) could more than make up for a higher hourly rate.
Another net benefit of hiring freelancers: you only pay them when they’re doing productive work. Arrangements are made by the hour or project. With full-time employees, you’re paying whether they’re getting work done or getting distracted on Facebook.
Lost employee productivity is an unfortunate reality. The average office worker wastes over 750 hours a year. Even if you’re an excellent manager, valuable minutes slip away on social media, coffee breaks, and gossip.
That said, one major benefit on the full-time employee side is predictability. You know exactly how much payroll will be every month, while a freelancer might rack up significantly more hours to finish a project than you expected (or projected).
Specialization and Access
A huge percentage of the workforce is turning to freelancing, whether as a main income source or a way to supplement what they make in their day jobs. This number is expected to grow dramatically over the next few decades.
All of these freelancers translates into more competition. With so many people looking for gigs, the ones who stay on the cutting edge of their industries will stand out. Many of them specialize and get very good at doing one or two things.
This creates a lot of options for employers. Instead of just hiring a general photographer to take photos of your store to display on your website, you can hire a specialist with a proven track record of making stores look appealing as possible. No matter how specific the problem, there’s probably a freelance solution available.
Hiring freelancers also offers access to a broader pool of talent. Instead of just hiring people who live nearby and could commute to work full-time, you could use web platforms to hire freelancers on almost any different. All of these options are great, but there are some downsides to hiring too many people without deeper ties to your business’s success and the local community. More on that in just a second.
Hiring, Termination, and Legal Obligations
It typically takes longer to hire a full-time employee than a freelancer. There are interviews involved, along with lots of paperwork and training.
This is a double-edged sword. While it’s easier to hire a freelancer and have them get to work right away, it’s also easier for them to disappear on you. A full-time employee who relies on one job for all of his or her income will have a harder time just picking up and leaving.
But a freelancer, who’s typically juggling a handful of different clients, could simply stop responding to your emails and find another project.
On the other hand, it’s much easier to terminate a freelancer if the arrangement isn’t working out. But unlike full-time employees, there’s little incentive for a freelancer to stick around and try to make something work. An employee might be invested enough to take your criticism to heart and improve.
Hopefully you can see how many of these things could go from benefits to disadvantages (and vice versa) depending on the specific situation.
Other things to think about are tax and legal implications. The distinction between full-time employee and independent contractor (freelancer) might not seem like such a big deal to you, but it matters greatly to the IRS. Check out this page for further clarification.
Certain U.S. laws, like the EEOC and the Affordable Care Act, are triggered once your employee count reaches a certain number. Freelancers don’t count for these purposes. That’s good to keep in mind if you’re near one of those key thresholds.
Control and Scheduling
Most (but not all) freelancers work remotely with little to no supervision.
Whether that’s a positive for you depends on your management style. Some of us prefer a more hands-off approach while others like to stay closer to all the action.
Most freelancers also set their own schedules, which means they might not always be available when you’d like them to be. Depending on where they live, they might be working while you’re asleep or relaxing at home with your kids!
Working productively together requires more advanced planning. You’ll have to find out up front just how long a project might take and when you can expect it to be finished. One good thing: freelancers’ distance from the rest of your team makes it unlikely they’ll bump heads or get involved in nasty office politics.
That’s a huge benefit of having full-time employees. With a five-minute meeting or a single mass email, you can focus everyone’s efforts to address a high-priority task or any emergency that might come up.
With freelancers, their priorities won’t always match your own. They’re juggling multiple projects, so rush jobs will probably cost extra.
Community and Brand Investment
Freelancers want to do well and get repeat business. But their interest in seeing your business succeed isn’t keeping them awake at night. Even if you’re their favorite client, you’re probably just one of many.
Experienced freelancers understand that promising arrangements can fall apart quickly. The economy could change. A new competitor might show up. So, they’re used to finding new clients and adapting.
It’s easier for freelancers to just move on because it’s unlikely they live exactly where you do anyway. They’re already working remotely. Their investment in the local community is limited to their business with you.
Full-time employees are different. Most of these people live in your area. They’re invested in the local community and seeing you succeed.
When full-time employees come into work they build meaningful relationships with their co-workers. Ideas are bounced off one another. A work environment is created. A company culture is formed.
Concepts like “culture” or “work environment” are hard to quantify, but they’re the things that customers notice. These things are reflected in an incredible customer service and experience.
It’s harder to build those things if you rely almost exclusively on freelancers. Most of them are great people and work hard on their projects. But the nature of the arrangement limits just how much they can contribute to your brand at large.
The best hiring decision for you depends on your unique situation.
The ideal solution for most of us is to surround ourselves with a core group of full-time employees – people who are plugged into working as a team and building your company culture. Then you can supplement that talent with freelance specialists as the situation calls for it.
The good news: you can always make adjustments as you go. With all the emerging technologies and platforms, you’ve never had more options to find the perfect person for whatever job you have in mind.
Do you prefer to hire full-time employees or freelancers? Why? What do you think about before making the decision? Leave a comment below and share your experience!