Running a business is no easy feat. From managing day-to-day operations to ensuring customer satisfaction, entrepreneurs are always on their toes.
However, one of the biggest pain points of running a business is managing costs.
In today's competitive business landscape, every entrepreneur is looking for ways to maximize their profits while minimizing their expenses, and one way to do that is by hiring freelancers.
Why?
While one of the biggest expenses for any business is the cost of hiring employees, From payroll taxes to benefits and office space, the costs can quickly add-up. On the other hand, freelancers are self-employed professionals who provide services on a project-by-project basis. That means no additional expenses other than their service charge.
However, the main question is: Is it really worth it to hire freelancers? Does hiring freelancers really save you money?
The short answer is: It depends.
In this blog post, we will explore the cost-saving potential of hiring freelancers and weigh the pros and cons to determine whether hiring freelancers is truly a cost-effective solution for businesses.
How hiring freelancers can help businesses save money!
According to a survey, businesses can save up to 20–30% on human resource costs by hiring freelancers instead of full-time employees. Additionally, freelancers offer more flexibility, as businesses can hire them for specific projects and tasks without the long-term commitment and costs associated with hiring a full-time employee.
Moreover, the Indian gig economy is predicted to grow to 23.5 million workers by 2029–30. This is an almost 200% increase over the current 7.7 million.
Let's look at some examples of how businesses can maximize ROI and minimize expenses with freelancers in different industries.
Note* The scenarios presented below are subjective.
Example 1: Graphic Design Agency.
According to PayScale, the average salary of a graphic designer in India is around INR 3.1 lakh per year ($3,769), or INR 2,500 per hour ($30.50). On the other hand, a freelance graphic designer may charge anywhere from INR 500 to INR 1,500 per hour ($18.24) depending on their experience and expertise.
A graphic design agency can benefit greatly from utilizing freelancers for their design needs.
The scenario:
A graphic design agency in India needs to design a series of marketing materials for a new client. They estimate that the project will take about 200 hours of work. They could either hire a full-time designer or work with a freelancers.
Outcome:
If the agency hires a full-time designer, they would need to pay them INR 5 lakh ($6,080) for 200 hours of work. However, if they work with a freelancer charging INR 1,500 per hour ($18.24), they would only need to pay 3 lakh ($3,648) resulting in a savings of INR 2 lakh ($2,432).
The bright side is that the agency only has to pay for the work done by the freelancer, on a project basis.
Example 2: Marketing Firm
Marketing firms can also benefit from working with freelancers for their various projects. According to a report by the McKinsey Global Institute, the freelance economy in India is projected to grow at a rate of 17% per year and is expected to reach $20–30 billion by 2025.
By tapping into this growing pool of freelancers, marketing firms can save on recruitment costs and overhead expenses while also gaining access to a wide range of specialized skills and expertise.
According to Indeed, the average salary of a social media manager in India is around INR 3.5 lakh ($4,255) per year, or INR 2,917 per hour ($35.47). However, a freelance social media manager may charge anywhere from INR 500 ($6.08) to INR 2,500 per hour ($30.50), depending on their expertise.
The scenario:
A marketing firm in India needs to create a social media campaign for a client. They estimate that the project will take about 100 hours of work. They could either hire a full-time social media manager or work with a freelancer.
Outcome:
If the firm hires a full-time social media manager, they would need to pay them INR 291,700 ($3,546.64) for 100 hours of work. However, if they work with a freelance charging INR 1,500 per hour, they would only need to pay INR 1.5 lakhs ($1823), resulting in a savings of INR 141,700 ($1,723).
Example 3: Bootstrapped Startups
For a bootstrapped startup, which is a company that is self-funded and operates on a tight budget, every penny is important, hiring freelancers can be a cost-effective solution to full-fill their business needs.
The scenario:
The bootstrapped company is looking to add new features to their website to enhance the user experience. They estimate that they will need the help of a web developer for 50 hours of work.
