Offshored FTE Team Members vs Freelancers
Recently we have spoken to a number of organisations considering freelancers in an effort to reduce costs, this article walks you through some of the pros and cons of this approach vs traditional FTE offshoring
Published 17 Oct 2018
Recently we have spoken to a number of organisations considering offshoring or hiring freelancers in an effort to reduce costs or access a wider talent pool and not aware of the pros and cons of each approach. There are some considerations for you and your organisation if this is something that you can relate to. Full disclosure, we are obviously strong advocates for full-time equivalent (FTE) staffing but there are times when freelancing is effective and useful to an organisation.
By way of background, services such as fiverr, upwork and/or freelancer act as marketplaces for organisations and freelancers to connect, scope and deliver work. They are all well structured to protect both parties and you have access to a huge pool of resources. They, of course, take a cut of the action, but that's their model so no issues there.
Consider the below though when making your decision;
Cost Savings... maybe
In most cases, Freelancing creates a win-win situation in terms of cost savings for the customer & money in the pocket for the freelancer. This assumes the fees are fair and reasonable from the "broker" but it is also really important to consider the tax that is needed to be paid by the freelancer.
It is also worth considering that you are likely paying for somebody who is specialised in the area you are needing assistance, as such, they are likely to expect a higher hourly rate for work that is within the scope of that specialisation.
When hiring an FTE team member, you are generally hiring for experience, attitude, core values and aptitude. Specific technical capabilities are "nice to have" because they are the easiest attributes to teach and develop after the hire. This does provide organisations with the opportunity to take on the task of education and professional development, and hire somebody with less experience and therefore demanding less per hour.
Shifting the Burden
I touched on this in the previous section, but freelancing sounds great for the organisation involved, however, it is strongly recommended that you validate that your freelancer is compliant with all government and taxation requirements. In most countries, Australia and the Philippines included, foreign organisations are not able to pay an "individual" directly. In Australia, at a minimum, the individual must obtain an ABN and comply with all relevant requirements, and in the Philippines, the individual must register with the government if they wish to be a freelancer. At this point they also need to effectively act like a business, keeping financial records, paying taxes etc.
You may think, "well that's not my problem", and legally you're correct, but if your freelancer disappears because they are non-compliant and get into trouble, that's going to affect you significantly.
With FTE offshoring placements, the legal and HR requirements are all included in your fees, whether it is broken down and included in a "seat fee" or built into the hourly rate you agree to. There's comfort in that for any organisation and this is one of the selling points for offshoring through a BPO in the first place.
Infrastructure, hardware & security
Freelancers will generally be working from home and you will not be providing infrastructure and hardware like the internet & laptops. Again this could be a good thing but in locations like the Philippines, internet in regional or provincial areas can be troublesome and unreliable. Having zero control over their laptop and what is running on it could also mean exposure to security risks, especially if you're freelancing anything that involves your intellectual property, as is the case with development resources.
With an offshored FTE team member placed in a BPO provider this risk is mitigated or avoided. Any BPO that is worth their weight will be able to provide you with both traditional or customised security options for the hardware that they provide your team member. You should be able to; restrict access to suspicious sites, implement an always-on VPN to your office, ensure corporate virus and malware protection and more.
Freelancers are in the business of working with a number of campaigns or projects at a given time, that's the model. They will be seeing new project listings regularly and if they are good, they will likely have repeat business with past customers too. There is always a cost to shared responsibilities and juggling multiple tasks simultaneously, and generally, as is the case in business normally, "the squeaky wheel gets the oil" meaning the loudest customer will likely get their focus and attention. Not suggesting every freelancer is like this but plan to potentially be a lower priority for them at times when scheduling your project timelines.
Obviously with an FTE, during your committed working hours, your staff is dedicated to your organisation and the tasks you assign them, you have much more control over their priorities and which tasks that should be completed on any given day.
Part of the appeal for freelancers is the flexibility that this type of work brings, meaning that you have less control over their ongoing availability to the team or business. You are generally working on project or task-specific agreements and they can exit at any point with little to no notice period. You are also less likely to be implementing retention strategies with these types of resources such as performance management, development planning and job analysis and design.
When hiring an offshored FTE, you can and should take control of your team members retention strategies, but importantly you're working much more closely with them and so should be able to work with them to identify and resolve any issues in the role they may have.
There are clearly pros and cons for both offshoring full-time team members and freelancing, but when it comes down to it your choice should be dictated by the type of work you need to be done. For us, it comes down to these questions;
- Is there a general requirement for work to be delivered (read: growing the general resource pool)?
- Is this an ongoing requirement?
- Is there a need for significant team collaboration?
- Is this work sensitive or involves divulging your IP?
If you answer yes to any of the above, then perhaps freelancing is not the best option for you and your organisation, but if it is a short-term, specific, non-sensitive need freelancing could be a great way to deliver value to your organisation cost-effectively and quickly.
I'd love to hear your experiences with freelancing, especially if you answered yes to the above questions!