Freelancing vs. Hiring an Employee: Weighing The Options

Female Freelancer Working

Small businesses are just that: small. 

For many startups and entrepreneurial endeavors, keeping the employee roster relatively limited is key. Even when the workload begins to pick up, many small companies avoid hiring additional full time help in an effort to avoid extra expenses and overhead that could reduce profitability.

As a result, we’ve begun to see the emergence of a gig economy in the work world. The freelance market is booming and many workers have decided to operate on their own, gathering projects from various companies on a freelance basis rather than tethering themselves to one organization.

For small business owners, this means you have options when it comes to expanding your workforce. 

Considering the pros and cons of hiring a freelancer vs. hiring an employee? Here are some important thoughts to keep in mind.

When Should You Hire a Freelancer?

There’s no one-size-fits-all rule when it comes to deciding whether a freelancer or a new hire is your best bet, but there are a few good indications that can help to push you in one direction or the other.

It’s typically a good choice to work with a freelancer when: 

You Have a Short-Term Need

Freelancers are great for hiring on a short-term basis. If you have a specific project or a client that you’ll be working with for a limited period of time, a freelancer can help you get the job done without a long-term commitment. 

You’re Trying to Save Money

Hiring a freelancer means you won’t have to pay for benefits, insurance, retirement, social security and more, which reduces the expense for your company. 

Additionally, though freelancers may charge a higher hourly rate than you’d pay an employee, you can hire them on a short-term basis, meaning you won’t have to continue paying them once the project or engagement they were hired to assist with has concluded. 

You’re Looking for a Low-Risk Engagement

Adding a new employee to the payroll can feel like a risk, especially if you need to hire quickly and don’t have the time or bandwidth to be sure that your new hire has been properly vetted. 

By collaborating with a freelancer, you eliminate the need to pay for benefits, as mentioned above. It’s also likely that your company wouldn’t have to cover unemployment or workers compensation for the freelancer. Additionally, hiring a freelancer can make the hiring/firing process easier. 

You Want a High Quality Product

A new employee will likely give you their very best work when they’re just starting out. In fact, most good employees will work hard for your business on a consistent basis, but every employee will struggle with burnout on occasion.

Freelancers, however, are forced to give their absolute best on every project they’ve accepted. Their livelihood relies on recommendations, re-hires, and on providing you with the best possible product they can produce. So if you want to guarantee that you’ll receive a high quality product without signing an employee on for the long-term, freelancing is the way to go.

When Should You Hire a New Employee?

Hiring a new employee is a big decision for your company, but in many cases adding to your staff is the best way to handle the work that’s coming your way.

It’s a good idea to hire a new team member when: 

The Task or Project Involves Significant Training

Training and supervising a freelancer who is going to move on to another opportunity after their engagement with you has concluded is ultimately a waste of company time and resources. If you have a task or project that requires extensive training, it’s in your best interest to spend time training and supervising an employee who is going to stick with you and be able to utilize what they’ve learned to benefit your company for the long-haul.

You’re Handling Confidential Information

Sometimes you’ll find yourself working with classified or sensitive information – and in some cases that information is associated with a client or business partner that has asked for you to keep the data confidential. When that’s the case, you’re obligated to do so. As such, keeping the project within your company is the safer thing to do. 

Your employees will feel a higher level of commitment to your organization, and to the projects that they’re working on in most cases. Keeping sensitive information within your company can help to keep it protected and ensure that confidential materials and data aren’t leaked. 

You’re Going to Need Help for the Long Term

Freelancers are great when you have a specific task to outsource or a project you need help with that will eventually reach a conclusion. If you have client work or a project that’s going to go on indefinitely, assigning it to a permanent member of your staff is ideal. 

You Need Someone Completely Focused on the Task at Hand

While freelancers’ priority is to build their business as an independent contractor, connecting with various companies and taking on various projects at any given time, a dedicated on-staff employee’s priority will be to meet the needs of your company. That means they can be completely focused on the project they’re assigned without any side-work interfering, if that’s how the project needs to be handled. 

If you need an employee to be completely and utterly focused on tackling a specific long-term project or handling a specific client, hiring an employee is likely your best bet.

Weigh Your Options Carefully When it Comes to Freelancing or Hiring

There’s no one right answer to the question of whether freelancing a project or hiring a new employee is the best option. Each scenario is different, and it’s important to weigh your options carefully and consider the pros and cons of each so you can make the decision that’s best for your organization. 

Looking for other insight that can help small business owners build companies that thrive? Be sure to check out our tips for small business owners for information about everything from choosing office space to managing employees effectively! 

Growing your team and need more space for your company? Our office space just outside of Boston could be just what you’re looking for. Learn more about our available spaces. Interested? Schedule a tour with us today!