Growing your business is a truly exciting time, but you still want to be sensible with your resources.
One of the major questions that comes up is whether you should hire a freelancer or an employee. We’ll try and make the decision as simple as possible for you.
Freelancers
Pros
Paying by hour might be cheaper, depending on the number of hours they do. If you’re working on a project with acute specialist needs, a freelancer may well be the more sensible option. As they’re specialists, they will generally be able to complete tasks quicker and with less guidance.
A sensible option if working space is limited. As freelancers largely work remotely, you won’t have to worry about them taking up vital work space.
Easy to scale up or scale down based on workload. You might have a significant project planned, such as a marketing campaign, but once it’s delivered, you worry that full-time staff you hire won’t have any work to do. A freelancer would be more suitable than an employee here.
Quicker to hire. With a freelancer, you can go straight into the meat of the project and have a discussion about fees. When you’re hiring an employee, you’ve got a job ad to write and applications to sift through, with potential multiple interview rounds, extra interview tasks and notice periods to see out.
Cons
May have limited flexibility when they have other commitments. Good-quality freelancers who are in high demand may need to be booked months in advance, so they’re not always ideal for tight deadlines.
They could scarper part-way through the work without a contract in place. Freelancers are working with you rather than for you. Should they be unhappy with you or find a better work offer from someone else, they could get up and leave without a contract.
As they’re not staff who are familiar with the business, they’re less likely to know the ins and outs, as well as what you use day-to-day. This could mean that the time they saved with their existing expertise could be eaten up with learning how your systems and processes work.
Potential murkiness around whether a worker is a freelancer or an employee. The crucial nuggets you need to know are that a freelancer is responsible for themselves and should be working on their own time with their own equipment.
Employees
Pros
Employees tend to be more committed to the business. For those with long-term projects and goals, having a full-time member of staff means that they can grow with the business and will be more invested in it. Employees who have been with you for a long time know the company and their role pretty well. They ‘get’ the company culture. Plus, they’ll understand and have existing relationships with the business’ other employees and clients.
It’s easier to do your cashflow forecast. With set salaries and obligations you know what’s going out every month, so your cashflow is easier to forecast.
You have more control over employees in terms of when, where and how they work. You also set their performance metrics to keep in line with company objectives.
Cons
Employees are typically more expensive to hire. Between sick pay, holiday pay and other outgoings, you’ll find you’re paying a lot more than their base salary.
Recruitment can be time-consuming and costly. It takes a while to find a suitable candidate, especially when you’re committing to them for an extended period of time.
You’re responsible for managing training and development. With enough employees that could mean hiring yet another member of staff to manage it all.
Breaking down the cost
Say your company needs an HR person and you’re deciding whether to outsource or hire in-house. These would be the expected costs.
| Mid-level HR professional | Employee | Freelancer |
| Cost per hour | £23.05 (based on £44,950 per year salary, Reed) | Around £100 per hour (payrollprices.com) |
| National insurance per year | £5,992.50 | £0 |
| Pension contributions per year | £1,61.30 | £0 |
Based on 2026/27 figures
A bit of both
A combination of full-time staff and freelancers will offer the balance you need between long-term and short-term goals. Plus, you get a stable base with your full-time employees with extra support from specialist freelancers as and when you need it.
What other small businesses do
Three business owners spoke to Small Business about how they handled the freelancers vs employees dilemma.
Kay Phelps, founder and director of PR in HR
I hire freelancers, rather than employees, for my small business. We’ve been operating for 30 years and the choice is clear for me as a small business owner.
I could hire employees at a lower cost overall. However, the freelancers I work with are skilled in specific areas and those skills are needed by our clients in different ways. For a small business, one or two employees would be unlikely to have the right experience, knowledge and expertise for every client need.
Our clients value that we have expertise in a range of situations, so they can pick and choose it as they need it. This keeps the value of our work incredibly high at a lower cost.
I also find that freelancers are entrepreneurial. They have a personal and professional need to keep originating ideas, delivering to deadline, partnering with our clients alongside me. They ensure they’re one step ahead of any competitors they may have.
The flexibility is important for a small business like mine. One of our freelancers has worked with me for 14 years. We work remotely, yet loyalty and teamwork are still highly possible (and part of our way of doing things). It’s also possible to increase and decrease workload if necessary in line with client, freelancer and business needs.
We are a tight-knit team and plan to stay small, offering a great service to our clients. If growth was my intention, I’d revisit the employee/freelancer equation, but unique freelancer expertise is key.
Nishi Patel, managing director of N-accounting
We have used both employees and freelancers in our business. With the increasing costs and obligations associated with employing people, including changes arising from the Employment Rights Act, I can understand why many small businesses may initially favour freelancers.
However, for roles that are genuinely long-term and central to the business, I believe employing people is often the better option. There are three main reasons for this:
- Loyalty and stability work both ways
By employing someone permanently, a business is taking on a greater long-term financial commitment, but in return it provides that person with greater security and the ability to make longer-term plans in their own life.
I think businesses can underestimate both the perceived and actual value employees place on that stability. In return, the employer can benefit from a more stable, experienced and committed workforce, which can ultimately contribute to more consistent profitability.
- A permanent team can add value to the business itself
When somebody is considering buying a business, they are not simply buying its current profits. They will also look at how dependent the business is on its owner and whether there is an experienced team capable of continuing to operate it.
A stable and committed workforce can therefore make a business more attractive to a potential buyer and potentially contribute to a higher valuation when the owner eventually decides to exit.
- Using freelancers does not automatically remove employment tax risk
Businesses also need to be careful that someone described as a freelancer is genuinely self employed in practice. HMRC will look at the reality of the working relationship rather than simply the terminology used in the contract.
If a freelancer is subsequently found to have been an employee for tax purposes, the business can potentially face liabilities for PAYE and employer’s National Insurance, together with interest and potentially penalties.
Freelancers absolutely have their place, particularly for specialist, project-based or genuinely independent work. But for a permanent role that is fundamental to the business, I think small business owners should look beyond the immediate cost saving. Building a loyal permanent team can create considerably more long-term value than simply choosing the lowest cost or most flexible option.
Donna Airey, founder of HomeGrown PR
“I started HomeGrown PR four years ago. I always knew I had plans to scale, but that the workload had to be there first. Like a lot of small business owners, I hit a really busy period when the workload wasn’t sustainable, but I still wasn’t confident enough that I had enough security to commit to a permanent employee. As a small agency, workload can change drastically month to month, and committing to a fixed salary made me uncomfortable.
Working with retained freelancers let me bring in the senior expertise I needed to take things off my plate, and know that HomeGrown and my clients were still in safe hands, as well as meaning I had no responsibility for things like sick pay or holiday pay.
As the business has grown, I’ve reviewed this regularly, and the first of my retained freelancers is now moving towards a permanent role. By starting flexibly, building the capability, and only taking on employees once they’ve proven themselves and there’s a sustained need, I feel like I’ve safeguarded the business and moved the process from an overwhelming one to an exciting one.”
