Find out what drives us and what defines our values
Meet the experts who manage your finances with passion.
Discover our current job offers or apply proactively!
Accounting
David Merz | Founding Partner
Zurich, April 24, 2024
The choice between hiring freelancers and full-time employees is crucial for businesses aiming to optimize their performance and financial efficiency. In this article, we explore the distinctions between these two types of workers, outlining the level of flexibility, cost implications, and operational impacts of each. By examining the key advantages and disadvantages, we aim to help you determine the most effective workforce structure for your company’s specific needs and goals.
Book a free initial consultation with our experts.
The terms “freelancer” and “freelance employee” are not regulated in Switzerland and are therefore not officially defined in Swiss law. In general, a “freelancer” can be considered as any independent professional who works on a self-employed basis rather than being permanently employed by a single company. Instead of being bound to a single employer, freelancers can offer their services to various clients and typically work on multiple projects at a time, charging either by the hour, day, or project. They are responsible for managing their own schedules, taxes, and business operations.
One of the key characteristics of freelancing is the flexibility it offers. Freelancers can choose which projects they want to take on, set their own hours, and decide their work location. This flexibility offers many advantages for both the freelancer and their clients, as we will explore in this article. However, along with the benefits of freelancing, there are also additional risks and responsibilities, such as variable income, lack of employment benefits (like social security contributions, subsidized work equipment, etc.), and the need to handle one’s own contractual and tax obligations.
Recent years have seen a major shift towards a more flexible, project-based work model in Switzerland and abroad. This has been driven by several factors, including technological advancements, changing worker preferences, and the global nature of modern businesses. Platforms that facilitate remote work and digital collaboration have made it easier for freelancers to connect with potential employers around the world. Consequently, freelancers now comprise a significant portion of the workforce in sectors such as IT, creative industries, consulting, and more. This trend was greatly accelerated by the COVID-19 pandemic, which demonstrated the viability of remote working, making freelance options more attractive to both workers and employers.
Here you can easily calculate the costs of your accounting.
The decision to employ freelancers over full-time employees, and to what extent, can significantly impact your company’s flexibility, operational dynamics, performance, and financial efficiency. Let’s explore the advantages and disadvantages of each to determine which employment model aligns best with your business goals:
One of the primary considerations when it comes to deciding between using freelancers or hiring permanent employees is that of financial efficiency. And so, the question often boils down to: “which is more cost-effective for my business”. In short, the answer to this question is: it depends on the circumstances. We have already touched on the various cost considerations and variations between freelancers and employees in previous sections, but let’s take a closer look at this crucial point:
Employers are often put off by the seemingly high fees charged by many freelancers. While this may seem a logical concern at first glance, it’s important to examine these costs more closely.
On paper, freelancers charge more per hour than their permanent employee counterparts. However, employers should consider the fact that freelancers are only paid for actual hours worked or output produced. If the freelancer is sick or takes a vacation, the employer doesn’t pay them for it. By hiring freelancers, employers also bypass costs associated with permanent employees such as health benefits, pension contributions, and other employment-related benefits. Most importantly, if the freelancer spends half their day browsing social media instead of working, it’s their problem because they don’t get paid for it.
Compare this to permanent employees with a so-called 8-hour work-day, all of which is paid for irrespective of how they use (or abuse) that time. There have been multiple studies that suggest that actual productive work time in an 8-hour workday is significantly less than the time spent at work, with a considerable amount of time being wasted on non-work-related activities and inefficiencies. Some of the most well-known of these include:
All this serves to illustrate that the actual hourly rate earned by permanent employees may be much higher than first appearances suggest. Not to mention that an employee is entitled to at least four weeks of paid vacation per year. Now add in all the additional costs such as social security contributions and other employment benefits, the cost of office space and equipment, higher recruitment costs, ongoing training, and so on. It is not difficult to see that the true cost of permanent employment can be much higher than anticipated.
The above points show that it is not as straightforward as simply comparing hourly rates between freelancers and permanent employees to know which is the more cost-effective. In many situations, freelancers may be the more financially efficient choice even though they appear to have a higher hourly rate, especially when it comes to short-term projects or when needing specialized skills that are not required on an ongoing basis.
However, freelancers are not always the more affordable choice, and there are also circumstances where a permanent employee may be both better suited to the job at hand and more cost-effective. This is especially true for roles that are central to your company’s operations, where employees can develop a deeper understanding of your business, contribute to a stable company culture, and drive continuous improvements and innovations, which can lead to greater overall business profitability and efficiency.
Ultimately, determining which is more cost-effective depends heavily on the specific needs and circumstances of your business, and the nature of the work which the employee or freelancer is needed for.
While it can’t be said that either freelancers or employees are the better choice in all circumstances, there are a few factors to consider when determining which best suits your company’s needs:
To sum it up, if your work demands flexibility, specialized skills for short-term projects, or you operate in an industry with high variability in workload, freelancers can offer the cost-effectiveness and adaptability you need. Conversely, if your business requires consistency, long-term commitment, and deep institutional knowledge, the investment in permanent employees could provide a stronger return on investment. For most companies, hiring the right combination of permanent employees and freelancers can provide the balance they need.
Deciding how to best structure your workforce is complex and depends on multiple factors. Why face this difficult process alone when you can turn to the advice and support of experts in the field?
Along with our comprehensive suite of accounting and fiduciary services for SMEs and startups in Switzerland, Nexova offers professional consulting services that can help you assess your needs and make informed decisions about using freelancers or hiring employees. Our expertise can guide you through the intricacies of workforce planning to ensure that your staffing strategy supports your business objectives effectively.
Don’t hesitate any longer; contact us today to find out how we can help you drive your business to lasting success.
Your email address will not be published. Required fields are marked *
Comment *
Name *
Email *
Website
Submit Comment