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Labor costs are the biggest dent in most business budgets, whether it’s a one-woman powerhouse or a major global company. Today, I’ll be talking about how labor costs affect small businesses, and one of the most common questions you’ll face. In terms of labor costs and ROI, is it better to take on a project in-house or bring on a freelancer?

This article will provide examples of tasks and roles that you might be considering when bringing on a self-employed worker. But first, let’s cover a few basics that you should know about how your staff affects your labor costs and how you can curb that expense.

Balancing Labor Costs: When to Make It Work and When to Bring On a Freelancer

1. How Labor Costs Affect Your Business
2. How to Hire a Freelancer to Get the Most Value
3. Web Designers: Beauty is in the Eye of the Browser
4. Copywriters and the Labor Costs of Compelling Copy
5. Social Media Management and the ROI of Digital Presence
6. When to Make Your Freelancer a Full-Time Offer

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A yougn freelancer working at a table in a cafe. Knowing when and how to hire a freelancer is the key to balancing your labor costs.

1. How Labor Costs Affect Your Business

According to PayCor, labor costs can add up to 70% of a business’s expenses. Now, it’s important to understand that this isn’t just because of employee salaries. Labor costs also include benefits, healthcare, and taxes. In the United States, most solopreneurs and microbusinesses do not offer healthcare, yet. Once a team grows large enough, an employee health plan becomes possible.
However, small businesses like you are probably still paying taxes for your hourly and salaried workers. What’s more, many states require that small businesses provide paid sick leave to all employees, which is also a factor in labor costs.

A person searching on a tablet. How to find freelancers is all about using the right freelancer sites and networks for hiring temps and bringing on pros. This is a great way to balance your budget and control labor costs.

You want to provide decent, and hopefully even competitive, benefits to your employees. However, when your business is just starting to grow, taking on labor costs with a new salaried employee might not be the best approach for achieving your budget goals.

Read: How to Optimize Your Small Business Budget

2. How to Hire a Freelancer to Get the Most Value

Independent Workers and Labor Costs

Now, let’s talk about freelancers. When you hire a freelancer, you’re adding someone to your team, but they’re not really on your team. They’re on their own team as independent contractors. This means that you’re not expected to offer them health insurance or paid time off, and you don’t have to pay taxes for employing them. That’s because independent contractors cover their own labor costs.

Your first thought might be that a freelancer is going to save you money, without those extra labor costs. However, what you will find is that an independent contractor will charge a higher hourly rate than many of your employees. That’s because freelancers factor labor costs into their fees. These hourly rates may seem enormous when you compare them to equivalent salaries, but you need to remember that freelancers also need to protect and defend their labor costs. If a client pays late, or doesn’t pay at all, they need a little extra wiggle room in their own budget to get by. This brings me to my next point: be good to your freelancers.

A man speaks while holding a laptop in his lap, wearing casual clothes. If you want to cut labor costs, knowing when and how to hire a freelancer can make a big impact.

Invest in Freelancer Relationships

Pay your freelancers on time. Be as helpful as you can in helping them achieve the goals you have defined together. Be responsive. Be polite. Afford them all the same courtesies you would your regular staff.

It sounds obvious, but it would be surprise you just how many small business owners treat independent workers like garbage. The end result? One day that small business reaches out for a project, and they get shut down. The work relationship dissolves.

Freelancers don’t owe you anything other than work they’ve contractually agreed to. If you treat them badly, it’s only an incentive for them to find new clients who treat them better. In the long term, chances are that you will want to work with a freelancer on an ongoing basis. So, make the effort and invest in that relationship.

Three coworkers on laptops. How to hire a freelancer is about how to maintain one, as well. Nurture your relationships with them, and it will benefit your labor costs in the long run.

How to Find a freelancer that Fits Your Budget and Labor Costs

Before you master how to retain a freelancer, you probably want to know how to hire a freelancer. Upwork and Fiverr have become the gold standard for connecting with talented freelancers, but there are other options as well. When in doubt, ask around. Many of your peers have brought on independent contractors for everything from social media ads to bookkeeping.

Your first instinct might be to identify someone who is super affordable, but slow down and think about that. To get the best ROI for your project’s labor costs, you might want to bring in a mix of experience and value to make the most of your labor costs. Be sure to hire someone with relevant experience and great communication skills. Once you’ve identified a pool of candidates, then you can address how to hire a freelancer who fits your budget.

