PAYE Employee or Freelance Contractors

Too much work, not enough hands

More work than you can handle, no time to go through a recruitment round, not sure that the cash flow can justify a new hire, don’t want to lose the extra business, competitors eating into your market share.

Freelancers are professional workers, skilled in helping businesses to make use of the latest technologies; they can help you grow, make improvements and efficiencies, and they can take on some of your development tasks and challenges, … entrepreneur_640

Where do you go
to get a freelancer or temporary programmer?

It is not unusual for a business to fall behind in productivity, since computer technology continues to evolve and improve every two years. Next generation technology can give a competitor a distinct advantage, and allow them to provide answers to market changes quicker and with more efficient tools.
working-team_640Meeting business challenges quickly can become a matter of survival, your choices, such as, hire in more help, or adjust your existing development priorities. But, do you want to risk losing future business; you could get in a temporary worker, and still get the business, and utilize their expertise, and do this whilst maintaining your current work activities. Why would you not want to do that. What is your best strategy?

So in order to secure extra earning opportunities, you are obliged to grow your development team, or face losing revenue to competitors. There is a third choice, and it is a relatively easy one.

permanent / temporary staff OR hire a freelance contractor

The thing is, cash-flow and work comes and goes, sometimes your business is growing, and other times it needs to shrink to survive.

Can you afford to take on a long-term investment of a permanent staff member, or will this become a liability?

This is where temporary employees and short-term freelancers come in, you hire them when business demands are high, and you let them go when cash flow becomes scarce.

question-help_640Q: What’s the fastest way to get cash-flow if you are a business start-up? Deliver something small / compact to the market place (the minimum viable product). Or, make efficiencies to reduce your internal business costs. Incidentally, reducing internal costs can be business speak for making use of BPA business process automation.

Permanent employee – PAYE costs:

Are there any impediments to hiring permanent staff?stress-man_640

Once you have secured a permanent employee, it’s not so easy to lay them off if the relationship goes sour; employees have legal rights.

On the other hand, hiring an employee is an opportunity to mould a person into your way of thinking and take advantage of their experience.

yes – but, what about …

  • Recruitment agent fees
  • Time and effort required to source good talent as well as retain personnel
  • Gross salary
  • Employees national insurance
  • Office space, desk furniture and computer equipment
  • Expenses
  • Subsidies (coffee, meals, social events)
  • Sick pay
  • Annual leave pay and Public Holidays
  • Maternity pay
  • Pension contributions
  • Administration, New hire induction, Insurances, HR management / counselling. End of year reviews (sometimes called salary reviews)

  • Training and career planning
  • Notice period
  • Possible redundancy pay
  • Time-sheet indirect costs: Administration, company team / project meetings, performance appraisals, team building and mentoring
  • Employees tend to talk a lot on Monday mornings!

Employees are clearly an expensive commodity and you have to work hard to keep them from being poached by other companies.

Permanent employee – Advantages

  • Possess a clear understanding of your company’s culture, industry and products
  • Career orientated and will want to take on more responsibilities within the organization.
  • Employees are committed to a long-term relationship with your business, they want security, and you need their work output.
  • They tend to advance their experience in-line with project work that you assign to them, and thus they have good product knowledge and understanding of business development strategies.

Employed staff tend to work in ‘team competitive environments’, reasons why this is, so are down in part to managerial practices and the belief that productivity is greater when there is competition amongst team members. In my experience, employees often ask contractors questions, that they would not normally allude too, to any of their own colleagues! Contractors are able to stay outside these sorts of team dynamics by virtue of the fact that they are not employees.

Why hire a Freelance Contractor?

You only hire freelancers when you need them.

Contractors tend to have a large project portfolio with the experience to match. Moreover, they will have encountered and solved a range of business and technical problems. With some failures and many successes, they are uniquely qualified to help steer you through any technical or business difficulties.

Mitigating business project risks – Opportunities / solutions – Leverage the talents of outside expertise

Common reasons for acquiring outside consultancy and development help: –

  • Free up your business to explore new opportunities.
  • They are able to adapt quickly to changing demands for business or technical skills.
  • Contractors provide you with a quick way to access their skills, and knowledge of emerging technologies. Knowledge transfer and indirect training. Acquisition of new technical skills and experience are all hidden bonuses from bringing in new ideas and outside help.
  • Require lower overheads, since there is no need to provide company benefits, holiday / sick pay, employer taxes, superannuation / pension payments / …
  • They have their own equipment, development tools, licenses.
  • They don’t require training, indeed, contractors are obliged to maintain their knowledge of emerging technologies – its in their own self-interest after all.
  • Quick learners; after working on more than 15 projects, they acquire a knack for understanding where within the development cycle, a client is focused now, and an understanding of where a client needs to be next. Contractors are used to being given new projects to work on, as well as being thrown in at-the-deep-end to solve problems when there is high political or business stress.

idea-person_640Moreover, contractors think differently, their approach to solving technical challenges is mission orientated. Their work planning is designed for the minimum expenditure of effort to achieve a given goal; because they are not being paid to do more than was agreed. Freelance contractors therefore are interested in deliverable milestones, tend to be more productive, and think in terms of product releases and marketable deliverables.

