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Cover image for Why is it cheaper to hire a freelancer?
Răzvan Stătescu
Răzvan Stătescu

Posted on • Originally published at

Why is it cheaper to hire a freelancer?

Last week I did a post about this on LinkedIn and people reacted well; so I said, I'll write a short article about this.

I've been freelancing for around 4 years now and in all this time, I've come to realize quite a few things about rates, money, etc. I'll share those things with you today.

Let's start by making a quick comparison between an employee and a freelancer in terms of money & benefits. A freelancer doesn't have:
🚫 paid holidays
🚫 medical/life/... insurance
🚫 gym subscription
🚫 free courses/training
🚫 free coffee/water/food
🚫 any kind of benefit

So, usually, a freelancer has to pay for all the above and:
💳 taxes
💳 bills (internet, electricity, ...)
💳 subscriptions (services that help him run his business)
💳 equipment (laptop, monitor, headset, mouse, ...)

In addition to all of this, a freelancer has to take care of:
👨‍💻 client communication
👨‍💻 proposals
👨‍💻 estimates
👨‍💻 marketing
👨‍💻 sales
👨‍💻 finances (invoices, payments, ...)
👨‍💻 and much more

When you set your hourly rate, you need to take all of that into account.

From a Client perspective, hiring a freelancer will simplify your cost per employee a lot. You no longer have to think about the things mentioned above (taxes, paid holiday, insurance, coffee, ...) and you can just think about the invoice you get from the freelancer.

Hiring a freelancer will not only simplify the process but will also make you pay less. Let's look at this article Cost of Hiring Full-Time vs. Freelance Software Developers. You can go ahead and read the full article, it's very interesting. But let's look at the numbers: the cost to hire a full-time developer with 5 years of experience is $198,974 and the cost to hire a freelance developer with 5 years of experience is $107,400 - $179,000 (based on his hourly rate). For a more detailed breakdown of those prices, go ahead and read the article above.

To sum everything up, as a business, you could save up to almost 50% by hiring freelancers instead of full-time employees!

Now that we clarified some things, let's try and destroy a mith

If a freelancer gets $100, he will keep $100
That's totally wrong. Depending on the country you're in you'll have to pay taxes, after that you'll have to cover different expenses covered above (bills, subscriptions, equipment, ...).

Extra: set your hourly rate

If you're a freelancer / want to become a freelancer and have no idea how to set your rate, a simple thing you can do is think of your salary. Let's assume $2880 for this example (this is your net salary). We want to get your gross salary now. Let's say the employer has to pay 40% in taxes, so if you have a $2880 net salary this means your gross salary is $4800. Divide that by 160 (the number of workable hours in a month). This will get you a $30 hourly rate. You can use this technique as a starting point.

Let me know what you think about this subject in the comments 👇🏻

If you want to reach me, check out my website.

Top comments (1)

ecyrbe profile image
ecyrbe • Edited

Hello, as a freelancer myself i can give some hints.

But remind yourself that freelancing in western europe can be very different than eastern one or than western america etc...

So everything can be different depending on your country.

When it comes to freelancing, a lot of people may want to do it for many different reasons. Here is a short list (not exhaustive) :

  • money
  • organize yourself like you want
  • choose your clients
  • starter for creating a bigger company

Some tips that apply to western europe :

  • you can get paid much, much better if you work in cities with a lot of high-tech opportunities
  • you can have hard time finding clients if you are working remotely without a lot of clients around then not have much choice on choosing clients, negociating better hourly rate...
  • usually, on site work is better paid than remote one.
  • you'll find more work if you work with front end web technologies or mobile technologies
  • evoid working for foreign countries, laws are different, you'll have a hard time complying with them
  • if you work for only one client at a time, don't bother take an accountant, you can do the bills and recovery yourself, you'll save some money.
  • don't forget to take the fact that you will need to pay yourself for medical care, paid holidays. so add these plus taxes, else you'll end up earning less.
  • check the daily or hourly rates for market around you and see how much other freelancer with your experience charge. you don't want to charge less.

Here is an exemple, in France, Paris :

  • a web developpers can charge between 400€ to 800€ per day depending on their experience and if they work remotely or not.
  • my price is 700€ per day. But in the end with commercial share (to the company that found me my client), taxes, insurance,etc i'm left in my pocket with half of this money. This means around 7000€ per month Net (all king of taxes, expenses deduced)