Freelancers vs. Full-time Employees: Which is Better for Startups?

When starting a new business, one of the most critical decisions a founder must make is whether to hire freelancers or full-time employees. Each option has many advantages and a few significant disadvantages, so choosing the right one can impact a startup’s success in the long run. In this article, we will discuss the freelancer vs. employee conundrum for startups, compare the costs associated with each option, and provide guidance on determining which is best for you.

Advantages of hiring freelancers for startups

Opening your startup to the possibility of hiring freelancers or independent contractors can be an excellent option for founders who need specific help on certain jobs but aren’t sure how long the work will last. Unlike full-time employees, freelancers require a significantly smaller up-front investment and can undertake specific jobs within just a few hours of onboarding them.

Cost-effectiveness

person holding money with a calculator next to it

Suppose you take away the fact that freelancers don’t qualify for employee benefits such as health insurance, vacation time, and retirement funds. In that case, it becomes apparent how much more affordable full-time employees are since they are only paid for the hours they work. 

Onboarding costs are also reduced drastically because they only require access to certain parts of your operations.

Once you have agreed upon payment, your freelancer can get straight to work without needing constant supervision. Increased productivity reduces costs, so when you have an expert freelancer completing tasks, you can rest assured that you are spending less getting crucial elements of the job done.

Flexibility to use them only during heavy work cycles

Startups can hire freelancers as needed, which is especially useful during busy periods when additional resources are required. Conversely, when work is a bit lighter, startup founders can reduce their business expenses by not paying salaries or keeping freelancers on the books.

Instead of hiring full-time workers, freelancers provide startup founders the flexibility to pick and choose the moments to optimize their resource allocation. Feast and famine cycles dictate when it is an excellent time to have more hands on deck or to hold off and wait for more freelance gigs to materialize.

Access to specialized skills

peoples hands moving gears around

Freelancers are often multi-disciplinarians with different clients and specialized skills that are not available in-house. It can be tricky to find full-time workers who are guns in a specific niche, whereas freelancers of all types can be found with a quick search and added to your team for the duration of the project.

In addition, many self-employed workers have an established network they can call on to help with complex components.

Reduced management responsibilities

Hiring freelancers reduces the burden of management and HR-related tasks. Because founders generally wear multiple hats, the less time they have to spend on the arduous process of hiring, vetting, and onboarding allows them more time to promote their business to clients.

By partnering with an outsourcing company that takes care of finding, onboarding, payment, and communication, founders can focus on client work with greater vigor and enhance the possibility of making more money by applying their time where it matters most.

Disadvantages of hiring freelancers for startups

two asian people at work on laptops

Of course, independent contractors can only solve some problems. Many work several jobs for various companies, so their priorities will differ from yours.

Lack of control over work quality

Since freelancers work independently of companies and have more flexible hours, startups have limited control over the quality of the work they produce. If a founder has a propensity to micromanage, there may be better options than freelancing. However, by creating a clear scope of work in the employment contract, your outsourced hires will likely adhere to your ideal outcomes more efficiently.

Of course, any issues over the quality of work can be prevented by thoroughly vetting freelancers before they come on board. The vetting process can take time, so using an outsourcing company that takes care of the nutty gritty is a wise decision.

Communication challenges

angry woman on a phone

Poor communication is often cited as one of the cons of freelancing hires. It does happen, especially if a business doesn’t have helpful communication strategies in the work contract.

Freelancers like being their boss and can have multiple clients at any time. Therefore, startups must pay particular attention to staying in touch regularly. Having oversight of your outsourced projects is essential if you want to maximize monthly income and cash flow and move on to the next project.

Limited availability

Freelancers may not be available when a startup needs them due to work-life balance and other commitments. Of course, given the sheer number of individuals looking for freelance work, it is easy to hop back on an outsourcing marketplace to find someone with the skill level and expertise that meet your requirements.

By ensuring your freelancer is available for the whole duration of your project before getting started, you can avoid any availability issues down the track.

Advantages of hiring full-time employees for startups

Man holding up a sign that says startup

When you hire for a full-time job, you want to bring someone in who will be invested in the company’s long-term success. On balance, full-time workers are more committed to the success of the company they work for. While freelancers love their work, their professional goals are slightly different, focusing more on financial independence, varying jobs, and building their portfolios.

Control over work quality

Hiring full-time employees allows startups to have more control over the quality of their work and ensure that it meets their standards. A startup that chooses full-time employment contracts over short-term hires can train its staff to perform tasks exactly how they want.

