Hiring

Freelance vs In-House Developers: Pros & Cons of Hiring or Contracting

2022-04-2020 min readWritten by Arc Team

differences between freelance vs in-house developers

Summary:

Are freelancer developers a replacement for in-house developers and software engineering teams? Here are the negatives and advantages of both.

With the rise of the gig economy, more CEOs, CTOs, and hiring managers are wondering what the future will be like. Will it be more efficient to replace in-house employees with freelancers? Or should you merely seek to complement your in-house team with external talent?

One thing is certain. The gig economy is only getting stronger every year. From 1997 to today, it has averaged a 2.6% per annum growth. Comparatively, regular payroll employment grew at a meager 0.8% per annum in the same time period.

This represents more than three times the growth rate of regular employment! Similarly, consider that 47% of millennials prefer working independently. At this rate, freelancers will represent the majority of the US economy by 2027.

This trend seems to be unavoidable. The best thing you can do is position your business to best take advantage of it.

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How This Affects Developer Hiring

The big advantage of developers over other professionals when it comes to freelancing is that coding work can be done remotely. In addition, remote supervision of coding work is also easily doable. Therefore, hiring developers plays to the biggest advantages of the gig economy.

We’ll quickly go over the benefits of hiring freelancers. We’ll also cover the advantages of in-house employees. Then, we’ll take a more in-depth look at what’s likely to happen. Thereafter, we’ll provide guidance on positioning your business to make the most out of these changes.

Let’s get to it!

Advantages of Replacing In-House Employees With Freelancers

Replacing in-house employees with freelancers has the following main advantages:

Access a global talent pool
Increased specialization
Quicker turnarounds (faster output and hiring)
Lower costs

A big benefit when hiring freelancers is that you can access talent anywhere in the world. You don’t have to limit yourself to your nearby geographical area.

Since many freelancers specialize in a niche, you can also look for exactly what you need. For example, if you’re looking to implement new technology on your stack, such as Vue.js, you can find the best specialist in this technology. Likewise, a really niche, one-off project requiring Alexa skills or advanced Machine Learning will benefit from freelance talent.

In addition, freelancers effectively run their own businesses. For you, this means that they’ll work faster than a regular employee who gets the same paycheck every month. In fact, research shows that freelancers are usually more motivated than regular employees.

And if you just need a developer for a few months, then an independent programmer is usually the best choice in terms of hiring. In fact, with freelancers, you don’t have to go through a complex hiring process.

Nor do you have to worry about any other benefits you have to provide for regular employees. Severance pay is also not an issue, and there are likely fewer taxes. Therefore, cutting down the bureaucracy around hiring makes the entire process faster and more straightforward.

Lastly, freelance developers tend to be cheaper even in the long run. You can save up to 50% on costs by working with freelance developers. For a breakdown of the costs of hiring freelance developers, refer to this post.

Advantages of Keeping In-House Employees

The main advantages are:

Direct supervision
Company loyalty
Continuous maintenance work

In-house employees are easier to supervise directly. If your project involves your own advanced software architecture, then an in-house developer is a good choice. In such cases, you might prefer to only outsource the not-so-core components.

However, you can also supervise freelancers remotely. There are lots of source control options that an employer can have access to. These include the likes of GitHub, GitLab, and Bitbucket.

In addition, supervision can be done through different project management tools. We have already covered the best project management tools that you could use!

Another difference, as developer Thomas Jost shared, is that freelancers tend to work harder, but employees tend to care more about the company’s interests. Since freelancers own their own businesses, their performance is key to securing future work. They’re more willing to do what it takes to deliver quality since a fixed income isn’t awaiting them at the end of the month.

On the other hand, employees will tend to identify more with the direct success of your business. This can mean greater loyalty to your business.

And finally, “perpetual” projects that require continuous work benefit from in-house employees. Because they know the software architecture and how it evolved, it becomes simpler to manage.

