Discover the pros and cons of hiring a freelancer and find out when it really makes more sense to hire someone instead.
Grow your business, Not your inbox
Stay up to date and subscribe to our daily newsletter now!
5 min read
The opinions expressed by the entrepreneur's contributors are their own.
You need help but want to find out if it is contractual help or if you have to pay someone. This question comes up frequently and has important implications for industrial relations. Do you need an agreement with a contractor or do you need to hire a regular employee? With millions of freelancers in the US alone, you have a choice of qualified candidates. Take a step back and do some homework to find out if you really need a staff member or an independent contractor.
When you have an employee on the payroll, you are in control of what the working relationship and schedule are. As an employer, you will most likely pay them hourly or as an employee and take away taxes. Most employers will of course also offer their employees a benefit package. On the other hand, contractors receive a flat fee per project or an hourly fee to work with you, but in the vast majority of situations they receive no W2s or services. (For more information on IRS designations and tests that will help you determine if the work arrangement you are proposing is in line with legal definitions, please visit this resource page.)
Related: When is Freelance Hiring a Good Idea?
There are some great benefits to hiring a freelancer:
Pay only for the work you really need. No benefit payment unless you choose to offer it. You can find competitive prices in the market and match your budget and desired level of experience with a like-minded freelancer. Access to talent around the world (which you also get if you hire a remote worker)
Here are the things to keep in mind when deciding whether to outsource to a freelancer or hire an employee.
Freelancers must be legally autonomous in their work. Flexibility is key to this work arrangement. In most contractual relationships, the freelancer works on his own schedule on his own equipment and meets project deadlines if necessary. Generally, freelancers remain available for scheduled calls, but are not available on call like an agent during typical work hours.
When you need someone to be available every day during your set hours, which means they have to block their entire working day while the rest of your team is working, it usually means an employee-to-employer relationship. In the US, this means wage, W2, and Social Security / Medicare taxes are paid as part of their paychecks.
If you're open to a more flexible arrangement and really want to treat that person like an independent contractor – where they control how and when they do their job – a freelancer is a better choice.
Just don't blur the line. Decide what best suits your needs and keep it that way. If you need to make changes, talk to your rep about the need to change the status and whether they're okay with it.
Related: Why So Many Americans Prefer the Freelance Lifestyle
Do I have access to the talents who are looking for an employee position? Many freelancers volunteer to work remotely and want to have access to more than one client at a time. This means that some of the best talent could be among the freelance workforce. Leaving jobs is a bigger commitment, but hiring a new client is commonplace for freelancers. Hence, there may be more people you can talk to about the opportunity faster if you choose to work as a freelancer.
That's not to say that there aren't any great people looking for full-time jobs. On the contrary. However, if you are open to freelancers who may get their job done faster if you only pay them for a job well done, it can put a better strain on your budget.
Do you have enough work to keep a part-time or full-time employee busy all the time? If not, you end up paying a salary or hours in which the employee has nothing to do. This is not good for anyone.
Sporadic workload or short-term overload are a strong argument in favor of hiring a freelancer, while work in progress – especially if you need someone to be available to you at certain times – indicates that you may need a permanent employee. Since both parties can potentially work remotely and expand your talent pool, it becomes even more important to think about the structure of the working relationship and the overall workload.
Freelancers can stay with your company for a long time, bill hourly or keep them on an hourly basis, but many of them are happy to work with you on smaller projects or shorter periods of time.