Are freelancers cheaper for business than full-time staff? Companies have to deal with the rising costs of recruitment and hiring. Every penny counts in the current situation of spiraling inflation. Is it better to hire a freelancer or a full-time employee? What is better for my company? Read the article to find out.
Are freelancers cheaper for business than full-time staff? – table of content:
Are freelancers cheaper for business?
In the current situation of spiraling inflation and increased costs of living companies have to deal with rising costs of recruitment and hiring.
It is not easy to decide, which form of employment to choose for the company. All factors have to be taken under consideration and some in-depth analysis is required. Particularly smaller, growing companies and startups should take a closer look at the matter. Such companies have usually shorter, limited budgets, hence they have to pay stronger attention to their spending.
In the article entitled: „Working full-time and freelancing” we have already explained the differences between freelancing and full-time employment from the perspective of the employee. In the current article, we are going to discuss the same issue from the viewpoint of employers. We will try to find out if hiring freelancers is more cost-effective than hiring full-time workers. Let’s find out, what else needs to be examined while choosing between those two forms of employment.
Comparing the cost of hiring the freelancers and employees bound by the full-time employment contract the company should focus on remuneration. Freelancers are being paid usually fixed rates or receive their fees for the entire work done. They don’t receive anything more. In some situations, the company may decide to pay freelancer a premium for the work done perfectly, but it depends entirely on the employer’s policies and will.
In case of full-time employees, salary is one of many costs of employment. The employer has many more costs related to the employment, above all he needs to remember about taxes. In the USA, for example, three different taxes have to be added on top of each salary: federal tax, state tax, and local tax. Tax systems vary a lot across the globe, but what is similar in each country, is their never changing complexity.
The overall cost of hiring full-time workers, due to many related components, may not be easy to calculate. Due to those costs more and more companies turn away from traditional forms of employment. While hiring freelance employees may be a way to avoid employment costs because all taxes, insurances, social security payments are no longer of concern of company.
Taxes and salaries is not everything, while hiring full-time employee we have to consider many other costs. One of them is the operational cost of HR processes. The recruitment process of full-time employee is usually more time consuming and has to be conducted by experienced, hence well-paid, HR specialists.
Full-time employee has to be trained and go through the onboarding process, both are costly. It takes some time before our employee becomes fully productive. Additionally, the company has to provide all workers with the necessary equipment, such as: laptop or mobile phone. Obviously, purchasing and maintenance of all appliances, furniture and machinery generate expenses.
In comparison, freelance workers don’t need to be trained since they already possess all the required skills and abilities. They should have all the necessary equipment as well.
The recruitment and onboarding processes are not equally cost-intensive as in case of full-time workers. There is no need to involve large HR teams, since some external freelance management systems may be used instead.
Only one person is needed to operate such system for quick and effective freelance workers recruitment. More about freelance management systems read in our article entitled: “How do Freelance Management Systems help at work?”.
While choosing hiring options for your company one has to consider all available options and costs related to the employment process. To obtain good results, in the case of a full-time employee, all costs have to be precisely calculated, and such elements as: taxes, insurance, and charges have to be taken into account. The financial burden is lighter in the case of hiring freelancers, although they are not strongly connected with the company therefore the turnover among freelancers is usually very high.
What is cheaper: hiring freelancers or full-time employees with a contract agreement? Are freelancers cheaper for business than full-time staff? Considering all the charges the company has to pay, freelancers seem to be a less expensive option, especially for shorter, smaller projects.
Hiring full-time employees seems to be more appropriate in a situation of more complicated projects and longer cooperation. Full-time employees possess skills, expertise, and experience related to their position therefore their performance may be superior in some areas of work. We know, which type of employment is cheaper, but each manager has to decide for himself, which is most suitable for his company.
Read also: Key elements of Freelance Management System