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What’s the real cost to hire a full time graphic designer vs a freelancer?

The pros and cons for creative agencies and in-house studios.

Until fairly recently the most common approach to taking on new customers and added workload was to hire additional full-time staff. This approach has served businesses well and has plenty of benefits.

Employees learn the business well over time, they become part of a team and contribute to the environment and culture of a company. Some full-time employees really grow into their roles, and they continue to excel as more work and responsibility are assigned to them. Company culture is important, and having a core team of full-time employees is important.

But, finding and hiring the right full-time employee can be expensive, frustrating and time-consuming—leaving team members picking up the slack.

Let’s take a look at the real costs of hiring a full-time employee and compare against hiring a freelancer.

Lets say that you just acquired some new business and need some additional graphic design help. You might hire a junior graphic designer for $60,000 or you can hire a freelancer for $80/hr.

Both have their pros and cons. The full-time employee will learn the ins and outs of the business, be ingratiated into the corporate culture, get to spend time with management, and become a valuable team member. The freelancer will learn some of the ins and outs of the company, likely in less detail and they’ll primarily focus on learning the needs of the project, in order to work quickly and effectively.

But what is the real cost of the full-time employee vs. the $80/hour freelancer?   For the purposes of simplicity, this is the example we will be working with. Let’s start at the top.

Recruiting and Training

The Cost: Estimates of hiring a new employee for high-level positions that require advanced education can be 213%  of annual salary. The Society for Human Resources Management is more conservative and estimates that the average cost of hiring and training a salaried employee is about 6 to 9 months of salary. Clearly, recruiting and training are significant costs of hiring a new employee. All of this can take weeks or months  and there is no guarantee that the person you bring on board will be effective or a good fit.

An experienced freelancer can really make sense in this situation. The best freelancers come to jobs ready to begin on day one and require less training than a standard employee. You might say that being ready for new jobs and challenges is hardwired into freelancers and can stay focused on the tasks of the project. Employee ❑   Freelancers ✓

Taxes

The Cost: If you’re hiring a full-time employee, you need to include allowances for: Payroll Tax – 15% of an employee’s salary; Social Security – 6.2% on each employee’s wage up to $118,500; Medicare – 1.45% on each employee’s salary; Federal Unemployment Insurance – 6% on first $7,000 of employee’s wages; Workmen’s compensation – depends but we’ll say on average about 1.85% of employee’s wages. On top of that, keeping track of expenses can be complicated, so hiring an accountant may be necessary. If you’re hiring a freelancer, you don’t have to worry about paying taxes. Freelancers ✓

Benefits

The Cost: Full-time employees require benefits. These include: Health coverage – $2,000 to $3,000 per employee; 401k savings plans; vacation; Life insurance; Dental insurance.  According to Joe Hamzida, senior lecturer at MIT Sloan School of Management, after including taxes and benefits, the costs of hiring a full-time employee for a company are actually roughly 1.35 times base salary.

Freelancers do not require benefits or vacation, so you are only paying for the time that they are working. Employee ❑   Freelancers ✓

Vacation

Let’s assume 3 weeks of vacation and 5 paid sick days per year. That’s 7.7% of the full work year. Right off the bat, your full-time employee will not be working 7.7% of the work year. Freelancers, on the other hand, may take vacation or sick days, but are not paid for these vacation or sick days. Employee ❑   Freelancers ✓

Meetings & Distractions

Countless meetings, water cooler talk, social media, surfing the Internet, and lack of sufficient workload are serious problems that plague many workplaces. Freelancers are judged solely by their output and bill only for the time they are working on your project. When they go out to get coffee or lunch, they’re not on the clock…so you don’t pay!  Employee ❑   Freelancers ❑ ✓

Office Space & Equipment

Furnishing the office, providing physical space and providing the proper technological equipment (laptop, phone, etc.) all add up. Depending on the job, you may have to provide a freelancer with physical space in which to work, but likely not any other equipment. Employee ❑   Freelancers ❑

The Final Word

It’s clear to see that the costs involved in hiring a full-time employee go far beyond the salary. Recruiting, training , taxes, benefits, vacation, lost productivity and office space and equipment. All of these costs add up. Freelancers, on the other hand, generally charge by the hour and their rate is exactly what you pay. More importantly, you ONLY pay for time working on your project,allowing you to scale your business efficiently.

Chip Barthelmes is Principal and Creative Director at Barthelmes Brand; a Columbus, Ohio based brand and design micro agency.

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Columbus, Ohio

Phone: 614-354-8340

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