Outcome:
If the company hires a full-time web developer, they would need to pay an annual salary of around INR 5–6 lakhs, resulting in a total cost of around INR 4,000 per hour ($48.64) of work. However, if they work with a freelance web developer charging INR 1,000 per hour ($12.16), they would only need to pay INR 50,000 ($608.05), resulting in a savings of INR 2–3 lakhs.
Since the e-commerce site is self-funded, working with a freelancer on a project-by-project basis lets them better use their budget and avoid making long-term commitments.
Example 4: Tech Startup.
According to a report by Naukri.com, the average annual salary of a mobile app developer in India is around INR 7 lakhs ($9,447) or INR 5,833 per hour ($70.93). On the other hand, the average hourly rate that a freelance mobile app developer in India may charge is around INR 1,200 ($16.17) per hour.
So, here's a question for you: "Who would you hire, a full-time employee or a freelance mobile app developer?"
In summary, whether it is a graphic design agency, marketing firm, tech startup, or bootstrapped startup, hiring freelancers can be a cost-effective solution to fulfill their business needs.
How to? Tips for hiring freelancers and maximizing cost savings .
The short answer is: Hire and manage freelancers strategically!
Primarily, you must understand your company's requirements and recruit freelancers for specialized, short-term jobs. Moreover, avoid using freelancers for critical business operations.
Here are some tips for maximizing cost savings and multi-fold your ROI.
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Prefer hiring freelancers for short-term projects.
Employing full-time employees for short-term tasks can be both expensive as well as pointless. While hiring freelancers is a more cost-effective alternative for short-term needs, you'll notice an exponential drop in overhead expenditures, which includes office space, equipment, and software.
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Use freelancers to fill skill gaps.
Recruiting qualified freelancers can help your organization fill skill gaps. This can lead to higher production and efficiency, which can result in long-term cost savings.
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Choose freelancers wisely.
- Consider their experience.
- Check references for specific, short-term projects
When it comes to hiring freelancers, it's essential to get the right person for the job. This is to guarantee that they are dependable and have a strong track record.
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Hourly based, project based or milestone based hiring.
When it comes to hiring freelancers, you can choose from three primary models: hourly, project-based, and milestone-based.
By selecting the appropriate hiring model, you can ensure that you're only paying for the work that you need and track your expenses effectively. This can help you save money in the long run while ensuring that your freelancers are motivated to deliver quality work.
Hourly-based hiring is an ideal choice for jobs that require ongoing support, such as SMM, customer service, or VA. You pay the freelancer an hourly rate for the time they spend working on your project.
While project-based hiring is suitable for well-defined projects that have specific deliverables and timelines, You agree on a set price for the entire project, and the freelancer delivers that project within the agreed timeframe.
Whereas, milestone-based hiring is a combination of hourly and project-based hiring. You pay the freelancer for each milestone they complete, rather than paying them for the entire project upfront. This model is ideal for larger projects that have multiple phases or require ongoing support.
- Develop a system for managing freelancers
- Use project management tools
- Establish clear communication protocols
- Provide feedback and guidance to freelancers
It's crucial to build a system for managing freelancers as you do for your business, that guarantees the process are being managed efficiently, communicates effectively and keeps everyone accountable.
Need help getting started?
As we discussed above, selecting and managing freelancers wisely allows businesses to maximize the benefits of this employment model and maintain a competitive edge. Freelancers can become valuable employees if you treat them well, allowing you to meet your business objectives and adapt to an ever-changing industry.
Why don't you start with Gig4U today! Find qualified freelancers for your project. Save time, money and efforts by ensuring you are working with freelancers who have been vetted.
Stay ahead of the curve, access specialized skills, reduce costs, and stay competitive in today's ever-changing business world.
Well, we hope this blog post has been helpful in exploring the ways to saving money and maximizing ROI while incorporating freelancers for businesses.
Good luck and see you in the next blog post!
