Freelance v Perm: The Reality of Cost and Flexibility
Richard Rosser
I help (ex)consultants & finance pros build careers they love | OnUpBeyond & Movemeon Founder | ex-McKinsey
IN THIS ARTICLE, YOU’LL FIND A DETAILED ANALYSIS OF THE PAY COMPARISON BETWEEN FREELANCE AND PERMANENT EMPLOYEES.
Focusing only on day rates, the gap between freelance and permanent pay can look quite large, even if this gap tends to decrease with seniority. However, hiring permanent employees implies hidden costs that need to be considered.
Drop us a line at info@movemeon.com and we’ll help you through your hiring project.
- Pay comparison: freelance v. permanent
- Data source: 34,945 aggregated, anonymised movemeon.com & payspective.com responses
NATIONAL INSURANCE & PENSION CONTRIBUTIONS
National insurance and pension contributions from the employer represent permanent employee costs that are usually not considered as high as they really are. In value, these contributions represent more than 10% of the total annual compensation for permanent employees.
These costs don’t exist when you hire a freelancer.
THE EFFECTIVE NUMBER OF WORKING DAYS
One of the main differences between freelance and permanent employees is that you pay freelancers based on the actual number of days they work on your project. When it comes to permanent hires, it’s a bit different. You have to consider sick days, paid holidays, bank holidays or even weekends. There are 260 weekdays per year but a permanent employee, on average, will work only 223 days.
Taking this into consideration, the effective average day rate for a permanent employee is £411.
ONBOARDING AND OFFBOARDING
You’ll invest more time in the onboarding process for a permanent employee. Also, you’ll have to consider training costs. Because you hire freelancers for their expertise, onboarding will take you less time. A freelancer will be ready to work as efficiently as possible faster than a permanent employee.
Regarding offboarding: freelance contracts can be ended with little to no notice. There are a number of reasons why you may need to let people go. Termination of permanent employment brings costs that don’t apply to freelancers. Hiring freelancers also mean hiring at a lower risk, knowing sunk costs will be minimal if the contract has to be ended.
TIME TO HIRE
Freelancers can be hired much faster than permanent employees. Recruiting for a freelancer can take just a few days on movemeon. Freelance interview processes are generally fast as hiring managers are focused purely on competency, not team fit. In contrast, recruiting for a permanent employee takes a number of months. During this time, businesses may suffer simply because there is nobody in the role. Simply put, there is an opportunity cost to the business.
Are you looking for freelancers? Do you need some more info? Don’t hesitate to drop us a line at info@movemeon.com or to visit our contact page.
🔸 𝑰 𝑨𝑵𝑰𝑴𝑨𝑻𝑬 𝑻𝑯𝑰𝑵𝑮𝑺 🔸// 2D Motion Designer @orangewedge
5yFreelance is the best approach, if you actually manage to pull it off succesfully (in my opinion). Freelancing poses a greater number of challenges to overcome, but can yield the best results. The sad reality is that for every 10 persons who try to freelance, only about 2 succeed.
Biopharma Strategist | Neuroscientist | Immunologist | Professor | Trainer
5yI can add from a freelancer perspective: I don't have inordinate amount of meetings locking up my calendar, I don't commute everyday (actually look forward to on-site meetings), I don't chat online, I don't go out to lunch, I don't work on 3-4 projects at the same time. This allows me to concentrate on 1-2 projects at a time, do actual work the entire 7-8 hours in a day, put a lot more thought into the analysis and outputs, and don't have to deal with client or even firm politics to get projects done. Its a great gig, but there's also an element of feast or famine. But you may actually work 9m and make more than a comparable FTE at a firm. Add in time value of meetings, commute and delayed decision making, then you're certainly coming out ahead on a total comp to work ratio. Plus you're generally a lot happier every day!
Enterprise transformation and co-founder of WellWeb
5yGood article. There are some further freelancer benefits you could add. In my experience, freelancers tend to have to be good at what they do to survive and thrive, so capability tends to be upper quartile. There is an important role for freelancers and professional services to transfer knowledge of good practice across and within sectors. This is a bit like a good Non Exec Director, but at a different point in the organisation. Because of what they do, freelancers tend to have to respect, but cut through politics. And organisational politics are a major source of ‘value destruction’, cost and decision delays in any organisation of scale. This approach both speeds the thing the freelancer has been hired for AND nudges wider culture change.
Advised 250+ startups/scaleups on growth - profitably! Shaping the strategy, then hiring the team
5yGreat analysis. I'd include equity as well. C-level hires will have a large chunk of options which will be worth £millions on exit.