The world is changing, and so are the ways people work.
In the past, businesses could only hire developers who would become integral to their company's identity and culture from within their local workforce market. However, with the rise of freelancing, contracting, and other non-traditional employment, businesses have had to adjust their hiring strategies while simultaneously struggling to keep up with the pace of innovation and global market demands and changes.
While it may seem like these different types of employment are similar at first glance, there are many differences between them that businesses should consider before deciding which kind of team member works best for them.
Enterprises have become accustomed to the flexibility of contracting and freelancing, but it's important to remember that these are not the same thing.
When hiring new team members, you may have several options for how to structure their employment.
The most conventional way is through traditional employment, where a team member is hired as an employee and receives full benefits. This may be the eldest, tested, and proven way businesses hire people, but it's not always the best option for everyone. This arrangement has some disadvantages, which we'll discuss later in this insight.
Hiring a distributed team member, such as a freelancer or contractor, is another option. When a remote team member works for your business, they are considered a distributed, external expert, and you won't be responsible for providing benefits like healthcare and retirement plans for them. You also won't have to pay payroll taxes on their behalf (or withhold taxes from their paychecks).
Whether you're a CTO looking for affordable staff augmentation options or a startup owner trying to find the best talent possible outside of the limitations of geography and time zones, it can be a daunting task to make heads or tails of the vast array of differences between traditional employment, freelancing, and contracting.
We've put together a guide to help you make that decision. And, hey, we threw in an extra 4th option we think you’d love.
1. The IT job market today
The job market has grown by leaps and bounds over the last 20 years, forcing us to rethink the way we work. The IT industry was at the forefront of changing the way we perceive work – what was once a niche sphere a select number of “computer geniuses” worked in is now an industry that moves and shakes societies.
The digital revolution has radically changed the way we work, and the IT job market is the most affected.
Long ago, the standard work week was a Monday through Friday schedule. But as the 20th century progressed, a Monday through Friday work week became less and less feasible for companies requiring employees to work overtime or late nights to meet production quotas. As a result, more companies began offering flexible scheduling to their employees on a case-by-case basis.
Typical full-time employment schedules have been completely disrupted by technology, especially in the last decade, with more workers than ever staying home or working remotely instead of spending time commuting to and from an office building. Employees also work longer hours: according to an article by Finance Buzz, remote workers average more than 40 hours per week (although this shouldn’t be something you demand of them).
More than ever, there's an increasing demand for people with technical skills and degrees, specifically in STEM fields. However, you don't necessarily need a degree to get a job in this field, as many companies have increased their demands for people with on-the-job training or boot camps.
As a result of a rise in technology, there has been an increase in jobs that require technical skills. However, while jobs requiring technical skills have increased, there has also been an increase in jobs that require non-technical skills.
According to the Bureau of Labor Statistics of the USA, employment in computer systems design and related occupations is projected to grow 16 percent from 2021 to 2031, much faster than the average for all occupations. This projection is based on a growing need for businesses to have access to information technology (IT) professionals who can design and maintain their computer networks and other hardware as they continue to evolve technologically.
The United States has been leading the way with openings for developers, and companies within the US are looking worldwide for talent; this trend is especially true for small businesses.
And it’s not just the lack of talent – it’s also the financial costs, time, and other staff related to finding great developers attributing to this trend.
It takes about a month to assess and interview a developer.
The biggest challenge facing Engineering Leaders today isn't technology-related; it’s people. There is an incredible amount of talent shortages within the industry, and it is a challenging feat for companies to attract and retain top talent.
Product companies feel this more than anyone else as they need experienced developers in the most in-demand technologies to build their products.
But hiring for these roles is a time-consuming and difficult process. It's really hard to attract the right developers, now more than ever.
We chatted with Proxify’s Chief Commercial Officer, William Svedström, about the increasing demand for freelancers in the market. We asked him why he thought this was the case. Here’s what he had to say:
"The lack of skilled talent is one of the reasons, of course. In 2020, according to US labor statistics, By 2030, the global talent shortage is expected to reach 85.2 million. Сompanies worldwide are at risk of losing $8.4 trillion in revenue because of the lack of skilled talent."William Svedström
He adds that another reason is that companies are seeking a more flexible work model where they can get the right talent at the right time and at the right place to stay competitive.
“Freelancers and talent on-demand platforms allow companies to get more things done without taking on the risk of increasing fixed costs. That means you can experiment before investing in hiring full-time employees. The other huge benefit is the possibility of getting people with a highly specialized skill set without going through the long process of recruiting someone or hiring an expensive consultant.”William Svedström
According to Svedström, Covid-19 certainly sped up the transition to on-demand talent.
“I remember that pre-Covid-19, every other company we talked to viewed remote work as suspicious. Post-Covid-19, it is the norm, and never even a discussion of how a remote worker will be integrated into their team.”William Svedström
Proxify works with freelancers and full-time staff. Despite the pros and cons listed above, we asked William whether he thinks for a company to excel in the market, they need all three types of employees. Or whether there is only room for one type of staff member (i.e., either a freelancer, a contractor, or a full-time worker).
“You need a mix,” he adds.
“More and more companies today are moving towards having a more flexible and agile organization where you have a mix of full-time, part-time, and freelance workers. We are certainly embracing the product we sell too and have it like that in nearly every part of the organization.”William Svedström
As a CTO, you have a lot on your plate. You’re primarily responsible for ensuring that your team is operating at peak efficiency and that your roadmap is moving forward according to schedule.
With so many different projects going on at once and so many people working under you, it can sometimes take some work to know whether you should hire full-time employees, freelancers, or independent contractors. While there are pros and cons to each, here are some things to consider as you decide what's best for your business.
