Freelance v. Perm: the reality of costs

Freelance v. Perm: the reality of costs

At MMO Freelance, we’re always on hand to help you understand how much working with freelance consultants cost compared to hiring permanent employees.

In this article, you’ll find a detailed analysis of the pay comparison between freelance and permanent employees. Go directly to the bottom of the page to download the full Working with Freelance Consultants guide. 

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.

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 means 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 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.

Recent posts

Freelance v. Perm: the reality of costs

There is a lot of uncertainty around how much freelance consultants actually cost compared to perm employees: we’re here to help you understand all of this.

MMO Freelance info pack

We know the challenges faced by employers and freelancers. We overcome these problems for 29k+ members and 1,900+ clients. Find out more in our info pack.

MMO Freelance info pack

MMO Freelance info pack

Our founders worked at McKinsey and then as freelance consultants. So we understand the challenges faced by both employers and freelancers.

We overcome these problems for 29,000+ members and 1,900+ clients. We’re fast & fair – we allow freelancers & businesses to agree the day rate themselves, and are market leading on fees. 

Go to the bottom of the article to download our information pack and find out more.

A market full of opportunities

The freelance market is growing year on year. On movemeon more than 4,600 candidates say they are interested in freelancing and since the launch of MMO Freelance, more than 500 freelance roles have been shared by employers.

Freelancers are highly skilled and possess deep industry expertise. Hiring managers often believe that they are more expensive to recruit than permanent employees, which is not always true. You can read more about this in our article comparing costs for permanent and freelance employees. Freelancers are also quicker to hire than permanent employees.

In a nutshell, hiring freelancers can represent various advantages for your projects.

What to expect

Are you thinking about hiring freelancers for your next project? Do you still have questions or doubts? We’re here to help.

Download our info pack and learn about the advantages of hiring through MMO Freelance. Of course, you can always drop us a line at info@movemeon.com.

In our info pack, you’ll also be able to discover employers’ testimonials about working with us. Have a look at our success page for some examples of previous freelance hires.

Recent posts

Freelance v. Perm: the reality of costs

There is a lot of uncertainty around how much freelance consultants actually cost compared to perm employees: we’re here to help you understand all of this.

MMO Freelance info pack

We know the challenges faced by employers and freelancers. We overcome these problems for 29k+ members and 1,900+ clients. Find out more in our info pack.

Top tips for hiring freelance consultants

Top tips for hiring freelance consultants

 

When hiring freelancers, there are a number of things clients can do to maximise their chances of hiring the right freelancer for them. As with any hiring process, there’s never a guarantee you’re going to get things spot on every time, however, with these tips & tricks, hopefully, you’ll improve your success rate moving forwards. 

Learn from previous hiring processes

How have previous freelancers performed in the business – is there something you wish you had asked them at interview, now that you’ve worked with them for a few weeks/months? Hiring processes should be a learning process for employers as well as candidates, with important takeaways being integrated into future processes.

Did the process ‘feel’ right? By this I mean, was there a good opportunity for both parties (candidate & client) to learn & share all necessary information?

When things do go wrong with freelance hires, it’s important to try to understand what safeguards can be brought in during the interview process to avoid repeat situations (perhaps adding another level of screening in your process).

Learn from current employees/freelancers

What do current employees/freelancers say could be improved in the hiring process? It’s amazing how many clients don’t tap into this vital knowledge pool. Current employees will give you candid/unfiltered information. If you have any freelancers on site, they should be your first port of call when it comes to refining your interviewing process.

Spend time creating a proper project brief

Given the quick turnaround times involved in most freelance hiring processes, it’s often easy to skip past the step of creating a proper job brief. Sometimes, you’re just desperate to get someone on site as soon as possible. This creates a mismatch between freelancer and client expectations, which leads to a number of challenges around how & what work is delivered. A proper job description (with clear objectives), provides a document you can constantly refer back to, so if a project doesn’t result in what you’d expected, you have something to come back to when discussing where/how things had deviated from the initial plan. It’s not the freelancer’s fault you hadn’t clearly clarified what you expected from the start.

A proper project brief will also expedite the hiring process, as the applications you receive will be far more pertinent to the specific engagement you’re hiring for.

