Freelancer vs. Full-time Employee

The leaders of modern companies are faced with a choice between hiring freelancers and full-time employees, and each decision has its pros and cons. In this article, we will look at the differences between a freelancer and an employee, the key aspects of hiring and working with freelancers and full-time employees, help you consider the advantages and disadvantages of each employment model, and share tips on choosing the best option for your company.

Differences between a freelancer and a full-time employee

A freelancer is an independent specialist who works under a contract, provision of services, and other civil law contracts he enters into with clients. An employment relationship with the company does not bind the freelancer; they do not enter into an employment contract with him. Usually, a freelancer works remotely and has a free work schedule. The freelancer’s remuneration does not relate to salary. Freelancers work on projects and perform one-time tasks for companies. At the same time, their main task is to perform the work efficiently and on time and provide services to the company. Usually, a freelancer is not required to share a company’s corporate culture and become part of its team. A freelancer may or may not have the status of a self-employed or individual entrepreneur. A freelancer may have several customers (clients).

On the contrary, a full-time employee is an employee of the company. An employment contract is concluded with an employee who performs work according to the employer’s requirements. Full-time employees have a fixed place of work and work schedule and have specific social benefits: payment for temporary disability (sick leave), preservation of pay and place of work during the vacation, and stable income – wages. When hiring an employee, it is usually possible to set a probation. Usually, employees are required to share the company’s corporate culture and comply with the rules of internal labour regulations and regulations on trade secrets. Usually, an employee has one employer.

The main differences between a freelancer and a full-time employee are the degree of freedom of choice of work, flexibility of schedule, predictability of income, social benefits and features of responsibility to the employer.

Features of attracting and working with a freelancer

Working with freelancers has its characteristics and requires a unique approach. Here are a few key points to consider when working with a freelancer:

1. Using specialized platforms to find doers
Specialized online platforms such as Upwork, Freelancer, Fiverr, and others can be useful for finding and hiring freelancers.
2. Choosing a high-quality doer
You need to ensure that the freelancer has the necessary skills and experience to complete the task. To do this, we recommend asking the freelancer for feedback or recommendations or getting acquainted with them on specialized platforms. It is also important to be in constant contact with the freelancer, ask questions, clarify details, and monitor the work process.
3. Monitoring the fulfilment of deadlines
In the contract with the freelancer, it is necessary to specify the deadlines and stages of the task and monitor their compliance. Discuss possible delays in advance and find ways to eliminate them.
4. Legal registration and tax payment
In a civil contract with a freelancer, you need to specify all the conditions of cooperation, including the cost of work, deadlines, rights and obligations of the parties. Pay attention to the issues of payment, payment deadlines and taxation. In Belarus, the income tax of a freelancer who is not an individual entrepreneur or self-employed is withheld and paid by the customer. When a freelancer is registered as a business entity, he pays taxes on his income.
5. Payment and evaluation of results
Usually, customers pay the freelancer after the freelancer completes his tasks and draws up an acceptance certificate for the completed works (services rendered). Giving the freelancer feedback on the collaboration’s results will be helpful. It will help improve the collaboration process in the future and build a partnership with a freelancer who understands your requirements.
6. Engaging in one-time tasks
Traditionally, freelancers are not hired to perform permanent functions and processes since the tax service can qualify such hiring as a substitution of labour relations and bring the company to financial responsibility. An example of the erroneous involvement of freelancers may be the dismissal of employees and then the conclusion of civil law contracts with them, as with freelancers. After completing the tasks defined in the agreement, the company is not obliged to continue the relationship with the freelancer.

What are the features of hiring and working with a full-time employee?

Hiring a full-time employee involves a longer-term and stable process compared to working with freelancers. Some features of the company’s involvement in the work of a full-time employee include:

1. The selection process
   The company must conduct the recruitment procedure, including searching for an employee for an open vacancy, conducting interviews, evaluating candidates and choosing the best candidate for the position.

2. Registration of employment relations
   After selecting a suitable candidate, an employment contract is concluded with him. Several professions require special education and experience, so the employer can set a probation period of up to 3 months to verify the employee’s compliance.

3. Mentoring and adaptation
   A new employee will require time to train and adapt to the company and its processes.

4. Management and motivation
   It will be necessary to ensure the effective management of the new employee, his motivation, development, and support in achieving the set goals.

5. Employee expenses and taxes
   Hiring a full-time employee involves salary costs, payroll taxes, social benefits, training and development, and insurance. In Belarus, wages must be paid at least twice a month. Usually, one of the parts that is paid for an unworked month is called an advance payment. 

6. Long-term relationships
   Hiring a full-time employee means creating a longer-term relationship between the company and the employee, which can be necessary for the stability and development of the business. Salaried employees are usually brought in to perform ongoing processes that are not projects with an end date.

In general, hiring a full-time employee requires more responsibility and investment of resources. Still, the right strategy can bring the company many advantages through a reliable and talented workforce.

Who to choose: a freelancer or an employee

Analyzing business needs

The question of choosing between a freelancer and an employee is undoubtedly solved depending on the company’s tasks at each stage of its life cycle.

When a company needs to solve a specific ongoing task that requires control and a full workload, it makes sense to hire a full-time employee so that he does not get distracted by other issues and focuses as much as possible on the tasks. When tasks are of a one-time, urgent nature, hiring freelancers for short-term projects is better. 

One way to determine whether you need a freelancer or an employee is to analyze the duration of job closures in your company and the duration of the hiring procedure and compare it with the period during which the company needs to perform specific tasks. For example, when your hiring process lasts four weeks and the task is urgent, it is more profitable to hire a freelance contractor. A suitable specialist can be selected in a few days on the stock exchanges or among well-known specialists of the company.

Analyzing the legal consequences

In addition to the business needs, the legal aspect must be taken into account. In some cases, companies are prohibited from recruiting freelancers and hiring freelancers may be associated with tax consequences in the form of fines and taxes.

It is important to understand that companies are prohibited from cooperating with their self-employed employees who pay professional income tax (NAP) and with former employees who pay NAP for three years after dismissal. However, civil contracts can be concluded with such former employees.

Also, fulfilling specific company tasks may be associated with a trade secret or a competitive situation. In this case, it is easier for the company to immerse an employee in the task and assign him the duty to preserve trade secrets and conclude a non-disclosure agreement. A freelancer is not always suitable for performing tasks in such a situation since he is not obliged to keep the secrets of the customer and does not bear the consequences of their disclosure and use, except in the form of refusal from further cooperation on the part of the customer.

Measure the cost

Freelancers usually charge a specific rate for their services per project or hour of work, while hired employees receive a fixed salary and additional benefits and bonuses. The company’s expenses for attracting such specialists must be calculated. If the company has a limited budget, hiring a freelancer for a certain period or a specific project may be more profitable.