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What is Best for Your Start-up – Freelancers or Employees?

What is Best for Your Start-up – Freelancers or Employees

When you work to get your start-up off the ground, you have to consider a lot of things, especially the financial investment. However, you also have to grow your start-up and that you cannot do alone; you need experts and key players in your industry. But if you have a budget constraint the only way to make most of your finances is hiring the right people, as Freelancers.

Yes, freelancers can be a boon for start-up companies. Read on to know more about why start-ups should hire freelancers.

But before you hire… ask questions.

The first resource for your company growth is people, who will help you to accomplish company objectives, without breaking the bank. And, so you need to ask what kind of employees you can afford to hire – freelancers or employees.

Although either type has its own advantages and disadvantages, you should make the decision based on your company needs and objectives.

What Are Your Start-Up HR Requirements?

The initial phase of your startup business needs agility; where you would be required to be flexible and swift in decision making and achieving milestones. It is essential that your shift from discovery to validation is smooth and that you have scope to pivot back just as smoothly.

The smooth shift phase is possible when you hire the right kind of people. And so, your HR practices should have the following parameters;

  • You should be flexible in staffing people on different tasks and project. You are at a stage where you cannot afford specialists. Look for people who can handle multiple tasks across multiple projects.
  • Apart from your key employees, who are the backbone of the company, you can be flexible in hiring or firing the ones who add temporary value. This would also help you to shake off any legal contracts and bonds.
  • When hiring people for a start-up you need to think about the total HR costs. It’s not the salary alone, variable allowances, PF, incentives, insurance, social security, IT equipment and other indirect costs also are part of the total HR costs.
  • Since your liquidity is tight, you have to find people who are cost effective and offer the best deal along with their skills.
  • You should also make sure that the skill set of people whom you hire should be in line with your start-up’s vision.

Now that you have an idea what are your basic HR needs, you will be in a better position to assess the type of workers you need.

Therefore, for your convenience, we have broken down how employees and freelancers fit in start-up’s HR requirements.

Freelancers vs. Employees for Start-ups

1. Work Flexibility

Freelancers

  • When it comes to flexibility, freelancers win hands-down. Freelancers are faster to hire and easier to reject. They don’t come with legal formalities and other paperwork that acts as contracts.
  • There’s no cooling off period when you hire freelancers. Freelancers are more flexible with start dates and they are clear about the jobs which they can’t immediately take up.
  • Since they don’t have any employability or organizational culture baggage, you will get more honest answers about work, skills and payment from freelancers.
  • Freelancers can be hired from different cities, states and even countries as location is never a constraint in home based jobs.

Employers

  • On the other hand, full time or permanent employees seek job security, allowances, and perks and you have to go through HR diligence as they are long-term
  • With permanent employees, you need to go through background checks and make sure that they are available for your clients.
  • Such employees are difficult to dismiss, even if they are unproductive as they are bound by law.
  • You need to have valid reasons to fire them and even if you do, you will still have to pay benefits package when they leave.

Although employees are more flexible in jobs as you can move them around from project to project, 50% of their time is wasted by being unproductive. Hiring a freelancer will help you avoid unnecessary payouts as they get paid only if they perform.

2. Employee Affordability

Freelancers

  • Freelancers are cheap and cost-effective. You pay only for the work accomplished. Hence no wasted hours and no unnecessary investment.
  • However, freelancers are often located in different locations which may create problems in communication, one of the essential factors for the growth of start-ups.
  • Since freelancers have unique skill sets, their pay per hour may be higher as they charge flexibility premium.
  • Although they are more expensive for the long run, they are affordable when you are working in short time skill specific projects or when the workflow is irregular.

Employees

  • Employees are affordable in the long run as you can delegate them to different activities and projects.
  • They are flexible and you can train them to be leaders and managers.
  • They are more loyal, a particular trait that increases the value of the company.

However, if you fire an employee who’s been there with you for a long period, you will have to give up on the skills that you have trained him, which also means you lose on your investment.So, hiring a freelancer would be a better option when you are cutting down your investment cost.

3. Work Effectiveness

Although freelancers and employees both have a similar level of knowledge and skill, their standard of work significantly varies.

Freelancers

  • Start-ups which demand data science or honed skills should hire freelancers as they are experts in their respective fields and will come up with accurate and adequate insights.
  • Such experts if hired on a full-time employment may demand a higher salary and other perks.
  • This is valid when your start-up is facing an urgent, short-term and exceptional skill requirement.
  • Since freelancers work project wise their and your time will not be wasted. You always have the option to hire them back for future projects.

Employees

  • Employees are more beneficial for long term projects and work that’s permanent in nature. For example, if you are launching a product and you want to market it, you can hire a full time sales executive to do the work.
  • But when you work on different projects that require different skill sets, then full time employees may seem like burdens.
  • In start-ups, permanent employees will be most suitable for works like sales, marketing, HR etc.
  • However, a company employee will go out of his way to learn more about the company, its culture, its structure and goals and mold himself accordingly to provide best solutions that are beneficial for the company growth.

So, what do we find from the work effectiveness perspective is that freelancers and employees both add value to the company.

The Solution:

You should start making your decisions based on the start-up phase you are currently in.

If you are in a seed phase, you need flexibility, cost-effective employees and quick access to skills. Therefore, Freelancers are most suitable option for this phase.

If you are in the growth phase, you will definitely be more settled and more stable. You will need people who will help you grow as a business. In this phase, you can afford to hire 2 or more permanent employees and consider freelancers for specific skill-based projects and tasks.

Having said this, freelancing is going to be the next best thing in 2018. Although the choice depends upon your individual business needs, it is always good to choose freelancers for start-ups when finance and other resources is a big factor that may influence your company in both, positive and negative ways.