Today, the innovative nature of business means that hiring in-house employees isn’t your only option. Depending on your needs, seeking professional help from independent contractors or freelancers could also be a viable option that provides you with the expertise you need in a more cost-effective manner.
You do, however, need to get clued up on the differences between the three. Misclassifying workers may result in a hefty fine, and you should avoid any unnecessary headaches by always doing plenty of research before making a decision.
Before deciding whether a freelancer, a contractor, or a full-time employee is right for your business, read our helpful guide to the benefits and drawbacks of hiring each one.
What is a freelancer?
A freelancer is a non-permanent, self-employed worker who provides services to a variety of businesses and clients. These professionals can take on as many clients and projects as their schedule allows. As a freelancer, they can set their own rates, process tax payments on their own, and typically work wherever and whenever they want.
Whether your business needs a social media professional to help market your business to new customers, a copywriter to create engaging content for your website, or a talented graphic designer to design a new business brochure, using the on-demand services of a freelancer can be a cost-effective and low-commitment way to complete ongoing projects. The quality of service can vary, of course, but businesses will often work with the same freelancer multiple times if they consistently deliver high-quality work.
The pros of using freelancers
- It’s cost-effective: When you hire a freelancer, you only need to pay the agreed-upon rate for the job. You will not be responsible for payroll or any employer contributions; you are simply acquiring their service. Using freelancers can save your business a significant amount of money provided the service they offer represents good value.
- They have specialist skills: You may find that your in-house team doesn’t have the specialist skills required to carry out a specific task or project, and using a freelancer may plug that gap. Freelancers specialize in anything from web design to data analysis, so you’ll usually be able to find a freelancer to fill any kind of specialist job brief.
- You can be flexible: By hiring a freelancer, you can enjoy the kind of flexibility you may not get with a contractor or a permanent employee. They often work remotely and outside of traditional ‘office’ hours, and they can be hired on an ad-hoc basis as and when required.
The cons of using freelancers
- Deadlines can be missed: Although most freelancers are very prompt at delivering work, they typically work on more than one project at a time, meaning delivery can often take longer than anticipated if they’re under pressure from several clients. Furthermore, if a freelancer doesn’t take the time to evaluate and scope out the project beforehand, they may underestimate the time it takes to deliver the work.
- The quality of service varies wildly: Platforms such as Fiverr offer myriad options for finding freelancers; however, it’s important to assess their skill sets and study reviews from previous clients thoroughly, as the service they offer can vary in quality. You generally get what you pay for, but you don’t want to waste money on shoddy work!
What is an independent contractor?
An independent contractor is similar to a freelancer, since they are both self-employed; however, contractors work a little differently from freelancers, as they usually take on longer-term projects and work for one client full-time for a set period — unlike a freelancer, who is likely working with several clients simultaneously — and often on the client’s premises.
According to the IRS, “an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” This definition may vary between countries. Click here to learn more about hiring independent contractors from global employment experts Remote.
The pros of using independent contractors
- They’re ideal for long-term projects: While freelancers are typically hired on-demand for one-off or short-term projects, an independent contractor is usually brought in by a company to support with a long-term business project. They may be contracted for several months at a time, or at least until the project they’re working on is successfully delivered.
- They’re reliable: Freelancers can be hit-and-miss — some are highly skilled and responsive, while others are underqualified and poor communicators — whereas contractors are usually experienced, highly motivated individuals who you can count on to deliver high-quality work and conduct themselves properly.
- They don’t require training: Often when you hire a permanent employee, they’ll need a period of training to get them up to speed on the role’s unique requirements. With a contractor, however, you’re typically hiring someone with vast experience and expertise, meaning they can usually get to work straight away.
The cons of using independent contractors
- Laws regarding contractor classification vary among countries: As mentioned, it’s important to know where you stand as a business when hiring contractors. Laws differ between countries, so do your research to ensure you don’t unintentionally end up on the wrong side of the law.
- They can be expensive: Independent contractors are typically subject matter experts with highly specialized skills, and therefore they often command significant fees or salaries. You may find that hiring a contractor is significantly more expensive than taking on a permanent employee or a freelancer.
What is an employee?
The main difference between an employee and a contractor or freelancer is that an employee works solely for your business on a permanent basis. As their employer, you are responsible for paying them an agreed salary, ensuring they are taxed appropriately, administering employee benefits, and other aspects covered in their employment contracts.
The legal definition of an employee is “an individual who has entered into or works under a contract of employment”.
The pros of hiring an employee
- They understand your business: When you hire someone external to work on a project, they may not fully understand or appreciate what your business does, or what its goals and values are — and why would they if they’re only working on a one-off project? Permanent employees, however, are ambassadors for your business, and they understand the why as well as the what and the how.
- They’re more invested in success: Beyond the specific project they’re expected to deliver, a temporary worker is unlikely to be too interested the long-term success of your business, whereas a permanent employee has much more reason to care; it’s in their interests to contribute to its ongoing success, as a thriving business means long-term job security and more opportunities for personal development.
- You can build loyalty: Hired employees are more likely to feel a sense of loyalty to your business than freelancers or contractors. You’ve shown trust in them by hiring them and providing them with the benefits of full-time employment and other perks, making them more likely to stick with your company and support you during its growth.
The cons of hiring an employee
- One-off projects may take time away from other responsibilities: When one-off projects come along, it may be difficult for a permanent employee to manage their workload, meaning they’ll often have less time for day-to-day responsibilities and productivity may suffer. This can cause unwanted stress and potentially burnout.
- The recruitment process can be drawn-out: Hiring a suitable permanent employee takes time, and it can often be many months before your new hire is in place and settled into their role. Sourcing applicants, sifting through resumes, conducting interviews, and negotiating salaries can amount to a whole lot of time before you even consider onboarding.
Freelancers, contractors, and employees all have their benefits and drawbacks. Think carefully about the type of skills you’re looking for before hiring anyone, and this will get you the best results. Of course, if you have a range of needs, you might even consider a combination of the three.