(Updated as on April 18, 2019)
Before we jump to this million dollar question of whether a freelancer or contractor or employee will be best suited for your tech venture, it is essential to understand what exactly these terms mean.
Freelancers are skilled independent professionals, who only work on a project basis. They often specialize in areas including IT, engineering, creative, and legal. They usually pay self-employment tax and choose which projects and clients they want to work with.
How they differ from contracting agency or in-house employees?
They differ from the contracting agency mainly because freelancers are individuals and not a ‘company’. Unlike the agency, they also do not have employees. However, they can subcontract their work.
Having said that, the similarities between the freelancers and the contracting agencies is that both of them are a part of a contingent workforce.
Now the difference between a freelancer and in-house employee is that the former sets his/her own remuneration rate, unlike the employee. Similarly, they usually work remotely at their own location and work with multiple clients.
Advantages of hiring a Freelancer
- Cost savings
Cost saving is one of the major benefits for organizations that hire freelancers. Organizations save on administrative costs associated with hiring and maintaining full-time employees. Companies hiring contingent workers do not have to make contributions to their Social Security, make unemployment contributions or pay payroll taxes. Organizations are also not required to offer contingent workers health insurance and provide them perks like paid time off.
Flexibility is another benefit of the freelancers. Organizations can hire them on an ad-hoc and on-demand basis, and then terminate their employment once the work requirement is met.
- Filling Skills Gap
The contingent workforce also helps businesses offset a skills gap. Contingent workers provide businesses with a large pool of experienced candidates who are already equipped with the skills required to execute a project efficiently.
- Work-Life Balance
From the perspective of a freelancer, the choice of mode of work can also improve work-life balance over what is possible in most jobs. It fosters innovation and helps companies remain competitive.
Another advantage of a freelancer is the ease of termination. It’s easier to fire a freelancer than a permanent employee. This depends on the country and the industry of course, but it’s usually the case.
Disadvantages of hiring a Freelancer
- There are challenges associated with hiring freelancers. It can be difficult to find a freelancer who can not only perform the required job but can also adapt quickly to an organization’s corporate culture. Companies are also often skeptical of sharing insider information with these non-permanent workers.
- Organizations can also face legal and compliance issues due to worker misclassification. If an organization declares someone a contingent worker when in fact he or she should be classified as an employee, the company runs the risk of paying hefty fines and penalties. Organizations must be aware of their industry’s regulations in regards to contingent workers before developing a strategy for hiring them.
B. Contracting Agencies
A contracting agency is an organization permitting you instant and accessible access to combined resources, technology, and processes in a particular field like software development, technical partnership, SEO, Social Media, AdWords, etc. Building such a structure in your own business is costly and impractical. Therefore, agencies offer evident practicality to the market.
How they differ from others?
A contracting agency mainly differs from freelancers since it is not an individual and has employees of their own to conduct day to day production and/ or services. The thing that sets it apart from the full time employed staff is the fact that it is not in the company’s payroll and does the job as per the need.
Advantages of hiring an Agency
- Team and Skill
Employers can select the best individuals for specific projects from a larger pool than that available in any given area. They also have the ability to contract with experts for specific projects who might be too high-priced to maintain as a staff.
One of the key benefits of having an offshore development team is that they can offer extra brain power and understanding into your account. A freelancer or in-house employee may operate in a silo. But agency teams work together to come up with the perfect ideas to offer to their customers.
In a gig economy, businesses save resources in terms of benefits, office space and training.
Besides having a team of experts, agencies make use of particular technological strategies and tools to increase the efficiency of various projects.
Since an agency may work with several different client accounts, they have possibly gained a lot of learning they applied to various other businesses. Also, agencies are predicted to be on the first edge of their industry. They allow their staff to stay on the top trends, which gives them a bright idea about strategies to test.
Agencies have a reputation to maintain, so while employees will do what you tell them to do, a right agency will say “no” to you when you are doing wrong and will tell you something that will help you to be successful.
An agency looks inexperienced when a client doesn’t prosper, so it’s in their best interest to get good results as soon as possible.
- Time Savings
Hiring an agency is time-saving because an agency comprises of multiple people with different expertise. A project manager to deal with each member’s progress, you don’t need to select the right person to create your team.
An agency will be ideal for you particularly in two cases. First, if you have experience of working with tactical partners. And second, if you have a robust idea in mind and you’re ready to invest in growing it into a robust strategy.
So, are you ready to collaborate with an experienced agency for your next venture or your next crazy idea? Then why not give Wolfmatrix a call for software consultation?
Disadvantages of hiring an Agency
- First of all the quality of the work done by such an agency cannot be guaranteed. Undoubtedly it is cost efficient to choose agency but if the work they do isn’t satisfactory or up to the quality then it’s of no use. So, you should check the past projects done by such agency and also ask for a reference to get in-depth knowledge about their working environment.
- Let’s not forget about the language barrier. If the agency doesn’t understand the requirement properly then the project might fail or end up being too costly. Likewise, poor communication can also result in failed software delivery.
Hiring an in-house employee has more risks, and it usually takes more significant and long-term investment. There are several times when it seems to be the right option though, mainly if you have a very complex business and you are looking at the long term needs of the company and the employee rather than at the short term project.
It is usually so because your employees can help you grow your business and they are typically more invested in your business’s success than freelancers.
Advantages of hiring an In-house employee
- Cross Department Functionality
In-house teams are essential assets to the company, whereas freelancers and agencies are not assets for the company.
But this again depends on the nature of the business and whether the task at hand is supposed to be the core strength of the company or not.
When you opt for hiring an in-house employee, the benefit is having someone specific handling the day to day works. Also, they focus on the issues that need frequent attention.
- An in-house employee will always beat an agency or freelancer when it comes to knowing the inside information.
It is true that one of the leading advantages of hiring an in-house employee is paying one person to manage the job. This means their only focus is the work at hand. They can always answer queries from your clients and provide the necessary support. An outsider won’t know all the intricate details about your business and won’t be able to answer the right way. There may be a specific way you will handle an inquiry and the problematic customers based on your experience. This particular person doesn’t have ten different voices, he just has one, and that’s yours.
When you opt to hire in-house, you have full control over the tasks of that person and how they complete or handle them. Tiny details can be easily coordinated, and the in-house staff can be molded, trained and adapt the team culture easily. This control comes at a price, though.
Disadvantages of hiring an In-house employee
Many business owners are pretty aware that hiring the wrong person can cost them a lot. That is why they confused about whether to choose freelancer or contractor or employee.
Hiring is such a painstaking and time-consuming process. And even hiring the correct person has its open costs (meaning they are like an investment to the future accomplishment of the company if everything works well) apart from benefits, taxes, training, etc. Not only that much you have to spend extra time and resources to motivate your tech team.
Those disadvantages are enough to make a business person think twice about choosing freelancer or contractor or employee.
However, an in-house employee can be a good option if your work is particular and difficult to replicate. You can choose them if you want to create resources within your company. Also, if your industry is very slow and needs a lot of knowledge.
What should you choose a freelancer or contractor or employee?
Well, it’s pretty clear each option comes with a set of advantage and disadvantages. If you consider the cost and effectiveness of work then among freelancer or contractor or employee, the contractor will be the best option. They have proper knowledge and experience. Plus, there is no such risk of the contractor running away in the mid-project.
However, if you want someone who understands your company’s mission, vision and value, opt for an employee. They will be the best fit. But remember to hire the right person for the right job.
Lastly, you can opt for freelancers if the project is of short duration and you need quick but cost-effective expertise in the job.
Hence, it really depends upon your business and your work requirement while choosing between the freelancer or contractor or employee.
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