Freelancers vs. Permanent Remote Workers - Which is Better for Your Business, Part 1?
15 March 2023
If you are one of the people who still believe in on-site work, here is a reality check!
Remote work is here to stay. The global pandemic unleashed a whole new realm of possibilities for companies. Employers had to shut down offices for over a year, and during that time, it became evident that “the remote work exception” became… the new normal.
But what does remote work mean for companies? Well, it is rather easy to say - lower operational costs due to hiring from lower-cost cities/countries, lower cost of renting office spaces, and scientifically-proven higher employee productivity.
However, with this new working style comes a whole other realm of questions for employers to figure out. What’s the best way to hire remote workers? How do you tackle the payroll and legal side of remote hiring? And most importantly, who do you hire to do the remote job - freelancers or permanent remote workers?
In this article, we’ll provide an in-depth answer to the last question specifically: Should you hire Freelancers or Permanent Remote Workers?
What determines your budget?
Whether you will hire Freelancers or Permanent Remote Workers, there are a few determinants for the necessary budget for achieving your goals. Those are:
- Targeted overlap in working hours
- Skills and level of expertise
- Locations to hire from
The overlap in working hours is crucial, especially for projects that require a lot of collaboration. Companies need to start by deciding the necessary overlap in working hours. Our recommendation for a smooth collaboration with developers is - a minimum of 4 hours overlap in working hours within the team.
For companies based in Western Europe - hiring in Eastern Europe, Africa, and the Middle East is a great fit for their time zones, as there is often a time difference of only 1-4 hours.
The skills and level of expertise are also a must-have. Your tech stack defines the technical skills needed, and you know your company’s preferences regarding soft skills (e.g. strong communicators who are driven-individual contributors). What you need to decide is the level of expertise needed. We recommend that you should NOT hire Juniors (under 2 years of experience), unless you already have a Senior in the team who can mentor them.
Other than that, many companies choose to hire Intermediate developers (3-4 years of experience) when they have a tight budget. Because those developers usually cost about 30% less than Senior developers and can solve even complex technical problems, given some additional time.
Next, you are ready to decide on what countries to hire from. The local job markets are very different between countries (e.g. due to the different living expenses), resulting in very different costs to fulfil your hiring needs based on the country selected.
Some Emerging Markets are quickly becoming tech hubs, where more and more companies are hiring world-class developers at very reasonable prices. This allows them to avoid the brutal competition for local talent in their local job market.
Unfortunately, the typical Eastern European countries (Poland, Bulgaria, Romania) are now nearly as expensive as Germany for the purpose of hiring remote developers. This started a massive trend where companies hire successfully from Emerging Markets - countries such as Kenya and Serbia are among the best places to hire quality developers at reasonable prices.
For example, Kenya is rapidly becoming a large tech hub. Apart from the myriad of startups hiring from Kenya, there are many tech giants that opened their R&D centres there: Microsoft, Facebook, Oracle, Intel, among others. Hiring from Kenya (and other emerging markets) is a great hiring strategy for startups with a limited budget.
Browse available Kenyan and other emerging market developers for free on RemoteMore
Now that we’ve discussed these important factors let’s proceed to compare freelancers and full-time remote workers.
Hiring Freelancers vs. Permanent Remote Workers
Deciding whether to hire freelancers or full-time remote workers depends on both the economy and the internal strategy of the business, which go hand in hand.
For example, in 2023, profitability and cost optimization are major topics for nearly all hiring managers and business owners. Results must be delivered, but companies must do it with much more constrained budgets at the same time.
Therefore, making the right decisions and spending money wisely to achieve your goals is crucial. In the next points, we will examine freelancer and permanent remote workers, their workstyle and their pros and cons to help you make the right decision.
Hiring freelancers is perfect for companies that only need people to work on one-time tasks, where specialized expertise is needed, without much need for collaboration or understanding of the bigger picture of the company.
Freelancers are usually people with a specific set of knowledge that only want to work on their specialized area of expertise. Without digging deeper into the company culture, values and business objectives - as they will not be part of it for the long term. That makes freelancers very independent and efficient in their work as they’ve done this specific task repeatedly. However, this also comes with its downsides.
As a manager, you will likely have very little control over the work process of a freelancer. In terms of making corrections and adjustments, things may actually take a lot longer than expected. That is because freelancers are not a direct addition to your team and are simply outside workers unfamiliar with your company's objectives.
Freelancers also have their own working styles and time schedules since they work on other projects too. Therefore you can’t expect their undivided attention on your projects or to be available, especially during your regular working hours.
**Collaboration **with your regular team also suffers, as they are not in for the long-term. They are here to get their task(s) done, and that’s the deal. They are unfamiliar with who in your team to collaborate with for different parts of the job. Which is fine if their tasks are clearly scoped and require little to no collaboration.