The Middle Way: Advantages of Remote Teams

Instead of the binary choice of replacing or complementing in-house teams, there is a third alternative. This lies in creating or hiring remote teams. It allows you to gain most of the benefits of both options.

At the same time, you also gain additional benefits. These additional main advantages are:

24-Hour work- cycle
Boosted productivity
Reduced costs

One significant advantage is the tremendous productivity boost you get from being able to work 24/7. That’s right, with a well-structured remote team across different time zones, working around the clock is possible.

And research backs up the idea that remote workers are more productive and less stressed. This helps ensure that you deliver projects faster.

Aside from that, you also have reduced costs. So, finding awesome freelancers to integrate with your existing team is a fantastic option in light of recent trends.

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What’s Likely To Happen?

One thing is clear. As the global economy shifts more towards freelancing, more of your rivals will be looking to take advantage of this. The cost savings and other benefits of hiring freelancers will become significant considerations.

We will be seeing more employers adjusting and looking to improve the efficiency of their operations. In terms of development, this will translate to fewer in-house developers and more freelancers and remote teams.

Keep in mind that the gig economy is still in its infancy. Many think that we are at the early stages of the equivalent of a new Industrial Revolution.

Remember that at every major turning point in economic history, the players that thrive in the market are those who embrace change. So if you want to remain at the top, you should carefully consider your options for the future.

What Should You Do to Remain Competitive?

In an effort to boost your team’s productivity, consider integrating more freelancers within your team, or try building a remote team. Freelance developers are great for specialized development work and general non-maintenance tasks.

Moreover, if you happen to be a startup looking to get an MVP out on the market, freelancers are a great choice. There’s no reason to pay venture capital to hire in-house programmers when you may not need them.

As a larger business, by working with freelancers and/or remote teams, you’ll drastically reduce your costs. In short, you will reduce overhead, hours spent interviewing, and avoid long-term payroll expenses.

If you want to get started, be sure to read about building and maintaining teams spread around the globe. Concurrently, it’s also incredibly useful to learn about collaborating with remote developers from companies who have already done it. And finally, understanding the top misconceptions about hiring remote developers could save you a lot of time and money.

And one more thing. Looking for quality freelancers is very important. If you pick the wrong freelance developer, you may encounter difficulties in your project. The freelancer may not communicate well, they may be difficult to control, or there may be language barriers. In the worst-case scenario, they may even go missing in the middle of the project!

Working with reliable freelancers can help you reduce or avoid these risks, whether the freelancer is a referral, or if you use freelance developer platforms.

For the latter, you may have access to diverse talent and skills as well as the ability to propose a price range that is suitable for you depending on the platform you go with. More importantly, some platforms ensure that their freelancers are top experts in their field and will not let you down.

4 Considerations to Choose Between Freelance vs In-House Developers

Let’s use a fictional scenario to help us determine between freelance vs in-house developers:

You’re a CEO from an established company enjoying the fruits of your labor. Your team is working on a new feature to further accelerate your company’s growth.

You have a brilliant second feature idea, but you’re not sure whether your in-house engineering team has the manpower to build it. If you wait, however, your opportunity cost may be too high if you can’t keep up with the fast pace of the business world.

So what do you do?

Fret not — we’re here to walk you through the benefits and drawbacks of outsourcing your next idea. From expertise to quality, from time to money, here are the pros and cons of outsourcing versus in-house developers.

1. Expertise

The first question is: does your team have the ability to build your new feature? You’re thinking, well, they built the first one, so of course, they can build the second.

Hear of us out though.

Imagine if you’re an email outreach tool SaaS that is now expanding your product to have a lead generation feature. For that, you might need to have a developer well versed in databases or Python who you may not already have on your team.

If the skills required to build your flagship product don’t carry over well to the second feature, i.e., the languages you used would increase technical debt, are less efficient, or the engineer(s) that helped build the first project is long gone, should you continue pushing your in-house team to build Feature #2?

