Outsourcing is a sound option whether you need administrative help, IT support, bookkeeping services, creative work or just about any other skill. And it’s growing in demand and value — according to Upwork, more than half of freelancers in the United States provided skilled services, like computer programming or business consulting, in 2021.
Not sure whether freelance talent is right for your business? Here’s what to consider.
5 reasons to opt for freelancers over full-time staff
1. You can lower your costs
Hiring a freelancer is more cost-effective than onboarding a full-time staff employee. According to the U.S. Small Business Administration (SBA), hiring an employee typically costs 1.25 to 1.4 times their annual salary once you factor in payroll taxes, workers’ compensation insurance, benefits and other costs.
So, if you pay an employee a salary of $50,000, you can expect your actual costs to be anywhere from $62,500 to $70,000.
Freelancers typically provide their own workspace and equipment, so you don’t need to worry about purchasing a computer or desk or providing office space. You also aren’t responsible for paying employment taxes or providing benefits. Between Social Security and Medicare benefits, federal and state unemployment taxes, health insurance premiums and retirement plan contributions, hiring a freelancer rather than an employee can save a significant amount.
2. You’ll gain access to specialized skills
When you hire a freelancer to work on a project, they come equipped with a unique skill set. And because they’re independent contractors, they’ve honed their skills working with a variety of companies.
Say you need help redesigning a website, managing your social media channels or managing your small business finances. There’s little chance of finding a full-time employee who has experience juggling all these tasks. But you will likely find three freelancers who can handle all of them for you.
Traditional staff employees might need a lot of training or sometimes turn in subpar work. Freelancers, on the other hand, are running their own businesses, so they’re more motivated to turn in high-quality work, increasing the chance of earning repeat business.
3. It can free up your employees’ time
According to the National Federation of Independent Business’ (NFIB) May 2022 jobs report, 51% of small businesses report having job openings they’re unable to fill in the current worker shortage.
When businesses have a tough time hiring new employees, workloads tend to increase for existing ones. That situation may be tenable in the short term, but if left unresolved, it can lead to stress and burnout.
When permanent employees are hard to come by, freelancers can be tapped for special projects and other tasks that your team simply doesn’t have time for.
4. You can experience different or diverse views
Diversity matters, and not just on a social justice level. According to research from McKinsey, companies with high levels of racial and ethnic diversity are 35% more likely to have financial returns above industry medians, and companies with gender diversity are 15% more likely to have financial returns compared to the national industry medians.
Even businesses that want to hire diverse candidates may have trouble attracting and retaining them. While pinpointing why the business is losing diverse candidates is a crucial step toward building a more inclusive workforce, hiring freelancers is another way to harness the talent and ingenuity that a diverse team brings to the table.
When hiring freelancers, consider diversity on several fronts: age, ability, geography, gender, ethnicity, race, experience, etc.
5. You can scale your team faster
As a business owner, you know how time-consuming the recruiting and hiring process can be. You have to create and publish job ads, sort through dozens or even hundreds of applicants, interview candidates (sometimes multiple times), and wait to see if your top candidate accepts your offer.
This time commitment doesn’t stop when they accept your offer, either. After you hire someone, you need to deal with onboarding and training. According to the Society for Human Resource Management’s (SHRM) Talent Acquisition Benchmarking Report, it takes companies on average 36 days to fill an open position. And properly onboarding and training a new employee takes at least three months, according to Bamboo HR.
If you need to meet a short deadline or quickly cover responsibilities for a staff employee that quits or becomes ill, that timeline just won’t work. But you may be able to hire a freelancer on short notice. In fact, according to a study by Harvard Business School and Boston Consulting Group, 40% of business leaders say accessing highly skilled freelancers has improved their speed to market, boosted productivity and increased innovation.
Keep in mind, working with freelancers doesn’t have to be a rollercoaster of finding someone on a platform like Fiverr or Upwork, contracting them to do one job, then going through the process all over again the next time you need something done.
Many highly skilled freelancers prefer building long-term relationships with their clients. So once you’ve found one (or several) you work well with and trust, you can “rehire” them for new projects.
Of course, every business doesn’t need long-term help. You might need someone for a one-time task or during a particularly busy season. Working with freelancers allows you to scale up and down as needed. Since they’re not staff employees, you’re not forced to hire only to let people go when you don’t have as much work for them to do.
A word of caution…
Hiring a freelancer might seem like a no-brainer at this point, but there’s one important distinction to keep in mind. The IRS and the Department of Labor (DOL) have strict rules around correctly classifying workers, and there are steep penalties for misclassifying staff employees as independent contractors.
The IRS looks at three factors when deciding whether a worker should be classified as an employee or an independent contractor:
- Behavioral. Businesses have a right to control how and where employees work and what equipment they use, whereas freelancers usually use their own equipment and choose their working hours and methods.
- Financial. Companies can include a clause in their employment contracts requiring employees to be exclusively employed by them and not work for competitors. Freelance work, on the other hand, is nonexclusive. Independent contractors can take work from any client, even competitors.
- Relationship. When you hire freelancers, you should have a written contract stating that they are independent workers, not employees. Independent contractors also don’t receive employee benefits, such as paid time off or medical insurance coverage.
Simply put, you have a limited amount of control over freelancers. Hiring a staff employee may be your best bet if you want:
- To dictate how people get the job done or the tools they use
- Assurance that they will work exclusively for your business
- To require them to work during your business hours or on your premises
Hiring a freelancer isn’t the right call for all roles, but it can be the perfect solution for short-term projects, infrequent work or jobs that don’t need to be performed during regular business hours or onsite. As long as you categorize workers correctly, hiring freelancers can help you tap into the talent you need to run and grow your company.