Hiring freelancers vs. permanent employees: pros and cons

Hiring new staff can be exciting for a small business. You get to put a fresh face on your Team page, but more importantly, you add new skills and bandwidth to the company that will hopefully lead to further growth.

An important decision you’ll need to make when hiring is whether the role should be filled by a freelancer or a full-time employee. There aren’t any hard and fast rules about which is better. Instead, choosing the most cost-effective and ultimately profitable option for your business means weighing up the pros and cons of each.

Pros of a freelancer

Pay-as-you-go has never been more popular. In fact, between 2008 and 2016, the number of freelancers in the UK increased by 43%. Here are three reasons why:

• Freelancers are specialists in their field. If you need copy, you can hire a copywriter. If you need a logo, you can hire a designer. A freelancer’s skills are often focussed on one area they excel in. If you have a specific need, it makes sense to seek out a specialist in that field.
• Pay-as-you-go can save you money. In the UK, freelancers have an average hourly rate of around £37. It’s more than double the average of full-time employees (about £14.40 in 2018 according to ONS). However, you’re in control of how much or little work you give freelancers. On an ad hoc basis, freelancer rates can be more affordable than full-time salaries. Let’s say you’re planning to change your business’s branding. You may need a designer working on it full-time for a while, but as soon as the rebrand is complete, you probably won’t have enough work for them. This is where freelancers can be the smarter choice.
• Save on desk space and equipment. Nine out of 10 UK freelancers work from home at least some of the time. If your office is already packed to the rafters, hiring a freelancer can allow you to expand your team without finding more space or buying new equipment.

Cons of a freelancer

Self-employed specialists can be convenient, but they can also have their downsides.

• Flexibility goes both ways. Despite there being 2 million freelancers in the UK, finding a reliable, experienced, well-priced one isn’t always easy. The best are highly sought after, so you may need to book them weeks or months in advance. This could mean a freelancer may not be the best bet if the work required tends to involve regular, last minute deadlines.
• They may not stick around. Without an agreement in place, there’s nothing stopping them from quitting halfway through or going on holiday. For example, using a freelance developer to build your app could make it harder for a different developer to update it in the future.
• You need to show them the ropes. Self-employed workers may be specialists in their field, but it’s up to you to help them understand the unique quirks and considerations of your business. This takes time, so it may be a while before they’re working at full capacity. You can avoid this by reusing the same talent, but if you often switch up your freelancers, the onboarding process could eat into your time.

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Pros of a permanent employee

While freelancers are flexible, there are benefits to hiring permanent staff to grow with your business.

• Commitment to your goals. While you can cut ties with a freelancer at a moment’s notice, and vice versa, permanent employees on average stay in a job for five years. That means permanent employees have more to gain if your business is successful, and may work harder to make it happen.
• Knowing their role inside out. A full-time employee is able to grow with your business and make increasingly valuable contributions as they mature in their role. This is particularly useful if your product or service is highly specialised.
• Build stronger relationships. Existing relationships are the second most important factor for buyers of professional services. Permanent employees are able to develop a rapport with, and an understanding of, your customers and clients in a way freelancers can’t.

Cons of a permanent employee

Hiring the right permanent employee isn’t always easy or cheap.

• Employees can be more expensive than you think. Once you factor in salaries, paid leave and holidays, pension contributions, and health benefits, the cost of hiring someone on a permanent basis can be higher than recruiting a freelancer. Try using a True Cost of an Employee Calculator to get a better understanding of all the costs involved.
• Recruiting the right candidate. It can take a while to find the right person, especially if the role requires a diverse range of skills. For projects with short turnarounds, the wait could prove costly, so hiring a couple of freelancers could be wiser.
• You need to look after your team. Permanent employees have specific rights, including parental leave and sick pay. While this gives permanent employees better job security, it means you can’t let them go at the drop of a hat if you no longer need them (ethically speaking, not that you should be doing this anyway, mind you). If you’re looking for someone on a short-term or seasonal basis, it may be prudent to go freelance.

Summing up

There’s no denying the freelance industry is booming. Half of the UK’s workforce is expected to be self-employed by 2020. But the choice between hiring a freelancer or taking on another full-time employee shouldn’t hinge on national trends. Instead, the decision should be based on what’s right for your business.

If the role will be integral to growth, with a consistent workload for the foreseeable future, investing in a full-time employee could be the best choice. If you have a project with a shorter turnaround, or one for which demand could rise or fall dramatically, a freelancer may be the safer, smarter decision.