In-House Developers

If you’re not in a hurry to have your second feature built, it would not be a terrible idea to consider doing so in-house. That being said, consider your team’s specialization and how much you value your dev team’s time and resources.

If the second project’s underlying technologies are a big departure from your existing dev team’s skills, it may take team members a while to get up to speed on the new material.

Taking time to learn the new technology might be a time sink for your dev team. Not only that, the time they’re spending learning the new technology means less time spent maintaining or adding features to your core product.

While it’s certainly feasible to have your in-house team build Feature #2, the question is whether it’s worth it in terms of time and resources if they don’t already have that expertise.

Outsourced Developers

When it comes to Feature #2, outsourcing could be a better idea if you have access to expert developers. If you can hire team members who already know the relevant technologies to make Feature #2 happen, that not only cuts down on development time and resources but can come with additional benefits.

For example, if you hire a developer from a freelance platform site for the language you need, he or she doesn’t need additional time to learn it — they’re already an expert.

Because the developer is already well-versed in the language you need, once you give them the wireframe or specs, he or she can get to work and your dev team can work on your existing product.

In addition, an experienced freelance developer that has passed a stringent vetting process often has other value-added expertise that will benefit you.

Your freelance developer can build with scalability issues in mind, which helps you avoid technical debt, and can advise you on potential pitfalls because of their experience and expertise. If you’re a non-technical founder or your CTO is only there on a part-time basis, he or she can also advise you on the more technical aspects of Feature #2.

While this may not seem like a big deal now, if Feature #2 is as successful as your core product, you’ll be glad you chose an experienced developer to help you sidestep potential problems on your way to growth.

Winner: Outsourced Developer

2. Quality

It goes without saying, of course, that you want Feature #2 to be a high-quality product that gives customers a great experience, is easy to maintain, and is highly scalable. However, how do you best control for quality for both in-house and outsourced development? Which option gives you an easier way to ensure your company’s best long-term and short-term interests are being met?

In-House Software Developers

For the most part, coding standards can be better controlled when working with an in-house team. With your own team, you can set the standards and ensure that they’re being followed relatively easily by checking in with your CTO, engineering manager, or your team directly.

This way, you can make sure that best practices are being adhered to in the development process and won’t end up with technical debt or a bigger problem later on down the line.

For non-technical founders who like being more hands-off, having a CTO and an in-house team build your Feature #2 means that you can assign the task and have relative peace of mind to focus on other aspects of your business.

Freelance Software Developers

Quality code comes from quality developers. For more access to both, outsourcing to a freelance platform might be the way to go.

Outsourcing gives you a larger talent pool beyond just the local market to draw from, and you can add a freelance developer to your existing team who can speed up the build process while still maintaining quality and coding standards.

Indeed, while there’s often debate on in-house versus outsourcing development, there’s no reason why you can’t have your cake and eat it too. You could have your existing team build the parts they know and supplement their efforts with experienced freelance developers to ensure quality.

While adding freelance developer labor to your team can help save you development time and resources without sacrificing quality, it does require that someone on your team spend time onboarding the new developer.

Although your freelance developer is an expert, he or she may not be completely familiar with your particular SOPs. Thus, until you know they’ve adjusted accordingly, you may have to spend just a little more time making sure everything is on the up and up.

Winner: Draw

3. Time

Time is money, especially in the tech world. The sooner Feature #2 launches, the sooner you can make money from it. In addition, the faster you can release your feature, the chances of someone else cornering the market with a similar feature or product decreases. Thus, it’s in your best interest to get your product out there.

However, your launch depends on how fast your team can build it. Whether it’s your in-house team or an outsourced team, the clock is ticking on your idea. Which team can get the product out there faster and test it on the market?

In-House Team of Developers

For one, communication is much quicker with an in-house team because it’s much easier to find someone when they’re working in the same building as you.

