Dec, 06 2022

Should you hire a freelancer or a full-time employee?

Does your blockchain business need to hire a freelancer or a full-time employee? Check our detailed guide to make an informed decision.

Anyone involved in the crypto world will likely have noted the relative popularity of freelance jobs versus more conventional full-time, permanent opportunities. There are a number of reasons for this, which are partly down to the nature of the sector itself, and partly down to recent shifts in working patterns driven by the coronavirus pandemic.

The crypto industry is still relatively new, and there is a shortage of talent. Under such circumstances, it’s a seller’s market, and those with the right skills are more likely to look for the best opportunities in the short term, rather than tying themselves down to a permanent role. They know the work is there, and there’s fierce competition for good people, so full-time jobs have less appeal. Organisations looking to fill a vacancy might therefore be more likely to hire a freelancer out of necessity, even if they’d prefer a full-time employee.

Additionally, the COVID furloughs and lockdowns accelerated the existing trend towards freelancing and remote work, as people seek to establish a better work-life balance and fit earning a living around their other commitments. A larger proportion of people are seeking freelance work than ever before – either to supplement their day jobs and earn a little more at a time when their finances are stretched, or as a replacement for their 9-5 jobs that gives them greater flexibility.

Still, business owners who need to fill a vacancy should weigh up the pros and cons of whether to hire a freelancer or a full-time employee. There are good reasons for both, but if you follow a few simple principles it will generally be clear which is better suited to your circumstances.

One-off task or ongoing role?

One of the most obvious issues to establish before making a new hire is the nature of the vacancy to fill.

If you need to complete a time-limited task that is outside of the current skill set of your existing team, there’s a strong case for hiring a freelancer. After all, once they have finished the job, you won’t have any further need for them, and they’ll either be an underused resource, or else you’ll be forced to move them into a new (and possibly unsuitable) role, or dismiss them.

A freelancer can be the ideal solution for a defined, specialist task. Blockchain jobs sites are full of freelancers offering such one-off services, from creating a new logo for your organisation to building a new component for a smart contract protocol.

On the other hand, if you need an ongoing job done, then you’re most likely better off hiring someone full time. For example, you wouldn’t want to entrust customer service to a freelancer, or a role that requires building and managing relationships within your team, as you’d expect within the HR department. Similarly, devs tasked with building and maintaining your core software product should almost certainly be full time. Any role that involves a long-term investment to do the job well is best given to a permanent employee.

How can you get maximum bang for your buck?

The most obvious advantage of hiring a freelancer is that it tends to work out cheaper than taking on a permanent employee.

A freelancer will only charge for the hours they work, whereas you’ll need to pay a regular employee full time (probably around 40 hours per week), whether or not they fill that time productively. What’s more, you’ll also have to pay permanent employees benefits, health insurance, holiday and sick pay, social security taxes and more, depending on where your company is based. Freelancers will typically charge a higher hourly rate than full timers, partly to compensate for this lack of perks that normal employees take for granted, but it should still work out in your favour.

However, there are caveats to this benefit. Some organisations end up employing freelancers long term, essentially in the capacity of a full-time employee but on a freelance basis, thereby avoiding paying taxes or benefits on their behalf, and without giving them any job security. Needless to say, aside from being unethical, this is also something the tax authorities may object to if they find out about it.

Assuming hiring a freelancer is a legitimate choice, you’ll need to weigh up the pay-as-you-go benefit against the downside that they might not be available when you need them. Freelancers will usually work their own hours, and so if you need them at a particular time (for instance, when other key employees are in the office, or when something goes wrong), they might not be free. Alternatively, if you need them to work additional hours due to a crisis or short-term problem, they might simply be unable to help.

This extends to organising meetings. If you know your staff are full-time, it’s far easier to get everyone together, whether that means in person or online. Scheduling a meeting with a freelancer can be more complicated – though if you’re operating a remote, global business, as many crypto organisations are, that may not make so much difference.

Try before you buy

Employing the wrong person can be expensive. Plenty of companies have had the unpleasant experience of welcoming a new hire into the office, only to find they were far better on paper than in reality. Perhaps they can’t (or don’t want to) do the job they are paid to do, for one reason or another. Unfortunately, they’re now on board and you’re stuck paying their salary until you can go through the necessary process to get rid of them.

As if wasting money on a poor hire wasn’t enough, research by the Society for Human Resource Management suggests that replacement costs can be 50 to 60 percent of an employee’s salary. In total, costs to the company can reach as much as 200 percent in the worst cases. For example, if you’re paying an employee $50,000 per year (which is on the low side for most crypto jobs), replacing them could easily cost $30,000, and the total cost to the company could be anything from $50-100,000.

Taking on a freelancer allows you to try before you buy. You’ll find out whether the person offers value for money, and whether they’re a good culture fit for the organisation. If it works out, then you can try offering them a permanent position – lots of freelancers are willing to move to a full-time role if the terms are right for them, especially in an uncertain jobs climate. If they’re not interested in coming on board in that way, you can keep the existing arrangement. Since it’s working, why change things? Good people are hard to find.

How important is loyalty and building a strong work culture?

A final factor to feed into your decision-making is how committed you want or need your people to be. A permanent employee with a full-time salary and all the perks is likely to be more loyal to your company than a freelancer. Beyond a freelancer’s hourly rates, you don’t owe them anything – and that cuts both ways. They don’t have any job security, and they don’t need to stick around if they find a better opportunity either.

There are a few points to bear in mind when you’re figuring out how important employee retention and loyalty are, including:

How difficult (and expensive) is it to find a new freelancer – or to hire a new permanent employee for that role?
Is high staff turnover a problem? For some businesses, it doesn’t matter. For blockchain jobs, it probably does. When you have a lot of institutional knowledge that’s specialist and hard to accumulate, keeping employees for the long term is vital.
How does it reflect on your employer branding? If you employ a lot of freelancers, rather than investing in permanent employees, that sends out a certain message about how you run the company.

In summary, full-time employees are typically going to be more loyal to your organisation and more reliable than freelancers, since they’re receiving a regular pay cheque, paid holiday and benefits. Freelancers have far less strong ties to the company. That’s by no means to say that you shouldn’t use them, only that you’ll get the most out of freelancers in one set of circumstances, and full-timers for another.

Where to find freelancers and full-time candidates

Ultimately, there may be another factor that takes precedence over whether you want a freelancer or a full-time employee, and that’s what talent is available. Web3 hiring is a competitive business at the best of times since there are too few experienced people to fill the jobs that already exist. It may be worth first seeing who can do the job best, and working with them on whatever basis they prefer. In other words, find the right person, and then decide how you should employ them.

LaborX is one of the best websites to hire freelancers and full-time employees who specialise in crypto and blockchain jobs. You can either advertise a defined task for a freelancer, or a full-time vacancy. Alternatively, you can browse the gigs (fixed-price services) that freelancers offer.

Web3 hiring made easy

In summary, consider hiring a freelancer if:

You need to complete a specific, time-limited task that is outside of the skill set of your existing team
Your budget is limited, or there are other good practical reasons not to take on a full-timer (for example, you’re bootstrapping a new venture and there’s a lot of uncertainty about the future)
You want to try someone out for a role with minimal risk, perhaps with a view to offering them a permanent position if they perform well
The hours you need someone for will vary, and it doesn’t make sense to pay someone a fixed salary

Consider a full-time employee if:

It’s an ongoing role within the company
You want someone who will work closely with other core team members and need them to be available on-demand
You need someone who will be committed to the project and build up invaluable long-term institutional knowledge

Check out candidates with Web3 skills on LaborX