If you run a business, you will likely consider hiring freelance workers at some point. Freelancers now make up 35% of the U.S. workforce, so no matter the sector, you shouldn't have any problem finding qualified contractors.
There are pros and cons when relying on freelancers, rather than full-time employees (and if you want to figure out how to classify a worker, here's a handy questionnaire from QuickBooks). It’s rarely an easy decision, but here are a number of things to consider when deciding which route you want to take for your business.
Wages and benefits
One of the obvious benefits of hiring freelancers is you don’t have to pay for benefits. Freelancers are independent contractors who usually take care of their own health care and retirement plan. Amidst rapidly-growing health care costs, this is a big advantage.
Because you don’t pay for freelancers’ benefits, however, you should expect to pay them more on an hourly basis. Be prepared for potential sticker shock when you receive quotes or invoices from freelance workers. But remember that they also have to cover the costs of their health insurance and 401(k).
In addition, freelancers may charge more per hour simply because their work is not as steady. Although they get paid more per hour, you, as a business owner, are likely still saving money because you are only paying the person on a temporary or per project basis. You don’t have to keep paying salary when their services are not essential.
The more instruction and training that is required of the task, the less benefit there is in relying on freelancers. Keep in mind that even jobs that you don’t consider complicated may require quite a bit of instruction and guidance before the worker becomes comfortable with it.
Even when freelancers claim they are capable of taking on the job, you are likely going to spend more time supervising them and checking their work to ensure they’re doing it correctly. If they do the work perfectly, you will have devoted time (supervising them) that could have been spent on more fruitful endeavors. And of course, if they don’t do the work well, you have to spend even more time getting them to correct it or finding somebody else to do it.
On the other hand, freelancers can also possess very specialized skills that can be utilized immediately versus training an existing employee. Still, the specific skill (e.g. event management, sales training, etc) may not be needed all the time, therefore it may not make sense to keep the person on payroll year-round.
In your cost-benefit analysis, it's important to consider the amount of time required to onboard, supervise and retain the worker, and how sustainable it is to keep that person employed throughout the year.
One big advantage of relying on freelancers – particularly if the work can be done remotely – is that your market of available workers is often much larger. When you’re seeking full-time employees, you not only need to find somebody who is qualified and interested in the compensation you are offering, but you usually need somebody who is either in the area or willing to relocate.
With contract workers, you are far more likely to elicit interest from across the country and the world, since this is work that can be done remotely. For work that must be performed on-site, the pool will still likely be larger, since there are workers who may not be willing to commute to the site regularly, but are willing to do so for a short period of time.
Even though more and more work can be performed remotely, there is a good reason why employers continue to require most full-time employees to report to an office. Business owners generally want salaried employees in the office so that even when they are not performing their central function, they can use their free time performing miscellaneous tasks – or other jobs that would not be assigned to a freelancer.
If you are relying on freelancers for specific projects, it makes far more sense to cut spending on office space and let them work remotely. This can be a major cost-cutter.
Even if you do have to provide office space to a contract worker, it will cost significantly less than providing all of the resources and amenities that a full-time employee expects in the workplace. While full-time employees might get demoralized working from a drab cubicle and demand a more spacious office with a nice view, a freelancer is generally not going to demand premium workspace.
Commitment and initiative
There is a certain psychological and emotional commitment to your business that can only be expected from full-time employees. Freelancers are solely focused on the narrowly-defined task they’ve been paid to complete and their only goal is for you to be satisfied with how they performed that task.
For instance, if you assign a task to a full-time employee, he or she might recognize problems with what you are asking for and suggest doing things differently. In contrast, a freelancer is likely to prefer simply completing the task as requested, simply because they are not as entrenched in the company.
Full-time freelancers are under daily pressure to find new gigs and get them done as quickly as possible, so they can move on to the next paying project. As is the case with the legions of millennials who seek out work at startups rather than major corporations, freelancers do not have the luxury of keeping a low profile at work, since they know they will be given a specific task for which they will be held accountable. As a result, they are often extremely disciplined and deadline-oriented.
Depending on how you are paying your employees or contractors, there may be reasons one group would work more efficiently than another. In either case, if you are paying them by the hour, to track project hours and progress so that you know exactly what you’re getting out of your payroll.
The way we work continues to evolve. There are some core functions of a business that will likely be better-served by somebody who is fully invested in the company’s mission, while there will be some tasks that will be perfect for a freelancer. As long as you identify the tasks required and categorize your workers correctly, you can opt for whatever mix of full-time employees and freelancers you require to grow your business. A business that hires multi-skilled employees to work alongside specialized contractors can be an economical and efficient model.