Hiring freelancers or salaried staff – which is better for your business?

- March 6, 2022 4 MIN READ
Smiling woman shaking hands at job interview

As your business takes flight, you may be considering hiring some extra staff to keep everything running smoothly as you scale up. Many business owners wonder – would hiring freelancers or salaried employees be a better choice? Founder of Group Colleges Australia, Alan Manly, says there are four things to think about before making the decision.

Hiring staff can be more an art than a science, and knowing who or how to hire can be a daunting part of the process of starting or growing your business.

In addition to salaried employees, potential staff can present themselves as entities or freelancers (ie. a company or skilled worker with an ABN) with agreed contractual arrangements, rather than having them in-house.

4 things to consider before you hire

As a potential employer it is vital that you have a sound understanding of what you wish to achieve so that you make the right hire, no matter what the arrangement.

So before you put that job ad out, consider these four things first:

Five people sitting inc hairs while waiting for job interview

1. Know what skills you need

Successfully growing the business to the extent that you need extra labour is exciting. This is an opportunity that, if managed well, can be the transition from a one-person show to becoming a viable business. However, recruiting can also be a minefield of distractions to a newly successful entrepreneur who is following their dream.

The business plan should have a section discussing what skills would be required to sustain company growth. If such a concept is not in the business plan, then now is a golden opportunity to draft a statement of the skills required to give you more hours in the day to capitalise on your strengths.

2. Know how many people you need

Having established the skills that are required to free you up, the next step is to assess if it is likely that any one person possesses all of those skills. As the company grows, a deeper knowledge of particular skills may be required. For example, simple bookkeeping may grow into the need for the skills of a qualified accountant.

So the question is how many hours per week are required to meet the need, and have you allowed for growth? Is the ‘not enough hours in the day’ cry actually a sign that there is a need for a higher level of several skills, spread over several different fields? Consider that you may need two or more people with different skills on a part time basis.

3. Know when to expand

Having been brave enough to successfully establish a startup may cause you to think you are over the hump for risk taking. Nothing could be further from the truth.

There is naturally a certain comfort from doing everything properly yourself. But once that confession of ‘not enough hours in the day’ is recognised, the time to recruit is now.

Remember, expansion of resources is vital to keep the company momentum going. And it will depend on you having enough hours in the day concentrate on what you do best.

4. Know what you can get

Having decided to expand the company necessitates gaining knowledge of support services that are available to small businesses. The earlier example of a bookkeeping task growing into an accountant role is applicable to many tasks. Another common distraction for startups is purchasing supplies – maybe a person one day a week could be more organised than you?

There are many services for small businesses that will set you free to be an entrepreneur. After all, if you can get more customers, you can afford to invest in resources that allow you to focus on the core business.

Once you investigate what services are available you may be pleasantly surprised by the range of skilled persons available to support you in growing your business, so you don’t get lost in the minutiae.

work from home

Should you employ freelancers or salaried staff?

Option 1: Freelancers

Freelancers are other entrepreneurs who have set up business to provide a quality service at a competitive price based on a narrow set of skills, utilising very organised processes and high volume.

Using freelancers, back office tasks can often be outsourced, gaining higher skills at better value. These cost savings can assist you to be price competitive.

This question causes a revisit of the business plan – what is the value proposition of the startup? Outsourced services from freelancers can allow you to focus on your value proposition.

The risk with freelancers, though, is a potential lack of commitment to your business.

Option 2: Salaried staff

These are usually skilled persons who are required to deliver the products or services aligned with the core value proposition. These are the folks who build up the corporate skills and relationships with customers and other stakeholders, such as regulators. They are perhaps the second stage of the startup journey.

Salaried staff form the team that invest their careers with your company and build your company’s culture. In joining your company, they have declared that they share your dream enough to be there on the ground floor. If your business succeeds, they hope to share the rewards.

As with any new business, you’re always in a high risk/high return situation. The risk with salaried staff for a startup is that the core product or service can be replicated by a full time employee.

But it’s simple – employing the right staff at the right time yields high returns. Just make sure you’re clear on what kind of staff best meets the needs of your business.

This post was originally published in 2016 and has been updated for 2022. 

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Fixing the skills gap: How to attract (and retain) the most talented employees for your business

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