More availability

woman at work on a computer

Because full-time employees are attached to your company, their availability to perform tasks is much greater than any freelancer. Of course, you must also factor in holidays and other absences that may derail your ability to prepare project work on time.

Increased loyalty and commitment

Full-time employees are more committed to a startup’s success since they have a stake in the company’s future growth. Given that they are afforded various perks and benefits, their sense of stability is enhanced, and they are more likely to stick around long after a project is finished.

Disadvantages of hiring full-time employees for startups

You can’t just ‘get rid’ of a full-time worker. There is a process you must go through to terminate someone’s contract. If things aren’t working out, you may have a few headaches.

Higher costs

Full-time employees are more expensive than freelancers since they require benefits such as health insurance and paid time off. Over time, the cost of full-time jobs increases as employees can ask for increases in their monthly salary, more flexibility in their paid vacations, and enhanced perks.

Less flexibility

Hiring a full-time employee can be less flexible than hiring an independent contractor since they are committed to a fixed schedule. Startup founders will find it much more challenging to adjust staffing levels when they only have full-time workers on the books.

Comparison of costs

Stacked up coins

A freelance job can be charged hourly or by a flat fee per project. However, depending on the freelancer’s availability, reliability, and communication skills, the freelancer may charge a higher hourly rate for a short-term project, knowing they have limited time to complete the project. 

Ensure that you lay out the terms and conditions of the role and agree on a fee that both parties are comfortable with.

In any case, hiring full-time employees may be more expensive upfront, but it can provide long-term benefits for the business. In addition to the employee’s salary, startups must consider the cost of benefits, such as health insurance, retirement plans, and paid time off. However, the cost of these benefits can be offset by the employee’s loyalty, commitment, and increased productivity.

To compare the costs of hiring freelancers versus full-time employees, let’s consider an example. A startup needs a graphic designer to design a website. A freelancer may charge $35 per hour, depending on experience and location. If the project takes 100 hours, the total cost is a manageable $3500.

Alternatively, a startup can hire a full-time graphic designer with a salary of $60,000 per year, plus benefits such as health insurance, retirement plans, and paid time off. Suppose the startup offers benefits that cost $10,000 per year, bringing the total cost of a full-time employment contract to $70,000 per year. In this scenario, the startup could save money by hiring a freelancer.

Factors to consider

When deciding between hiring freelancers or full-time employees, startups must consider various factors to make an informed decision. Here are some factors to consider:

Project timeline

Startups must consider the project’s timeline when deciding between freelancers and full-time employees. If the project is short-term, hiring part-time employees or freelancers may be the more cost-effective option. However, if the project is long-term or requires ongoing work, it may be better to hire a full-time employee.

Budget

Startups must consider their budget when deciding between freelancers and full-time employees. Hiring freelancers may be more cost-effective if a startup has limited funds.

Nature of the work

Person on a laptop programming

The nature of the work should also be taken into consideration. For example, hiring a freelancer may be more beneficial if a startup needs specialized skills that are not available in-house. On the other hand, if a project requires long-term commitment and continuity, hiring a full-time employee may be the better option.

Management style

Startups must also consider their management style when deciding between freelancers and full-time employees. If a startup prefers to have more control over the work and the employees, hiring full-time employees may be a more logical choice.

Communication

Communication is essential when working with freelancers or full-time employees. Startups must ensure that they can effectively communicate with their hired workers to ensure that they are on the same page and that the work is completed to the desired standard. If communication is an issue, hiring a full-time employee who can work more closely with the team may be better.

Quickly Hire: The outsourced hiring platform for startups and small businesses

freelance worker outside

When starting a new business, the decision to hire freelancers or full-time employees is a critical one that can impact a startup’s success in the long run. Both options have advantages and disadvantages, and startups must carefully weigh the pros and cons when making this decision.

If, after weighing up all the options, you realize that getting a freelancer onboard for a while is the easiest way to clear the jobs on your to-do list, then Quickly Hire is a great place to start.

Quickly Hire has developers, designers, copywriters, and virtual assistants ready and willing to take on any project you might have. Fully vetted and assessed for their competency in various areas, Quickly Hire pros are sourced worldwide, giving you access to the best talent money can buy.

So instead of hiring another full-time employee, enhance your business and financial security with one of our dedicated pros. You won’t regret it!


Author

  • Alex McInnes

    Alex is a Quickly Hire Pro Copywriter. He's a New Zealand-born, Thailand-residing copywriter extraordinaire. Dad to two beautiful girls, Alex loves playing rugby, reading, and running with his soi dog, Effie.