Read: How to Hire the Right Person to Grow Your Business (And Your Team)

Freelancer Drawbacks

Freelancers can bring a great deal of expertise, but there are downsides of working with them as well. As independent contractors, you can’t expect them to get back to you as promptly as your salaried workers. You can’t expect last minute changes as quickly as you may like. That’s because more likely than not, freelancers are juggling multiple clients. They do not work for you and you alone, unlike your full time team members.

So, as you can see, it’s not a clear cut decision. There are bound to be many projects where you ask yourself why or how to hire a freelancer, while also debating if it’s better kept in-house. Labor costs are a significant part of the equation, but you need to determine the real value that both options hold for you.

Next, I’ll cover three examples that come up often for growing businesses.

A shiny, sparkly home office. Know when and how to hire a freelancer. Experiment with hiring temps. Find ways to cut your labor costs.

3. Web Designers: Beauty is in the Eye of the Browser

Let’s say you need to add a new page to your WordPress site or totally revamp the look of your online store. Maybe your business is expanding dramatically and you want to completely redo your website. You need to bring on a web designer, but in what capacity?

WordPress is the world’s most popular content management system, so chances are if you want to redo your website or blog, you’ll want to hire someone who is familiar with the site.  Changes in WordPress are easy for an experienced designer but don’t attempt them yourself without a solid foundation. Likewise, don’t expect that just because one of your team members can pull it off just because they have graphic design experience or a little coding know-how. This is where you’ll want to bring in a specialist to get the most bang for your labor costs buck.

Man drinking coffee, working at a computer. Thinking about hiring temps or how to hire a freelancer? It's a great way to manage labor costs.

In this situation, you’ll want to hire a freelancer. Look for a freelancer you can communicate with and build a solid, positive work relationship. That’s because web design isn’t a one and done deal, it’s an ongoing process. Chances are that as online trends come and go, you’ll want to continue updating your site to make sure your branding is current, never outdated.

Another project that might require a web designer is your online store. After all, user experience and great design make all the difference in generating sales. Some Ecommerce platforms might demand a web designer to make small changes and tweaks, so you would absolutely need to bring someone on board to do an overhaul of your store.

If you’re using Selz, you’re already familiar with the high level of customization available to you. Even if you don’t have a background in design or coding, you can select a pre-designed theme that fits your brand, and tailor it to exactly what you want.

Read: Building an Ecommerce Website in 7 Effortless Steps

4. Copywriters and the Labor Costs of Compelling Copy

We’ve all been there. You’ve got an amazing product, but when it comes time for your product description, you can only manage to write, “This thing is great stuff!” Not all of us are born wordsmiths, and that’s okay. You’ve got a few options here.

First off, look to your team. You might be amazed by a colleague that has a knack for description. Talk to your team to gauge interest, and reflect on the written communication you have on hand. Maybe one employee sends consistently hilarious texts or emails that hit all the necessary data points. If so, copywriting may not be too much of a stretch. And there are so many resources online to help individuals write copy that converts. Ask for your team’s help. If it’s successful and they enjoy it, it could become part of their role.

A typewriter surrounded by beautiful plants. Copywriting is a skill that you might think about hiring temps for, or even asking yourself how to hire a freelancer. Outsourcing can reduce your labor costs.

Now, sometimes, we just have too much to do. Let’s say that you’re in the process of moving your brick and mortar business online. Perhaps you have dozens of items to turn into digital products, and they all require copy. Chances are that you and your team have enough on your plate without nurturing innate writing newbies. This is a good time to bring in some fresh talented blood. But if you’re choosing between hiring temps, adding a new team member, or agonizing over how to hire a freelancer, think about your long term goals.

Sometimes when businesses expand into Ecommerce there’s a level of maintenance involved. That means that if someone is a good writer, they probably also have the communication chops to handle more. This could include customer support emails, help with marketing emails, and even some content to boost your online branding efforts. That’s sounding less like a quick project and more look like a permanent role. In terms of labor costs, bringing on a new team member might make more sense than just hiring temps.

