According to stats from Forbes, 56.7 million Americans were doing freelance work as of one year ago, with the number having increased by 3.7 million since 2014.1 Upwork® recently shared some new stats about the freelance economy, finding that 45 percent of freelancers provide skilled services such as programming, marketing, and business consulting. While each generation had more than one in four workers who freelanced in the past year, the number was highest at 53 percent for Generation Z, which includes workers between the ages of 18 and 22.

What is a freelancer?

As Randy Duermyer at The Balance explains, "A freelancer is someone who offers their services for a fee and usually with no expectation of a permanent single client, although the working relationship can be ongoing. It's a form of self-employment, similar to operating a home business versus telecommuting. With that said, a freelancer can work as a contractor, as opposed to a home business."2

A freelancer must have a business license, as they are considered to be a business by the government even if they are a single-person, self-employed business. They are responsible for paying their own taxes, as no taxes are withheld by the client who contracts them. The freelancer charges a fee per job, sends the client an invoice, and is responsible for paying local, state, and federal taxes on the money earned.

There are many freelance careers. Beyond those mentioned in the Upwork survey, popular freelance jobs include writing, web design/development, tutoring, photography, sales, search engine optimization, and many others.

How using freelance workers can save your business money

1. Using freelance workers rather than employees can save your business money in a variety of ways, including the money you save on wages and benefits. When you pay an employee's salary, you're paying a consistent amount from pay period to pay period, regardless of the amount of work accomplished.

With a freelancer, however, you generally pay a set price per job. There may be some flexibility based on time or other agreed-upon circumstances, but you aren't committing to an indefinite period of time in which you'll be paying this person wages. When you find a freelancer with whom you work well, you can build a relationship that isn't dissimilar to that of an employer and employee, and you may be able to work out terms for which you can work together over the longer term. In some cases, you may both find it worthwhile to move the relationship from contacting to employment at your company. This can be a great alternative to hiring an employee with whom you have no existing relationship.

2. Beyond wages, you will also save on benefits by working with freelancers, because that's just not part of the equation. A freelancer is self-employed, so you don't have to provide benefits and perks the way you would to a traditional employee.

3. Stuart Koenig at Creatives on Call makes another solid point: "Another salary aspect to consider is location. If you’re based in New York and are able to remotely hire contract workers in more affordable cost of living areas, they’ll cost you less in wages. You’re still paying a competitive salary based on location, but actually saving money when compared to hiring locally."3

4. Also in terms of your location, you can save money on office space by having fewer in-house employees.

5. Training is yet another way to save. Freelancers are usually already good at what they do, or they wouldn't be able to make a living at it. You're contracting them based on their existing skills. While you may have to spend some amount of time making sure their skills fit into your existing needs, you won't have to train them how to do the job. With an employee, this can be a time-consuming, and therefore expensive, aspect of the hiring process.

6. Hiring itself can be expensive because not all new hires will work out, and if you spend the time and money getting someone up to speed only to have the situation not work out, you'll have to start over again and spend more money. While a freelancer relationship may not work out after the first job, it is much easier and less expensive to move on to another freelancer than to hire another employee.

There are certainly benefits to having full-time employees you can count on, but the freelance world presents some great opportunities to save your business money if you're willing to go that route. Most likely, you'll find the greatest success with the right combination of both.

1. https://www.forbes.com/sites/elainepofeldt/2018/10/31/freelancing-economy-continues-to-roar/#1e2e33f97df4

2. https://www.thebalancesmb.com/how-to-become-a-freelancer-1794507

3. https://creativesoncall.com/blog/post/cost-benefits-of-hiring-freelance/409/more

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of Zions Bancorporation, N.A. Member FDIC