 

 

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Create milestones for every project

Milestones create an element of accountability for both employers and freelancers. If it’s clear what’s expected in the project, set against a timeline, both parties are reassured that they’re working towards the same goals at a pace that’s agreed upon. I would say Day 1 of the project (or even as part of the final round interview process), milestones should be set & discussed. I appreciate sometimes deadlines need to be shifted (especially for more creative tasks), however, even having a rough outline will be beneficial to all involved.

Milestones also help break a project into digestible ‘chunks’, which helps timeline/map out how the project should be tackled. For instance, instead of creating a brief that only says ‘freelancer needed for a market entry project in China’, add a little context around what the market entry strategy will involve (preferably in order). You can then set milestones against this. This could include a competitor analysis, internal/external market forces to factor in, logistics, etc. You can then discuss prioritisation of each task and you’ll have a clear list of executable tasks to work against.

Don't forget to sell your business, as well as the project

Freelancing is on the rise and the volume of projects is increasing month on month. This rise in supply means freelancers now have far more choice for the type of work they choose to pursue, compared to even a few years ago. This means employers need to differentiate themselves versus competitors to capture the best talent in the market. So if you have any USPs in your business (cool office, highly skilled team, fun perks, i.e., foosball table) – be sure to mention it in the job description (they can sometimes tip things in your favour).

Quite often freelancers like to establish long-term relationships with the clients they work with. That’s why it’s essential clients sell their long-term vision for the business, not just short-term projects. This enables freelancers to look past only immediate projects. They’re more interested in your business (what you do & how you do it), which is far more likely to get them over the line, compared to selling just a single short-term project.

So there you have it! A few tips and tricks to help improve your freelance hiring success rate. As with many aspects of business (& life), all 5 of these tips revolve around effective communication (both written and verbal), so make sure you always remain receptive to improving your own hiring processes –  no process is ever perfect!

Recent posts

Freelance v. Perm: the reality of costs

There is a lot of uncertainty around how much freelance consultants actually cost compared to perm employees: we’re here to help you understand all of this.

MMO Freelance info pack

We know the challenges faced by employers and freelancers. We overcome these problems for 29k+ members and 1,900+ clients. Find out more in our info pack.

The comparative costs of freelance consultants & permanent employees

The comparative costs of freelance consultants & permanent employees

At movemeon, we’ve seen the freelance market grow year on year. Freelancers are highly skilled, they possess deep industry expertise and they are quicker to hire than permanent employees, so it’s no surprise that the growth of the market has been driven as much by demand as by supply.

But there is still a lot of uncertainty around working with freelance consultants. So, based on the questions many of our 1900+ employer partners have asked us, and using the data we’ve collected over the last 5 years, we’ve created a guide to employing freelancers.

Here you can read some of the findings outlined in our new guide, in answer to the question “Freelance day rates can feel really high – how much do freelancers really cost v. permanent employees?

Freelance v. permanent: pay comparison

 

freelance-v-perm-data

Pay comparison: freelance v. permanent

Data source: 34,945 aggregated, anonymised movemeon.com & payspective.com responses

 

The highest supply and demand for freelancers, in our experience, is at the Associate and Manager levels. At these levels, once you factor in all the costs of permanent employees, the saving on a permanent employee is 32%. However, in reality the costs are far more comparable: freelance hires don’t come with onboarding or offboarding costs, and hiring processes for freelancers are much quicker, making for hidden savings on freelancers. 

Freelance v. permanent: hidden savings

 

You can end freelance contracts with little to no notice (provided you take legal/HR advice – the extent of notice will depend on the given  contract). This means that you generally don’t incur the costs associated with termination of permanent employment when you end a freelance contract. This also makes freelance hires far lower-risk.

 

You can also appoint freelancers much faster. Recruiting for permanent employees can take several months, during which time business performance may suffer simply because there is no one ‘in role’. The recruitment cycle for freelancers is far quicker (via movemeon we see freelancers starting projects within 1 week of the project opportunity being shared). Generally, the interview process is faster as hiring managers are purely focused on competency rather than, say, competency and cultural fit. Moreover, the freelancers they interview have immediate availability.

 

Find a more detailed analysis of costs in our dedicated article.

Recent posts

Freelance v. Perm: the reality of costs

There is a lot of uncertainty around how much freelance consultants actually cost compared to perm employees: we’re here to help you understand all of this.

MMO Freelance info pack

We know the challenges faced by employers and freelancers. We overcome these problems for 29k+ members and 1,900+ clients. Find out more in our info pack.