Another disadvantage against Freelancers is the knowledge retention in the team. The freelancers are not staying in the team for the long-term, which means that the next time there are problems with their part of the codebase, someone new without background knowledge will need to figure out this area once again.
Last but not least, hiring freelancers can turn out to be much more expensive than hiring in-house workers: Freelancing prices are usually about 2x higher compared to full-time hiring prices.
Those higher prices are unavoidable on the candidate side because Freelancers constantly have to chase, close, negotiate, onboard and offboard clients, which takes considerable time. Practically, half of their time is spent on those non-billable activities, which gets factored into their billable hourly rate.
Now, let’s recap the pros and cons of freelancers below so you can decide whether or not hiring freelance talent is a good choice for you.
- Experts in their field with ready know-how
- Independent and efficient in completing specific tasks
- They require little to no onboarding and management
- Unfamiliar with company culture, product, and business objectives
- Very limited management control over their work process
- Collaboration suffers, and knowledge is not retained
- Limited availability and attention to your project
- Much more expensive compared to permanent hires
Permanent Remote Workers
Many companies are now re-positioning themselves, trying to come up with new offers and penetrate new markets to compensate for the cuts in revenue. This often requires lots of strategic thinking and working with individuals who are not only experts in a narrow field but also connect the dots of your company culture, the product and its business objectives. This is something that can’t be accomplished with external vendors, such as freelancers.
On the other hand, full-time hires (employees or contractors) will support your company long-term by building a reliable and competent team that is well aware of your brand’s identity, products/services, and work culture. Moreover, you can manage the work output better, as the remote workers will be part of the work process that your managers design and they will have a better understanding of what needs to be done and how you want it done.
However, hiring full-time workers means you need a full-time workload for them. Hiring them for a long-term job that is part-time (e.g. 20 hours per week) can also work, but mostly happens when that is their preferred amount of working hours. For example, working moms of small children often prefer working 20-30 hours per week. But if you offer a 20-hour per week job to the typical developers, they would tell you that then they need to find another 20-hour job to reach their intended full-time capacity, which is not easy.
Other than that, the full-time remote hires check all the boxes that the freelancers did NOT check in the earlier section. Besides that, the full-time remote workers are also 2X cheaper than the freelancers, for the reason explained in the earlier section.
Let’s recap the benefits and downsides of permanent remote workers below.
Permanent Remote Workers Pros:
- Much more affordable compared to freelancers and local talent (2x)
- Expert team members who also have full context on your project
- Better collaboration and retention of knowledge in the team
- Full availability and undivided attention on your job
- Better control over the final product
Permanent Remote Workers Cons:
- Require full-time job opportunity for at least a few months
- Onboarding them as part of the team takes more time
- More difficult to attract than freelancers
Freelancers vs Permanent Remote Workers - Practical example
We’ve already examined in detail the differences between freelancers and permanent remote workers. But what does it all mean in practice? Well, let’s look at one real-world example.
Imagine you want to hire a Senior Developer for a project that will take around 3 months to complete. You have the following options:
- 6,000 EUR/month for an Employee Senior Developer in Germany
- 12,000 EUR/month for a Freelance Senior Developer in Germany
- 3,000 EUR/month for a Full-time Remote Senior Developer
As you can see, freelancers can be 4x more expensive than full-time remote workers for the same job. That’s because besides the cost benefits of hiring remote talent (usually about 2x cheaper than local talent) - companies are also saving 2x money on the premium pricing that the Freelancers charge them.
In practice, this means you can hire a Permanent Remote Developer for 1 year for the same price you’ll hire a Freelance Developer for only 3 months. Most companies usually need at least 3 months of software development to build a significant MVP or product features.
So you have to choose between those two options:
Hiring a Freelancer Developer to do 3 months of independent work.
Hire a Full-time Remote Developer and receive 9 months of additional work for the same price… Plus, an expert team member with an in-depth understanding of your company/product.
Faced with this trade-off, many companies choose to go with full-time remote hires. This is a massive trend in 2022 and 2023 when it comes to hiring developers.
But ultimately, it’s up to you to decide which option better aligns with your company's strategy and goals. As with most things in life, there is no one-size-fits-all answer.
Figuring out who is the best person for a job is not easy. We hope you are now better equipped to hire the right type of talent for your company!
Do you need to find developers?
RemoteMore is a hiring platform - that connects companies with remote developers. The developers on our marketplace are looking for full-time or part-time remote jobs, that are long-term (minimum 3 months).
All the developers on our hiring marketplace have passed our extensive pre-screening. Furthermore, you will find in their profiles their exact salary expectations, and you can even use the search filters to find developers that match your budget.
Browse 24,000+ remote developer profiles - by simply signing up for FREE here: www.remotemore.com/companies
P.S. If you have already found or hired remote workers…
Whether you have found a remote developer on RemoteMore or through any other platform, we can help you set up your compliant remote contracts and payroll - so that you can build your remote team with peace of mind.