Management February 16, 2015 Last updated September 22nd, 2018 550 Reads share

The First Hire: Employee or Freelancer?

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Wise business owners quickly realize that there is only so much they can accomplish in a day. That moment is the time to decide what you are best at and what tasks someone else could perform. The goal is to delegate common tasks so that you can focus on growing your company. The question is: who do you delegate those tasks to when you own a small business? You have two basic choices: an employee or a freelancer.

It may seem as though an employee and a freelancer are the same things. The reality, however, is that they are different. Not only are there laws in place that define what each type of work is, there are laws that dictate how they can and cannot be employed. One problem is that businesses try to avoid paying employee payroll taxes by hiring a freelancer. Sometimes they do not understand the differences between the two and could incur penalties from the IRS.

The First Hire: Employee or Freelancer?

Do You Really Have a Choice?

If you are wondering if you should hire a freelancer or an employee, consider the overall job. The IRS has firm rules about what makes an employee and what makes a contractor. A good question to ask is: can tasks be performed by an independent contractor, or is the position structured in such a way that it must be filled by an employee? The decision you make is not arbitrary. If you misclassify the person you hire, your company could be fined.

Before you make your decision, review the contractor checklist from the IRS. This is not only an excellent guideline to help you decide which route to take, but it can also work as a tool to help you develop the position. For small businesses, a freelancer can be an invaluable asset to the growth of your company. In fact, a small team of freelancers can move your company forward quickly. Individually, they can focus on specific areas of the company allowing you to manage their projects rather than spend your precious time on administrative tasks. You can also hire freelancers to help with the data entry tasks to help free up more of your valuable time.

After reviewing the contractor checklist, small business owners can create customized positions that fit the contractor guidelines, thus allowing business owners the luxury of developing a team of micro-experts that truly are independent contractors. In so doing, businesses save on employee related expenses. Still, sometimes an employee is a better fit.

Here is a look at how the two types of workers differ.

Benefits of Hiring an Employee

  • Complex Projects: If you need someone to help with tasks with multiple components requiring significant cross-functional collaboration, you should hire a full-time employee.
  • Local Presence: An employee located onsite will get to know the inner workings of your company. If you need someone to represent the company at meetings, give presentations, and interact with clients on a regular basis, a full-time employee would be best.
  • Grow with the Company: If you need someone who is versatile and can take on different responsibilities as the company grows, you should hire a full-time employee. The right employee can help you tackle an evolving list of tasks as the day-to-day operations change. In addition, you can groom an employee to fill higher positions.

Overall the major difference between an employee and a freelancer is the scope of what they do. The employee has a broader application where the freelancer’s contract or skill set limits their role.

Benefits of Hiring a Freelancer

  • Cost Savings: While hiring a freelancer may seem more expensive at first glance, it can end up being a more cost-effective option in the long run. The business does not have to pay benefits, employer wage taxes, workers’ compensation, and other obligatory fees when using a freelancer.
  • In a Pinch: If you need help with a project immediately, it will be much faster to find a freelancer and have them get to work right away rather than finding and hiring an employee.
  • Specialized Expertise: One benefit of a freelancer is that they have a highly developed skill set that matches the task at hand. It might be hard to find a full-time employee in your area with that expertise.

Potential Tasks for Contractors

One area where freelancers can help your business is social media.  Having a social media presence is nearly a necessity for every small business. It takes an enormous amount of time to develop content for blogs and manage social media accounts such as Facebook and Twitter. That is an area where small business owners can delegate tasks to a freelancer. Not only can a writer help create exciting content, but by doing so, he or she can also help attract new customers.

Freelancers with design expertise can help develop pictures that tell stories. These artists produce stunning infographics that add value to blog posts, which become trackable marketing content for social media sites such as Facebook, Pinterest, and others.

With the combination of quality text and exciting pictorials, content becomes enjoyable to readers, and that helps turn them into customers. Small business owners who use freelancers to produce content for their social media campaigns only need to manage the content, not spend the hours and days needed to produce outstanding material for readers.

Time, cost, and the skills needed are three aspects that a business should consider as they decide between an employee or a freelancer. Whether the work will be ongoing and how the tasks might change over time are two other considerations that will help businesses define the role of a freelancer or build a job for an employee. With a little exploration of the company’s goals, small business owners can determine who they need to hire and capitalize on having the right person to help them accomplish more.

The real question for business owners is, how can either a freelancer or full-time employee help your business to grow?

Images: ”multiple choice test with lifestyle decision: freelance or employee job/Shutterstock.com

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Miles Young

Miles Young

Miles Young is a freelance writer, tech geek and world traveler. He's currently studying IT trends on how to BYOD, SaaS integration and enterprise mobility management.

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