Freelancer Fees Vs Employee Costs: Which is Most Cost Effective For Your Business?
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Freelancer fees can be up to 144% higher than employee costs.
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Expert shares advice on when hiring a freelancer may be beneficial, and how to manage these higher costs.
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IT Support Specialists are the only role in which employees are more expensive per hour than freelancers.
Full-time employees and freelancers each come with their unique advantages and costs. Whilst freelancers typically charge higher hourly rates, they offer more flexibility and often work on a project-by-project basis. On the other hand, employees provide stronger commitment and integration into the company, but come with additional expenses like benefits and insurance.
New research from small business credit card company, Capital on Tap, reveals which option – employees or freelancers – is more cost-effective. The research looks at both hourly rates and total annual costs (presuming they are working 36 hours a week) of each, considering the additional costs associated with in-house staff.
The full research can be viewed here: https://www.capitalontap.com/
Freelancer fees can be up to 144% higher than employee costs
In 29 out of the 30 job roles analysed, freelancers were determined to be more expensive than full-time employees. However, some charge much higher hourly rates than others.
The average employee costs £29,667 per annum when factoring in additional expenses such as income tax and pension contributions. In comparison, hiring a freelancer for the same period could cost around £62,070 – more than double.
This difference is especially pronounced in consultancy roles such as legal, human resources, public relations, and business consulting, where freelancers can earn up to £83 more per hour than full-time employees. The table below highlights the roles where freelancers command the highest rates.
|
Rank |
Job Role |
Average Freelance Hourly Rate |
Average Employee Hourly Rate |
Percentage difference |
|
1 |
Legal Consultant |
£99.06 |
£16.00 |
144.38% |
|
2 |
Photographer |
£65.69 |
£14.67 |
126.99% |
|
3 |
Voiceover Artist |
£52.92 |
£14.67 |
113.20% |
|
4 |
Human Resources Consultant |
£48.80 |
£20.67 |
81.00% |
|
5 |
Business Consultant |
£46.67 |
£18.67 |
85.71% |
|
6 |
Public Relations Consultant |
£40.86 |
£19.33 |
71.53% |
|
7 |
Copywriter |
£40.45 |
£16.00 |
86.63% |
|
8 |
Blog Writer |
£39.35 |
£14.67 |
91.40% |
|
9 |
Content Writer |
£39.33 |
£14.00 |
95.00% |
|
10 |
Technical Writer |
£37.24 |
£20.00 |
60.23% |
Expert shares advice on when hiring a freelancer may be beneficial, and how to manage these higher costs.
Fay Sumner, Head of People at Capital on Tap notes, “Whilst freelancers may appear more costly at first glance, it is crucial to align your choice with your business needs. They are often sought after for their specialised skills and deep knowledge which can justify the additional investment, especially for projects where your in-house team may lack experience.
“Additionally, freelancers offer significant flexibility, often working on a project-by-project basis. If you are looking to manage capacity in the short term, a freelancer might actually be more cost-effective than committing to a full-time salary.”
IT Support Specialists are the only role in which employees are more expensive per hour than freelancers.
On average, rates for illustrators tend to be the most similar between freelancers and full-time employees, with a difference of 26.2%. This is closely followed by UX/UI designers where the cost difference is 26.7%.
The research highlights that IT Support Specialists are the only role where freelancers cost less on an hourly basis than full-time employees, charging 32% less.
Legal consultants show the largest cost difference, with freelancers charging up to 144% more per hour, potentially leading to an annual difference of £145,500. Photographers and voiceover artists also display significant cost differences, with freelancers charging 127% and 113% more, respectively.