This cuts down on communication downtime considerably. Often, projects get delayed when people go AWOL or are slow to respond. Working together means that this is less likely to happen.

However, while there’s less communication lag when you’re in the same place, if you’re busy with your core product and you chose to go with an in-house team for Feature #2, your dev team still has to split their time working on different projects.

Also, your in-house team may not be as enthusiastic about Feature #2 as they are about the core product, which could result in feet dragging and delays.

These factors might increase the time to deliverables due to either lack of interest or simply because your developers need to prioritize and cannot dedicate themselves exclusively to Feature #2.

Although it’s easier for you to push for progress and updates in person, you’ll still have to wait for your dev team to have time to work on your new idea.

Freelance Software Engineers

When you hire a freelance developer, particularly if you pay them on retainer, you have a specialist who dedicates time exclusively to your project for X amount of hours.

Knowing that an expert is exclusively working on Feature #2 can allow you to focus your existing resources better with your dev team.

This new setup means that you don’t need to expect your in-house team to get Y amount of work done on a separate project, which could downgrade the priority of their existing projects because you have a dedicated person or team to work on this in the background.

Keep in mind that there may be delays in terms of communications, particularly if your freelance developer is a world away. That being said, the delay can be minimized with clear expectations, guidelines, and dates for deliverables. While it’s never fun waiting for someone to get back to you, the inconvenience can be mitigated.

Even if you may not be able to reach your freelance developer immediately, if you expect asynchronous communication, you can prepare for it by holding scrums, leaving detailed instructions, or preparing a detailed shared backlog.

Indeed, one advantage of asynchronous work is that by the time you’ve arrived at work, a core component might already be done while you were sleeping.

Winner: Draw

4. Money

Money is, of course, one important factor to keep in mind, so we saved the best for last. If you have a limited runway, are bootstrapped, or just have a tight budget, the decision of in-house versus outsourced development can be more complicated.

You want the best work, done in a small amount of time, and at an affordable price. Can your team give you this since you’re already paying them or do you need to dig deeper into your pockets?

In-House Software Engineer

One argument for having your in-house team build Feature #2 is that you’re already paying your dev team to do work for you, so in theory, having them build your second project doesn’t “cost” you extra, since their labor is already accounted for in your budget.

However, if your team is already very small, you may need to hire more people to help with Feature #2. The dev team may be shorthanded from maintaining and building your core product and might require reinforcements, which costs money.

Depending on your idea for your second product, you may need designers, product managers, and other labor to bring Feature #2 to life, which also costs money. In addition, it wouldn’t be cost-effective to create a whole new position for a feature that may or may not take off.

Thus, while on the surface it may seem like having your existing team build a project is free, that’s only true if you have a big enough team. Otherwise, the additional labor may be even more expensive than outsourcing if you need to pay for benefits for new hires.

Freelancing Software Engineer

If you outsource Feature #2, however, you can get an experienced developer at a more affordable cost, depending on where you source your talent from. In fact, depending on where your developer of choice is located, you can get a very good bang for your buck.

Indeed, with a freelance developer, you can hire someone for as long as you need and only when you need the extra help. With a freelance developer, you don’t need to pay the standard benefits that would be required for long-term employees who might be underemployed after the project is completed.

Winner: Outsource

Wrapping Up: In-House Devs vs Freelance Devs

To quickly summarize, the freelance economy is growing larger than ever. In order to remain competitive, your business can take advantage of its benefits, whether it’s hiring freelancers, building a completely distributed team, or a mix of both.

Freelancers and remote teams will continue doing more and more development work. To take advantage of this, be sure to consider hiring quality freelance developers wherever possible to take care of your development needs.

Once you’re ready for specific tips for hiring great freelance developers, we’ve previously covered searching for React developers, finding great front-end developers, locating Java developers, and more.

Do you have any questions about the role freelance developers can have for the future of your business? Let us know in the comments section below!