Do You Need Employees or Freelancers?

Does Your Business Need Full-time Employees or Freelancers?

Just as children growing into adulthood experience growing pains, there are growing pains to owning a business. For a business, these pains are not so much physical as they are financial and managerial, but they may still bring you to tears at times!

Brainstorming a business
Brainstorming a business

Perhaps the most difficult time period for a growing small business, particularly an entrepreneurial effort, is when additional help is needed within the company. It can be frightening, even, trying to decide whether the brand can support additional workers and, if it can, for how long.

Before stepping into an employer status, consider whether you really need employees. Would a freelancer or team of contract workers do the job just as well without long-term obligation? Do you have enough consistent, ongoing work to support employees and their needs? Below is some guidance to help you decide whether you should employ full-time workers or if freelancers are the right fit for your growing company.

Freelancers
Freelancers

Freelancers and Contract Workers

Hiring employees can be very costly. You can’t just consider salary or hourly wage; you must also take into account benefits, legal needs, accounting and payroll. These needs often require another person who specializes in human resources to guide and protect the company from potential problems. For a small brand, a freelancer (also called a contract worker) may be the right answer.

How Freelancers are Compensated

Freelancers only charge you for work they have completed, according to an agreed-upon contract rate. There are no benefits, taxes or legal issues to consider, outside of ensuring that the relationship is a true freelancer-client arrangement. The individual or company being subcontracted is entirely responsible for their own health insurance, taxes and other benefits.

You may be able to pay your freelancer monthly, weekly, as billed or through other terms that fit your cash flow better than a designated payroll date for an employee. How a freelancer bills you is based upon how his or her compensation terms are structured in the contract and whether he or she works for a contracting firm or as an individual.

Compensation
Compensation

Per Project Compensation

With freelancers, you may be able to agree to terms of compensation “per project.” This means that they will only be paid upon completion of an entire goal or set of goals. A project can be completed in one day or it can be something that takes a month or longer.

Sometimes, when arranging per project pay, a freelancer-client contract will require a portion of the compensation paid up front and a final amount upon completion. There may also be intervals of payments, to sustain the freelancer in longer projects. These are terms that a good written agreement should clarify.

Hourly and Monthly Pay

When a freelancer is paid hourly or on a monthly retainer, those terms are also outlined clearly in a written agreement. The contract must also state when each pay interval should be executed, whether compensation is delivered weekly, bi-weekly, monthly or on a specific date.

Also, find out if your freelancer has payment terms or if the compensation is due on the day a bill or progress report is handed to you. It is better to ask all of these questions in advance – and ensure they are in writing – than to suffer surprises along the way.

Written agreements
Written agreements

Importance of Clear Agreements

Finally, it is important that you discuss hours of work delivery, completion dates, obligations for supplies and equipment, and other expectations of the project. Some freelancers provide their own equipment, tools and even workspace for their services.

According to the Internal Revenue Service, there are certain things that a freelancer cannot be required to do, without being provided status and benefits of an employee. Whatever the mutual expectations are, you should have the freelancer provide written commitment to those rules before starting work.

Examples of Freelancing

Some examples of freelancing include IT or web design projects, wherein technical experts or web designers may even be located in another state or region than your company. They will likely charge a flat fee for their services with an expected finished project or website delivered in a specified period of time. They may charge an additional change or consultation fee for work beyond that first deliverable.

Someone such as a day laborer may work entirely on your site according to the hours you need. While things get sticky in the area of on-site management or directives of freelancers (who are, essentially, their own bosses), a good contract ensures everyone knows what the other expects.

A No-Brainer
A No-Brainer

Almost Headache Free

Depending upon your precise needs and expectations from additional workers for your company, freelancers can be an excellent medium for accomplishing goals without the headaches of regular employee management.

The key is to ensure the project or goals are clearly agreed upon in writing, along with compensation and specifics of project delivery. Freelancers’ rates may be higher than employees, but once the project is completed, you are no longer obligated to supply work or compensate them again, although you will likely have a great resource to call upon when in another crunch.

Employees

If you experience a regular and consistent need for help within your company, hiring an employee is likely a better and more cost-effective option than continuing or starting use of freelancers. Through an employee, there are benefits not experienced with freelancers. Those benefits may fit your situation for the long term.

A Blueprint
A Blueprint

Scope of Work

If you need just a logo designed, hiring an employee would likely result in a later search to find things for that person to do, in order to offset his or her hourly expense. If you have ongoing IT development or marketing needs, for example, you will benefit more from someone who gets to know your company, develops loyalty to it, is personally invested in ongoing growth of your brand, and can be provided with enough daily work and accomplishment to justify a continuing salary. That person would be a regular employee, not a freelancer.

Clear Definition
Clear Definition

Develop a Job Description

Before searching for the right employee, help yourself better hone in on what needs to be accomplished within the role. Develop a solid job description that you can also provide to applicants to reflect what you are seeking from the new hire.

This will help people interested in the job determine if they are the right fit, and you will know precisely whose resume provides a match with your expectations. Good examples of job descriptions can be found on the web for every common job title within a given field.

Budget for the New Hire

Figure out what the local competitive rate is for the job description and position title you developed for the role. Ensure you can afford this ongoing, inflexible expense.

If you struggle with the competitive rate, rather than trying to take on an employee at a lower rate (which will undermine loyalty and quality of work), consider finding a highly qualified and enthusiastic person who can accomplish more for your company in part-time hours than a lower-rate person could in full-time hours.

Parents with school-aged children, college students, retirees and many others with incredible aptitude and skill-sets are available on a part-time basis and may be able to grow into full-time hours when you are ready for them.

Compatibility
Compatibility

Match Personalities

As a small company, you are likely working in small quarters or need to maintain a heightened enthusiasm against bigger odds than a manager of a larger business department or someone at the helm of a big corporation.

When interviewing for your new hire, be sure you feel a certain hopeful chemistry with the applicant. Will he or she have the right attitude to help you accomplish growth-oriented company goals? Will he or she be the type to roll up his or her sleeves and happily pitch in during a crisis? While you should rarely be friends outside of work with employees, as it undermines the management hierarchy, this should be a person you can trust for the long term.  Have ideas on this topic? Please visit our NewsVine page and post your comments or recommend other resources to discuss this concept.

 

This great HR content was provided by Tracksmart.com, a leader in technology for small and emerging businesses.

Take a moment and think about how you manage your staff’s attendance issues and ongoing PTO and vacation accruals. What’s your preferred strategy? Is using employee time and attendance software? What about paper products you’ve been using for years? Is there someone you’ve outsourced your HR operations to? With the day to day hassles of running a business, modern day entrepreneurs and managers are shifting to using web-based employee scheduling software to simplify much of the ongoing chores involved in dealing with staff time tracking management. Leave a comment below to let us know please.