As your small business grows, one question that arises concerns the relative benefits or disadvantages of hiring additional in-house employees versus using freelancing services, either through outsourcing or crowdsourcing. All business owners face the challenge of finding and retaining the best possible employees, but there are also situations where hiring additional permanent personnel may be unnecessary. For special or short-term projects, outsourcing or crowdsourcing the needed work may be a cost-efficient and time-saving alternative.
Hiring Additional In-House Employees
Benefits of hiring additional employees to meet your work output needs are numerous. With a set employee work force, your payroll expenses are both known and relatively stable. A solid employee in the right position is an extremely valuable asset. Every time you fill a position with an employee whom you can depend on to successfully complete the tasks associated with that job frees up additional time for you to concentrate on management level aspects of growing your business. Also, as you add employees to your workforce, you are gradually building a core team of people to help you continue to expand your business indefinitely into the future. A look at virtually any successful business finds an important group of employees that has been with the company for many years; the careers of these employees are largely dedicated to helping advance that business.
There are, however, also disadvantages to adding more employees. There is the time and expense required to find and train a new employee. Hiring permanent employees necessitates providing employee benefits and dealing with payroll tax filings, issues that do not arise with hiring freelancers who are paid as independent contractors. Further, there are day-to-day employee issues to deal with, such as attendance or poor performance.
Outsourcing work, hiring a freelancer, engaging another firm, or contracting with a professional may be your best option for a special or short-term project that does not involve work you foresee as an ongoing need. For example, if you want to launch a new product or service with a major advertising and marketing campaign, this function might best be served by outsourcing to a marketing professional or advertising agency. Even if you have to temporarily spend more money than hiring an additional employee over the same time span, you may come out ahead in time saved and the quality of services received. You also avoid the time and expenses associated with employee benefits and payroll taxes. Outsourcing is simply a business expense for your company.
However, there are potential disadvantages to outsourcing work projects. Outside individuals or agencies are less familiar with your business, existing brand identity, and other factors that make it more difficult for them to produce exactly the right note in creating work for your firm. There is also the time and expense required to locate the right individual or outside company, and the difficulties of working with someone remote from your office. Another potential disadvantage is that if their work turns out to be exceptional, you may end up regretting not having hired them as an employee if you lose their services to a company that offers them a permanent position.
Crowdsourcing for Projects
In contrast to outsourcing, which involves securing the services of a particular individual or firm, crowdsourcing is the use of an unspecified group of public contributors. An example of a crowdsourcing project is coming up with a name for a new product. Primary benefits of crowdsourcing include substantial cost savings over hiring an employee or paying a professional freelancer, and the fact that opening up a project to a large group of people can bring in a wealth of good ideas that might have been overlooked. An additional possible benefit of crowdsourcing is it often serves, when publicized through social media, as a virtually cost-free means of advertising your business.
As with outsourcing, crowdsourcing avoids any payroll tax filings for your business. Crowdsourced work is treated the same as that of independent contractors, who are solely responsible for their income tax obligations.
A potential danger of crowdsourcing is contested ownership issues regarding items such as photos or intellectual property. Problems can arise from contributors or from other businesses that take up an idea solicited by your crowdsourcing efforts, but that you haven’t copyrighted or patented. Also, crowdsourcing may not produce the kind of quality material you can expect from outsourcing to a professional individual or firm.
The Bottom Line
Most businesses find hiring permanent employees the best option for the performance of core tasks, central to the operation of the business. Outsourcing or crowdsourcing can be useful alternatives for cost-efficiently expanding your business when the necessary work is a short-term project or work that requires special, professional skills your in-house staff doesn’t have. As you view new opportunities to grow your business, it is worth considering the available hiring options for accomplishing each goal.