Financial Benefits of Hiring Freelancers as a Small Business
Financial Benefits of Hiring Freelancers as a Small Business
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The success of any organization lies on the shoulders of its employees. Having an efficient and competent workforce ensures you meet revenue goals, build a strong reputation and work towards growing your business. However, recruiting the right individual is a time-consuming and expensive process. According to the Undercover Recruiter, the average recruitment cost for a full-time employee in the UK is around £3000.
In this article by Connecting Services, we explore why hiring freelancers is a cost-effective solution to reduce your hiring costs without sacrificing your organization’s productivity.
Tax benefits with freelancers
Here are some prominent tax benefits you can avail by hiring freelancers:
- No pension contribution: According to The Pensions Regulator, at least 8% of a full-time employee’s monthly salary has to go towards their pension contribution. As the employer, you are expected to make at least a 3% contribution. However, no such contributions are needed for freelancers.
- No Employee National Insurance: For each employee, employers are required to pay 13.8% National Insurance on all earnings above £732 per month. With a large workforce of full-time employees, you can expect to pay thousands of pounds a month. Conversely, there is no requirement to pay National Insurance for hiring freelancers.
- Lower Payroll Costs: To ensure adherence to the abovementioned requirements you need to invest in payroll software and personnel to make necessary deductions from employee salaries and make timely contributions to avoid hefty fines. However, when it comes to freelancers, the burden of making contributions and filing is solely their responsibility.
UK freelancers market
The freelance market in the UK has seen a tremendous spike since the start of the pandemic. Currently, there are more than 2 million freelancers in the UK, providing specialized services in disciplines of marketing, business, legal, finance, healthcare, and more. Freelancing provides individuals the freedom to work at their schedule while having complete control over their earning capacity. Additionally, there are no restrictions on the number of clients they can work with allowing them to work across industries, learn new skills, and create connections.
However, freelancers actively need to generate leads to find clients, which includes incurring marketing expenses to promote their services on freelancing platforms and social media. As a result, freelancers are experts in consistently delivering high-quality work, have excellent communication and time management skills which for any business is a big plus. Some prominent areas for which your business can hire freelancers include:
- UI Designers: These professionals are responsible for designing all screens customers will navigate through when using your website and mobile application. Having an intuitive design helps to increase website traffic and conversions.
- Web Developers: They are responsible for creating and maintaining websites which includes seamlessly implementing your UI design, ensuring fast page load times, integrating your website with databases, and much more. In terms of average cost, freelance web developer can charge up to £20/hour but can increase prices based on experience.
- Social Media Managers: In a digital-driven market, having a strong social media presence is integral for business success and growth. These professionals bring expertise in creating social media strategies, handling outreach programs, increasing website traffic, and creating brand awareness.
There are numerous freelancing websites such as Upwork where freelancers sell their services. These sites allow you to review their past work, compare customer reviews, ask for referrals and make an informed decision before hiring.
As a business, it is important to clearly distinguish your workforce between full-time employees and freelancers (independent contractors). Misclassification of workers can prove costly to your business as you will be liable to pay all due contributions, benefits, and more which can be in the range of several tens of thousands of pounds. Common criteria to qualify a worker as a contractor include:
- They have the freedom to work on their own schedule
- They can hire someone else to complete the work
- They control the rate charged for services and have the authority to change it
- They are paid on completion of a project and not based on duration
- They can work for more than one client
When choosing to expand your workforce, consider hiring freelancers over full-time employees as it’ll reduce your cost of recruitment, provide greater access to expertise, increase productivity, and achieve organizational goals affordably.
Article by: Vanessa Holwell