Incidentally, if its not obvious, deliverables are the items, and the artefacts that you are paying for. Essentially, anything that constitutes a service, or a piece of work that you need to be completed that can be described in the contract.

So, contractors are goal orientated, milestone driven. On top of that, they don’t need to be managed or mentored. On balance, contractors acquire more experience than permanent staff by virtue of the fact, that each time they take on a new contract, they are faced with new challenges. Fee paying clients have high expectations, for work quality, and expect freelancers to take on more project tasks. Freelancers are often asked to mentor staff and facilitate with team building within organizations.

Practicalities – things to think about before hiring a contractor

Do they have – relevant and sufficient experience, technical know how, availability, aptitude to team lead / mentor or train staff, understand your needs, …

1001 Interview questions

One might imagine that having lots of questions is the best approach, this is unnecessary. Three questions should be more than enough to establish competency. Hiring a freelancer is not like recruiting a permanent employee, freelancers are there to complete one or two tasks and then move on to their next contract -unless you specifically want to keep rehiring them for additional challenges?

Take note, that this is a business to business relationship; one of your questions should be to ask, and to establish if your candidate can resolve your most immediate problems – which are??? Plan for a meeting of 15 to 30 minutes, and allow for 45 minutes in case they have a lot to talk about. Do this interview over the phone, or by using Skype, this will be much faster and cheaper than planning for a face to face meeting. Simplify the process by deciding what is your most immediate concern and focus your questions around that. Don’t forget to ask for a guestimate of how long it will take to complete the work, or at-least, for them to complete some analysis to establish the size and scope of required work. Freelancers are also very happy to discuss rates, so don’t be shy.

Common mistakes – losing focus and asking the wrong questions, too many questions.

Trigger Questions – thoughts and ideas

Freelancers can make you a lot of money by helping to make business efficiencies , expanding on your capabilities to deliver improved solutions to your prospective clients / customers, but only if you set out the direction of travel by planning out what they are going to deliver for your business.

  • What would success look like, if your new-hired-hand provides you with everything that you need?
  • What are the mission critical needs, and what are the nice-to-haves? In other words, what deliverables can you afford to loose, or do yourself?
  • Are there any complications that will make the freelancers task more challenging or difficult? Access to documentation, test data, in-house technical tools, security access, …
  • officebuswrkerb_640How will you validate and check that the work is satisfactory and complete? An acceptance test might not be necessary if they are providing hands on training as part of their deliverable work and you are comfortable with this.
  • Can some of the work be shared and completed by yourself or by some other member of your staff. This consideration is sometimes overlooked, you might want to consider what skills can be acquired by your own staff during the contract period.
  • You should both be planning for a handover, and this might require some formal presentation or hands on training. Budgeting for this will ensure that there is less time stress during project handover, and provide for a more orderly change over of responsibilities to yourself or other staff members.
  • Do you need them to sign an NDA Non-Disclosure Agreement? Its not unusual to be asked to not-share-information or trade-secrets for a period of time, or to-not-work-for-a-competitor for a period of time, This clause is sometimes put into the contract and typically covers a period of 6 to 9 months. Note: The reason that this period is short, some folks might want a longer period, is that such a clause will not be legally enforceable if the contract stipulates an excessive amount of time. For clarification on what’s usual for your business sector, please see a professional lawyer.

Reverse questions

As a freelancer myself. I also like to ask some questions, most contractors do. At the very least, they will want to understand your expectations, establish the size and scope of work, any technical challenges and clarify the boundaries of responsibilities. I’ve always thought that you can judge a situation by the questions being asked, but this only works when the client is focused on what they want, their primary needs and their reasons why they need to engage outside resources.

Freelancer obligations are also important if work is being shared between other individuals. Collaboration is important to establish how much actual work is deemed relevant to their task load as opposed to sharing. The issue here is to stabilize who has primary responsibilities for delivering which milestones and moving such choices into contractual form so that both parties can begin the work.

Often this can be achieved quite simply by focusing on defining which deliverables are needed by the client. In a fixed price contract model, deliverables become the chargeable and invoice-able items; in an hourly or daily rate contract model, business or technical milestones become the focus for stake holder sign-off.

Deliverables – the things that you are paying for.

Most freelancers want to understand what your deliverables need to be, for example: –

  • Product features to be provided (a simple list),
  • Artefacts {a database, a spreadsheet model, design /product requirements / test requirement documents, database deployment and recovery plan, a computer program, a unit test project, a web site modification, test data, data entry into a spreadsheet, …}
  • Consultancy / analysis of business processes {power point presentation, training seminar course},
  • Data analysis {data flow diagram, warehouse architecture design, …}

Deliverables or agreed business milestones are an easy way to establish when a piece of work has been completed, so its incumbent on both parties to focus on where the end games are, how and when deliverable work will be handed over?

