Freelancing has seen a significant rise over the last decade. In 2020, more than 59 million people were freelancing in the United States. With the upsurge of talent available in the “gig economy,” companies are finding hardworking professionals whose position allows them to moderate their hiring budget and beyond. Here is a brief look at what to expect when hiring a freelancer over a full-time employee.
Businesses large and small rely on freelancers every day. The need is varied, whether it’s for help completing projects to meet deadlines, outsourcing important but short-term tasks such as designing a logo, writing copy or performing financial analysis. Companies do so mainly to cut costs but to gain other benefits as well.
A recent study revealed 40% of organizations reported that hiring highly skilled freelancers helped to boost productivity, improve speed to market and increase innovation within their company. The also see a decrease in the associated risks of employment when opting for independent contractors and the like.
What might make hiring a freelancer generally more cost effective than hiring a full-time employee? Even at a higher hourly rate, employers may anticipate saving 20% to 30% annually with a freelancer. Typically, this is due to the fact the employer does not have to pay for health insurance, retirement and other benefits.
Taxes are also a significant factor because Medicare and Social Security are not paid by the employer. That’s not to say there is no tax responsibility. While freelancers pay their own self-employment tax, employers must provide them with the appropriate tax forms. Managing such complicated matters could be better handled when an organization outsources tax form reporting.
Another aspect to keep in mind is a potential difference in working hours. Freelancers manage their own time and may not follow the business hours of the client for which they work. They may not even be in the same time zone. This may make coordination and communication more difficult than what is expected with a full-time employee.
The increase of available freelancers has been a win-win from both sides of the desk. There are some drawbacks, however, for both. There is often a lack of relationship building with freelancers along with a personal removal from the success of their clients. Without investment such as this, there may be a lower level of commitment. There may also be issues with inefficient time management, communication and similar factors resulting in higher costs in the long run.
Choosing who to hire depends on the short- and long-term goals of the business as well as the landscape of the workplace. As increasingly more individuals seek better benefits or remote work or hybrid arrangements, there could be continued changes to the pros and cons of hiring these two types of workers.
For additional benefits and drawbacks, please see the accompanying resource.
Sources
- https://hire.trakstar.com/blog/freelance-vs-fulltime-pros-cons-hiring-independent-contractor
- https://www.recruiter.com/recruiting/freelance-vs-full-time-when-to-hire-which-type-of-talent/
- https://www.coverwallet.com/business-tips/freelance-full-time-employees
- https://www.usemultiplier.com/blog/freelancer-vs-employees
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