Bridging the productivity gap with freelancers
Hiring a freelancer is an extremely quick, effective solution for resourcing most projects, but there are some considerations before hiring a freelancer in an interim position:
- Is it cheaper to wait?
- Does the rule suit a freelancer? Practically and from an IR35 point of view
Is it cheaper to wait?
There's a simple and a not-so-simple answer to this question. Let's start with the simple.
There are projects where you cannot afford to wait. In highly competitive fast moving industries, if you wait for a key hire to start before you begin working on a new product or development, you'll never survive. Your competitors will leave you behind and you'll never catch up. In other words, you need an interim freelancer in place as soon as possible.
For all other scenarios, the answer isn't as straight-forward and needs some consideration.
First, you need to establish how much the productivity gap is going to cost you.
Here's an example scenario.
You work for an ecommerce business selling red widgets. You have hired a new developer to improve your checkout process. The new hire will join you in 3 months, and they are going to help you hit your targets of increasing revenue by £5,000 a month and reducing the cost of inaccurate order fulfilment by £1,000 a month. There is also added pressure on your new hire because, if you don't hit your targets, you're going to need to spend an extra £10,000 on advertising to sell your stock.
To save you getting out a calculator, in the above scenario, the cost of your productivity gap is roughly £28,000 over the 3 months. About £310 a day.
If you can hire an expert freelance developer to produce results for less than £310 a day, it is financially viable and you should proceed with an interim freelancer.
Does the role suit a freelancer?
Assuming it makes sense financially to hire an interim freelancer, the next thing to consider is whether the role suits a freelancer.
There are two factors when considering the suitability of a freelancer for the role:
Projects that do not require the worker to be in a specific location or working between set hours fit freelancers the best. Read this guide on outsourcing tasks to a freelancer for more information about the roles that suit remote freelancers.
IR35 is legislation designed to combat workers who fraudulently claim to be contractors for tax benefits, therefore, it's important that you are IR35 compliant.
It's essential that, for tax purposes, the freelancer is considered to be genuinely self-employed and not, to all intents and purposes, an employee, otherwise, you and the freelancer will be liable to pay the respective tax and national insurance due (and you may incur penalties).
With IR35 in mind, you may decide against using an interim freelancer if the freelancer is required to manage your staff or control a budget or other financial responsibilities. Use this calculator to assess your freelancer's IR35 risk.