Freelancer vs. Employee: Which is Better for My Business?

employee vs. freelancer
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You can’t delay it any longer – your business needs some extra support.

The decision to hire someone is only your first step. You now need to decide what’s best for your business – hiring a freelancer or an employee. In this article, I’ve outlined the main differences between the two to help you make the best decision for your small business.

What is a Freelancer?

Being self-employed, a freelancer has complete control over their work location and work hours. A freelancer’s workload typically includes multiple clients and projects at any one time, with individual projects varying in length from short-term to long-term. Traditional freelance employees include copywriters (like us!), photographers, transcribers and web developers. Some people freelance on a full-time basis whereas others do it as a side hustle or in-between jobs.

Although they typically work on their own, freelancers may choose to outsource work for certain projects they take on. They determine their own rate of pay, with many opting to charge hourly or project rates. Typically located off-site, freelancers are responsible for paying their own income tax, unemployment insurance and worker’s comp (if applicable).

Freelancing appeals to self-motivated professionals who want flexibility around travel and family arrangements and small perks like lack of work uniform.

Why Should a Business Owner Hire a Freelancer?

For a business owner who requires extra support for a short-term project, freelancers are the best option. With the ability to hire them for as long as needed, you’re not tied to keeping them busy to justify a full-time salary. Once a short-term project has ended, you can end your contract agreement or agree to continue working together on a casual or more regular basis – the choice is up to you!

A freelancer is also a great option if you need expertise but can’t afford to hire an employee. This is why many business owners opt to contract out detailed work including communications plans, web development or PR projects.

The cost-savings along with hiring a freelancer rather than an employee are immense. No longer are you responsible for the costs associated with housing an in-office staff (office location, desk, administrative supplies, heat, hydro, etc.) or for making income tax, unemployment insurance and worker’s comp payments. Although their hourly rate may be more than what you would pay an employee, you can expect to save 20 to 30 percent annually when you consider all of these factors.

Hiring a freelancer also comes with less risk – as long as you abide by their contract (if any). If they are not meeting your expectations, a freelancer is typically easier to terminate than an employee.

What is an Employee?

Unlike a freelancer, employees are a permanent fixture within a company and are typically located on-site. They have a defined job description, work hours and pay rate (which can include salary, hourly rate, commission or a combination).

The employer is responsible for paying income taxes, unemployment insurance and workers’ comp which are automatically deducted from the employee’s wages.

Why Should a Business Owner Hire an Employee?

For business owners looking for on-site support, an employee is the best option. As the employer, you can set their work hours and job details including work uniform. Because of the stability of a full-time job, benefits and retirement funds, some employers prefer the implied commitment that comes with hiring a permanent employee.

If your small business needs to develop a clientele, an employee would be a better option than a freelancer. As an in-house employee, they know more about your day-to-day company details and can use that knowledge to build better long-term relationships with new customers.

For a position that requires extensive training and supervision, hiring an employee would be a better investment. Unlike freelancers who may be used only temporarily, employees are hired with the hopes of them becoming a long-term, dedicated fixture at your company.

The Bottom Line

In the end, there is no one-size-fits-all approach to hiring a freelancer vs. employee. Making the right decision depends on your business’s budget, project commitment and your individual working preferences as an employer.

For those situations where you’re looking for help with short-term projects, infrequent work or work that does not need to be performed on-site, a freelancer should definitely be considered. The same goes for when you want expertise on a project but can’t afford to onboard a permanent employee. If you have any communications projects fitting this description, we’d love to chat!

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