However, let’s say that you’re already got your marketing emails down to a science. Customer support has a clear channel in place for your online store. You want all the branded content to come directly from the founders. This means there’s no need to bring on a full-time employee for the role. The labor costs would exceed the value that this new team member could provide. Think about how to hire a freelancer to get all the product copy ready for your Ecommerce launch. Maintain a good working relationship with them, so that you can easily outsource copywriting for any new products you might introduce down the line.

Read: Persuasive Copywriting: How to Write Content That Sells

A big desk waiting for work to happen. Understanding hiring temps and how to hire freelancers can help you get things done without skyrocketing your labor costs.

5. Social Media Management and the ROI of Digital Presence

While we all dabble in social media for our personal lives, managing it for a brand is more divisive. Some people love it, while others hate it. What’s more, social media has traditionally been more about branding than making sales. That makes it tricky to determine ROI for the labor costs involved.

This is one area where hiring temps might not be the best practice, unless it’s a temp to perm role. It can take some time for the right person to settle into your brand voice, put together an effective strategy, and start gauging results. It doesn’t happen overnight, so a shorter contract might not provide the insight and consistency you need.

A person snaps a photo for social media. Sometimes, social media can take up too much energy in house. To curb labor costs and keep your team on task, considering hiring temps or investigate how to hire a freelancer.

Now, you can absolutely keep social media in house, and with good reason. Whoever is posting will really understand your business for all its new initiatives and products, as well as the values that shape your brand. Because they’re there with your team, it’s easy to communicate promotions that you want to run, or content that you want to focus on.

But maybe no one on your team can stand doing social media, or they don’t do it well. There’s usually a pretty strong correlation between the two. Sometimes, no one has time in their schedule to do it. And if that’s the case, they definitely don’t have time to stay on top of shifting algorithms or platform analytics.

If that’s the case, you might want to ask yourself how to hire a freelancer to get the most value out of social. Paying a skilled freelancer by the hour can be a better use of your labor costs than trying to pile it on top of your already busy team. If they’re familiar with Google Analytics and social ads, you could even increase the ROI of your social media tremendously. If that’s what you’re looking for, it’s very important to be clear about what you hope to accomplish. You may also want to hire an agency if you have specific goals you want to accomplish.

Read: How to Make Data Work for Your Small Business

A team working together over a table. Labor costs make up the biggest chunk of your budget, so choose your team wisely. Knowing when and how to hire a freelancer and hiring temps can augment costs.

6. When to Make Your Freelancer a Full-Time Offer

You don’t need to be a big corporation to know that hiring temps sometimes means finding your next full-time employee. It’s not at all uncommon for growing businesses to sign freelancers on as salaried employees after a few successful projects. It might not be on your radar now, but here are a few reasons it may come up down the road:

A freelancer works at her computer. Sometimes, after tackling how to find a freelancer and hiring temps for awhile, one independent contractor might stand out to you. Freelancers are often invited to join teams full time.

They exceed your expectations

If only it was like this with every employee, right? But only a handful can really wow a growing business by getting results, hitting goals, elevating your brand, and just being a general delight to work with. Why wouldn’t you want to lock that down?

You’re Growing. Fast.

Sometimes, the need to bring on extra hands arises suddenly. Rather than immediately writing up a job description, consider a freelancer who you have an established relationship with. You already know so much about their work style, and they’re already familiar with you from having you as a client.

They’ve Shown You How Much You Need Them

Maybe you just thought you needed a few hours a week for sales, customer support, or whatever else you brought on a freelancer for. However, they’ve shown you that they can make a real difference in your business as you grow. You’ve increased their hours to where it feels like they’re already part of the team. So why not make it official?

A freelancer receives a job offer on her cell phone. That's nice. This article on labor costs tells you everything about hiring temps and how to hire a freelancer.

As your business grows, balancing your labor costs will present a greater challenge because there will simply be more to do. Knowing when and how to hire a freelancer can help bridge the gap from where your growing business is now to achieving major goals down the road.

About the author

Tara Storozynsky

Tara Storozynsky

Tara lives in Portland, Oregon. She writes about the intersection of creativity and entrepreneurship, after a decade of working in the food and wellness industries. Her work has been featured by American Artists Watercolor Magazine, Salon.com, and others. Aside from writing content and copy, Tara also manages the affiliate program for Selz.

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