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The rise of the freelancer is one of the most impactful workplace trends of the decade. Today, millions of people are taking on side hustles or leaving full-time jobs to freelance.

Meanwhile, small businesses need to keep their budgets under control. When it comes to cutting costs, talent often bears the brunt. Because hiring a freelancer is generally cheaper than hiring a full-time employee, small businesses often outsource important but short-term tasks like writing copy, designing a logo, or conducting financial analysis.

Is hiring a full-time employee always “better”? Should you only hire freelancers when you want to reduce costs? Not exactly. There are pros and cons to either direction. The goals of your business in the short- and long-term will dictate which makes more sense in any given scenario.

Why Hire a Freelancer

It is easier than ever to find freelancers who can tackle specific tasks for your small business, whether those are one-off projects like building a website or ongoing needs like writing blog posts. Either way, there are a few benefits to going this route.

1. Lower Overall Costs

The most obvious benefit to hiring a freelancer over a full-time employee concerns your immediate bottom line. When you hire a freelancer, you might pay them a higher hourly or daily rate than you would a full-timer, but you aren’t required to cover their health benefits or pay Medicare and Social Security taxes. If your freelancer works remotely, you’ll also save on office space and other resources.

2. Reduced Risk of Legal Problems

Businesses that hire freelancers are typically safe from being sued for harassment or discrimination. This doesn’t give you the right to mistreat or otherwise abuse your freelance hires, but you are less likely to face a lawsuit from a disgruntled worker if you hire them on a freelance basis.

3. Easier to Move On

When you hire an employee, you need to be absolutely sure they are the right person for the job. The cost of replacing a bad fit is high, which can lead to a business sinking lots of time and resources into low-achieving hires in the hopes of turning the situation around.

On the other hand, freelancers are typically hired on a per-project basis. Letting the freelancer go is as simple and painless as sending an email. If you take a risk on a freelancer and it doesn’t work out, that’s okay — you can just find another. If your goals change and you need to scale down your operations, it’s a lot easier to part ways with a freelancer than a salaried employee.

4. Tap a Wider Talent Base

When you hire a freelancer, you are not constrained by your local talent market. You can hire remote freelancers from around the world, as long as they meet your requirements and can deliver on your deadlines. You might save even more money if you hire workers in markets where the going rate is cheaper than in your own.

5. Affordable Access to an Expert Skill Set

Have a highly specific or highly advanced task, such as a data science project that requires deep knowledge of machine learning? A skilled freelancer can knock it out at a fraction of the cost of a full-time hire with the same skill set.

Why Hire a Full-Time Employee

In some businesses and for some roles, it is just not possible to hire a freelancer. For example, only an in-house employee can work the floor at a retail business. There are other situations, too, in which a small business would be better off hiring an employee:

1. In-Depth Projects That Require Attention to Detail

You simply can’t guarantee the quality of work a freelancer will deliver, especially when that freelancer works remotely and outside your sphere of supervision. Revisions and re-dos are expected when working with a freelancer, but for in-depth tasks that require attention to detail and getting it right the first time, it makes more sense to hire an in-house employee.

2. Workplace Culture Flounders Without Full-Timers

If you are increasingly farming out important tasks to freelancers — leaving your full-time employees isolated, unchallenged, and underpaid — you’re going to have a problem with workplace culture. Even if your business is just you and your partner at the moment, you’ll never develop the kind of winning office culture that attracts top talent if you only hire transient freelancers.

3. Greater Commitment to the Company

For a freelancer, your business may be one of many gigs that demand their time and attention. If you pay your full-time workers a fair salary, your company will be their sole professional focus. Full-timers will also be more motivated to see the company succeed, because a thriving company means more opportunity and more reward for them. Freelancers know they will move on shortly, so they have less reason to be invested in the company’s success.

How to Decide Whom to Hire

Whether you should hire a freelancer or a full-time employee depends greatly on the current needs of your business. Just starting up and need to keep costs down? A freelancer (or multiple freelancers) who can tackle tasks at a lower price point is probably the way to go. Have a more established small business looking to cement itself in the industry and grow sustainably? An investment in full-time workers will trump short-term contract hires.

Either way, your business will suffer if you don’t consistently evaluate your decisions and determine when each type of talent makes the most sense for you. Keep an eye on your bottom line and you’ll have a better idea of when to go freelancer and when to go full-time.

Meredith Wood is editor-in-chief at Fundera.



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