Should you hire freelancers or permanent employees?

The so-called “gig economy” is transforming the world of work and the freelancers who comprise it are transforming the British economy and workforce. According to PeoplePerHour, one of the biggest online platforms for freelance workers, freelancers contribute almost £300 billion to the UK economy per year.

Consultancy UK estimates that there are 2 million British freelancers working across all sectors as of 2018. Meanwhile, some projections have estimated that independent contractors will make up 40 percent of the US workforce by next year.

According to the Association of Independent Professionals and the Self-Employed (IPSE), there are currently around 5 million self-employed people in the UK (an increase of nearly 2 million since 2001), with freelancers accounting for an estimated 41 per cent of this figure.

What seems clear is that the freelance workforce is booming, with no end in sight. This naturally means that small businesses (SMEs) are increasingly dealing with freelancers.

According to a 2017 People Per Hour study, 67 per cent of 1,000 SMEs polled say that they supplement their core workforce with freelancers, with teams usually consisting of 12 freelancers and just 3 employees, on average.

So, as a small business owner should you still be hiring permanent employees? Or should you be embracing the gig economy? In this piece we’ll talk you through the pros and cons of two very different kinds of employee.

Why hire freelancers?
The boom in freelancers isn’t just a fad. There are of course reasons why companies are increasingly turning to them, and here are just a few for you to consider.

Primarily, freelancers are cost effective. While they will naturally have a higher hourly rate than permanently contracted workers, you only pay them for the work they do with no obligation to give them sick or holiday pay.

You will also save costs on things such as PAYE and in relation to office costs, with the vast majority of freelancers working remotely. Furthermore, many employers like hiring freelancers as it largely allows them to avoid extremely high recruitment fees.

Another key benefit to hiring freelancers is the far greater talent pool you can draw from. Freelancers allow you to hire from far beyond your local area, while online freelancer platforms allow you to easily find the exact person for whatever task you’re hiring for.

Freelancers also allow you to make short-term hires for the specific requirements of different projects. With a freelancer, you can hire a specialist for whatever task you need on a short-term basis. When this has been completed, ending a contract with a freelancer is a far quicker and easier process than with a permanent employee.

Why hire permanent employees?
While the freelance sector is growing constantly and offers the advantages we discussed above, there is still considerable value and sense in hiring a permanent employee.

Perhaps most importantly, a permanent employee has a vested interest in your company. With a permanent employee, both you and they have a vested interest in forming a close, long-term working relationship. After all, your success is their success.

A freelancer on the other hand, is in business for themselves alone, and your company might be one of many clients. Hiring a permanent employee is a long-term investment that can have rich rewards for both sides.

What’s more, freelancers work to their own clock. If you need something urgently, they might not be available, or might charge a higher rate. Full-time employees work to your schedule, they are available and reliable.

A full-time employee can also be easier to train to the specific requirements of your company. Once you have an employee fully trained, they are completely in tune with how things are done at your business.

A freelancer, on the other hand, can be harder to train due to issues of distance or availability, while they are less likely to be fully invested in doing things exactly how you want them done.

So, who should you hire?
Overall, what kind of worker you choose to hire will always depend on your specific needs. No matter how much the world of work changes, this is always likely to be true and in some cases a full-time hire will always be the right decision.

However, the gig economy is truly transforming how people work and how employers hire. The number of freelancers is likely to continue growing and, due to the advantages they can offer, small business owners should see this as an opportunity.