Freelancer History

business manYour freelancer will have a project portfolio which should adequately explain their breadth and depth of experience. In the IT industry, most folks work for five or more years as a permanent employee before branching out into the world of the self employed. They should therefore, already have a number of projects under their belt; I wouldbusiness woman suggest that the minimum project portfolio for a contractor should be five or more projects. Some would argue more, but it will in part, depend on the type of work that you are both targeting. You don’t need them to have several years experience if all you want is for them to help test your mobile phone application, or website or to just perform some data entry!

So, what does their project portfolio consist of? what business sectors have they specialised in? How many projects?, how many greenfield projects (from conception all the way through to completion), was there any follow-through work (training, customer support, did they get involved in sales, technical support, customer facing roles)?

Know also. that freelancers are responsible for fixing any problems of workmanship that they themselves create – in their own time.

Having asked asked some basic screening questions, you have managed to make a good selection? You have established that your contractor has relevant experience with one or two examples of successfully completing work for other clients.

  • What are your main business concerns as you see them? Have you thought about any other ways that you might address the issue, your issues? What are your key business needs? What is the most valuable task that should be completed first?
  • What role do you see your freelancer playing in helping you address issues and challenges?

Tell your freelancer what are the business critical or strategic requirements, going forward. this will become a team collaborative process.

This is all you need to know, to start the process of engaging a freelance contractor. You may have some technical difficulties and challenges, but this is what freelances get paid to resolve. During the initial engagement and consultation process , you will want to check that a contractor has relevant experience in solving similar problems. Similarly, the contractor will not want to take on any work, that poses a risk to their reputation. So, you will both want to establish what the challenges are. You will both want to agree on how you can validate that the delivered work is satisfactory and complete.

How much will a freelance contractor cost?

Freelancers are happy to discuss rates, you will find that they have a set of rates depending on your needs and on the logistics of servicing the contract work (their overheads are things like insurance, accommodation / logistics costs, equipment, licensing, …). I tend to charge a lower rate, for local work since travel time and hotel bills are not part of the equation, moreover, if a contractor can work from home, you will find that this commands the lowest rates of all. Sourcing a freelancer directly will eliminate agency finders fees and other agency costs.

The three basic models for charging for deliverable work, are hourly rate, day rate and fixed price contract. Fixed price contracts are more common in the United States or with consultancies; in Europe a day rate or hourly rate is more normal. The rate that a contractor charges will be commensurate with their business or technical experience. In addition, while some freelancers work alone, you will find that others work as partners of consultancy companies that employ any number of analysts and developers (from a few to several hundred consultants).

While large consultancies will have more overheads, they also have the available manpower to take on larger contracts with higher business / technical risks. Consultancies charge different rates depending on who they supply to work on your business needs. Again, the chargeable rates will be commensurate with market rates as well as the experience of who they supply and how many engineers / analysts / architects / … that they supply to you. Yes. consultancies will charge more money than freelancers, but if they run into problems, they will also hire additional staff without burdening you with that task. For large projects that require teams of consultants and developers, one strategy is to hire an additional freelancer whose objective us to help you manage the consultancy organization itself. Think of this as having an independent perspective, to help steer you through and balance the advice and recommendations, that will be coming from a consultancy business that will in part be trying to self promote and sell their own services!


Both freelancers and consultancies will want to help establish what is the most important task or challenge, so that they can deliver that task first. For business objectives that can not easily be met or implemented, the discussion will be around work arounds’. Reducing product features being offered is an alternative strategy to reducing business time lines or development stress.

Eliminate ‘nice to haves’, identify what is technically viable, learn which challenges will deliver the greatest business value.

Technically viable: This is sometimes a question of in-house skills, or the acquisition of technical tools as much as it is a question of how long it will take to deliver a cost effective business solution. Sometimes, in-house development meetings get bogged down by competing issues such as who wants to learn which new software technology? Some technologies are tried and tested and mature, whilst other technologies are still in their infancy with problems being ironed out. Its important to nail down what are the main drivers for making technical choices, that will set the trend for future development decisions. Use your freelancers experience and senior sales folks to assist in making these critical compromises and choices between best value in the short or longer term.

Preparations – first work day

A contractor will arrive with their own equipment and should normally hit the ground running; so don’t slow them down with issues such as network access, database passwords, desk space, email lists … , you want them to be productive within the first hour.

So, who are you going to have them meet first?

If freelancers are working from their own premises, then its a useful idea to schedule a catchup meeting by phone or Skype, so that you can understand where they are on the deliverables-time-line; this will also help you to sync up their deliverable work with other team members.

Remember – freelances love to work, there is nothing more fun than having a challenge to solve.

If you have a business need or technical need,

entrepreneur freelancercash flow is volatile or manpower is limited or skills are lacking,

then freelancers are a good choice to help you grow your business.


Thanks for reading, I’m interested to know / learn

Do you agree with the balance of points made?
Have any key issues been missed?

LinkedIn: KeithSware


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