So you just started a new company or you have plans to do so. You have a great product idea, you’ve formulated a marketing strategy that you believe will work and you’ve saved up a chunk of cash, nothing much, but enough to get your startup sailing. There’s only one thing you haven’t figured out yet, who should you bring on board? 

Hiring employees has always been a steep slope, especially for new founders who are yet to have any experience. What do you look out for? How do you know who will be the best fit for your startup? What criteria should you use to determine if a candidate will turn out to be a good employee or a complete disaster? So many questions and minimal answers. 

For big companies that are already established, this isn’t a problem because they have a dedicated team of experts who sift through the pool of applicants to determine who is the best fit for the company. But most startups do not have such teams in place and the founders often have to do the whole job by themselves. 

As difficult as this may be, a new challenge has emerged and it still has to do with choosing employees. This time, it isn’t just about choosing the right or wrong candidate but about choosing between a freelancer and a regular (or in-house employee). 

To help you decide, I’ll be talking about why freelancing is becoming the new trend among startups and the pros and cons of going with either a freelancer or an in-house employee. 

Who is a freelancer and why do they matter?

According to Investopedia,” a freelancer is an individual who earns money on a per-job or per-task basis, usually for 

short-term work as an independent contractor.”  Freelancing has always been around even when office jobs were the norm. It is difficult to point out precisely when the shift began, but there has been a gradual shift in preference from the traditional office work model to freelancing. 

In the US for instance, the freelancing workforce increased by 11%. From 17% in 2014 to 28% in 2019. Between 2000 and 2014, there were 200 million freelancers in Europe, making it the highest-growing sector at the time. With these stats, you won’t be far from the truth in saying that there was a boom in the freelancing industry. However, a lot of them didn’t embrace the idea of selling their skills as independent contractors until 2020. 

It seems like the coronavirus was the one push the world needed to rethink its stance on freelancing. Soon as the virus broke out, company buildings became deserted as employees were forced to work from home. In compliance with health measures put out by the government. More and more remote employees who once had to wake up and head to the office every morning began to adapt to working from home. 

A lot changed during that time, but one thing stood out, employees had tasted the forbidden fruit (so to speak) enjoyed by freelancers and would not have it any other way. So when Covid-19 cleared and employees were ordered to return to the office, as usual, they revolted. 

Many employees quit their jobs when their employers denied their demand to continue working from home. On the other hand, some companies were quick to adapt to the changing workplace culture. Instead of imposing on their employees to return to the office, they made a schedule that accommodated remote work on some days and office work on other days. 

The influx of experienced individuals to the remote market was a win for freelancing as it meant more talents were available for those willing to hire a freelancer. The shift in work culture, the growing freelance sector, and the benefits associated with hiring a freelancer are tempting for business owners to ignore. 

Hence the debate on whether to hire a freelancer or an in-house employee. If you’re at this crossroads, here are some considerations that will help you decide.

Freelancer vs in-house employee: what founders should consider before making a decision

Consider your budget

If you are thinking about hiring a freelancer or a regular employer, one of the first things you should take into consideration is your budget. Retaining a permanent employee can be very expensive for a startup (which by the way is often short on cash). Aside from the salaries, you also have to provide office space, insurance, retirement benefits, social security, etc. 

All these costs eventually weigh down on the company, especially one that is yet to make any profits. 

Hiring a freelancer wouldn’t cost as much since you do not need to include any benefits. Payment is only necessary when there is a job to be done. Unlike regular employees who have to be paid as long as they stay employed. The extra money can be channeled into other areas of the business like product development, marketing, etc. 

Consider the type of business you're into

The type of startup also determines whether you should go with regular employees or freelancers. Many digital and internet-based startups will fare just fine with freelancers. Internet startups are startups that offer specialized services over the internet. One challenge founders may face in this type of business is protecting their sensitive content. 

This could be anything from a marketing strategy to a product design plan that is yet to be released. One way to handle this is by mandating the freelancers to sign an NDA. Upwork, one of the biggest freelancing platforms has a policy that helps clients protect sensitive data when working with freelancers. 

Consider the type of task that needs to be done

Before deciding to either hire a freelancer or a regular employee, consider the type of task they will be doing. Many companies now hire virtual assistants to work for them. The type of tasks commonly handed out to virtual assistants is repetitive and mundane tasks like sorting emails, scheduling appointments, customer service, content writing, and even basic accounting. 

Similar tasks can be assigned to freelancers while core tasks are reserved for regular employees. This way, you are still able to keep costs low by capitalizing on the growing freelance industry. This is not to say freelancers can’t take on bigger and more complex tasks. 

Pros and Cons of hiring a freelancer over a regular employee

Pros

Lower overall cost - the cost of hiring a freelancer is less when compared to that of hiring a regular employee. Freelancers are a complete package, you won’t need to provide office equipment or office space to help them work more effectively. Most freelancers already have this setup. All you have to do is pay for the task. 

Less risk - Imagine hiring an employee who is underperforming. All the time and resources put into the hiring process will be wasted when you eventually have to let them go. In some cases, these underperforming employees take with them benefits (like an employee stock option) that they have qualified for while working for the company. On the other hand, a freelancer who is underperforming can be terminated without wasting so many resources. 

The hiring process is simplified - Most freelancing platforms have greatly simplified the hiring process. From posting a job to selecting the most qualified freelancer for the job to payment, the entire structure is always in place. Studies have revealed that the average cost of onboarding new employees is around $4,000. Although the actual cost would depend on the company, it is still relatively expensive compared to working with a freelancer. Being that freelancers aren’t full-time employees, onboarding is often not necessary and this would save the company thousands of dollars. 

Cons

You can’t build a culture - every company has a culture. This is a way of doing things that have been carried over from the very first employees. It is a concession of values, beliefs, behaviors, and systems that are acceptable and tolerated within the company. A startup can't build a culture while working with freelancers. This is something that can only be done in-house. That being the case, regular employees are the best investments for startups who are looking at building a culture for any specific reason (perhaps as a core part of their marketing strategy).

Communication gap - another challenge with working with freelancers is that they could be a communication gap, at times. This may occur for different reasons, and what it means is that you are less likely to reach a freelancer to iron out an important issue. However, you won/’t have such a problem with regular employees being that they are within the same. In essence, regular employees are better for jobs that require close delibrations and instant communications. 

Time zone differences - Let’s say you have a company in the US and are working with a freelancer who lives in the UK. Instantly, you can see where the problem lies. The time difference between the two countries can go from 4 hours to up to 6 hours depending on the specific location of each person. This is one of the most common causes of a communication gap between employers and freelancers. ]

Conclusion

Founders and entrepreneurs have access to more talents now than they did say 10 years ago. The freelance industry is booming and this provides an immense talent pool, in fact, founders are spoilt for choice. But the story is not all rosy, there are a few thorns that might be a drawback to some people. Having discussed the difference between freelancers and regular employees, I hope you are able to come to a decision on which is the best option for your startup. If you need more information reach out to us @ Epirus Ventures and we would be more than happy to help out.