1.1. Freelance developers
Freelance developers tend to be more flexible than traditional employees regarding how and when they work. If they're working remotely, they can set their hours and work from anywhere worldwide as long as they have internet access.
Here are several other benefits of freelancers:
- You have access to talented and experienced developers from all over the world.
- You don't have to worry about payroll taxes or other expenses of hiring full-time employees.
- You can hire as many people as you need without worrying about overstaffing your business.
- You can get expert help on specific engagements without paying someone full-time.
- They are usually good at managing their own time.
- You have a wider talent pool cause they don't work in an office and in your time zone.
- The hiring time is shorter.
- They're typically paid per hour or engagement instead of your business's regular salary or an hourly wage.
- You don't have any obligations to pay them benefits such as health insurance or retirement accounts.
- They are harder to test and vet.
- The more niche the technology, the more expensive the rates are.
- There may be less opportunity for training and guidance and less direct oversight on how tasks are completed.
- There is no presumed loyalty or obligation – once the project is over, they may not be willing to continue working with you.
- The growth opportunities are limited – because freelancers usually work on only one project at a time and aren't responsible for overseeing other employees' work processes, there may be less room for career advancement within your company than there would be with a traditional employment position.
- They are usually available for only one-time engagements and limited gigs.
- They don't always reflect or absorb your company culture.
- They don't come with safe contracts.
1.2. Contractor developers
When you hire an independent contractor for a job, you are essentially hiring a freelancer to work solely for your company. This means that you don't have as much overview of their workday up close, but you can expect them to work only with you as a full-time client. You don't have as much responsibility for their welfare either – you're not required to pay social security taxes or insurance, for example. However, specific countries’ legislations may require that you withhold taxes from your employee's payments, so check your local laws before making this decision.
There are many advantages to hiring an independent contractor over a traditionally hired team member. For one thing, an independent contractor transcends geographical borders, allowing you a larger talent pool. Also, suppose you want someone with specialized expertise in a particular area. In that case, an independent contractor can be much more efficient as a consultant than having another full-time employee who needs a different job description after they’ve finished their temporary project.
In a nutshell:
- Contractors are more likely than employees to have specialized skills that help your business run more efficiently.
- They're also less expensive than traditional employees because they don't get benefits like health insurance or paid vacation time.
- They can work remotely, which is often a perk for the worker.
- They can focus on specific engagements rather than being assigned to particular tasks or departments.
- Instead of paying full-time salaries and benefits, you pay for the work as that is completed.
- You can hire them for a specific project or for a certain period, which allows you to be nimble and adjust your workforce based on your company's needs.
- Contracts are flexible and easy to terminate, which means businesses don’t have much legal power over retaining their contractors.
- They may not be motivated or dedicated enough to always complete their work on time.
- They might not provide the quality work they promised when they were hired.
- The company may not be able to enforce specific rules or regulations that it would generally enforce with full-time employees.
- They're not working for a long-term career at your company, so they might not put as much effort into it.
1.3 Traditional employment
If you hire a full-time team member, on the other hand, you essentially become their leader and can exert more control over what they do. You'll need to comply with all employment laws regarding minimum wage requirements, time off, and overtime rules. You may also have to provide benefits such as health insurance and paid leave time if they work for you long enough. You may also have to deal with unions if your company is large enough.
In a nutshell:
- The workload is easy to understand: everyone knows what the job is and how it works.
- It provides stability for employees because they are paid regularly (typically once a month).
- You'll know how much you'll pay a team member upfront without factoring in a fluctuating market rate.
- Full-time employees are more likely to stay with your company for the long term.
- Employees tend to have higher levels of commitment and loyalty to the company.
- Employees bring a wealth of experience in their field that can help you grow your business.
- They usually have a long-term commitment to the company and its goals.
- Employees can be trained in the best ways to do their jobs, which means they can become even more efficient over time.
- It can be difficult for businesses to find good developers if their compensation isn't competitive with other employers' offers; this can lead to high turnover rates that cost both time and money.
- Full-time employees can cost more than independent contractors or freelancers because you have to pay for benefits like insurance, vacation time, etc.
- You also have to pay payroll taxes, which can add up quickly if you hire multiple people at once.
- Whether your business has a quiet period or not, you will always need to pay salaries.
- You are responsible for paying for training your employees whenever the need arises.
- In an industry as competitive as tech, investing in a full-time employee sometimes proves to be ineffective – with high turnover rates and new interesting fields every year, your team members might quit their job often.
2. Sticking to one hiring model doesn’t cut it anymore
As the 21st century continues to unfold, it's becoming increasingly clear that the conventional employment model is not sustainable. The days of a company offering a job for life are ending as more and more workers seek out flexible work arrangements and companies realize that they need to provide these developers with a workplace that will allow them to grow as professionals.
There's a lot of talk about the changing job market when you look at recent data – and for a good reason. New networking opportunities such as LinkedIn, Twitter and GitHub have allowed candidates and employers to find each other, easier than ever before. That means today's job hunters have more opportunities to move up in their careers, whether by finding a new job or changing their current one.
But when you look back into history, you can see the roots of this opportunity. In the past, before the digital age, job agents could probably only get a few applicants for a given position which candidates would apply for in person. This is a far cry from the hundreds of candidates who apply for a single job now. According to LinkedIn Business’ Hiring Statistics, social professional networks are the number one source of quality hires.
The way jobs are distributed and careers are made is changing. While the unemployment rate has been steadily decreasing since the Great Recession, there's a growing concern about the quality of work available to those with jobs. Much of that has to do with the rapidly changing job market – the way jobs are being created and distributed, as well as how industries like retail, education, health care, and transportation are adapting (or not adapting) to new technologies.
Our focus here is on technology's impact on the job market. More than many other industries, technology is creating new career paths that didn't exist before: augmented reality designers, virtual reality engineers, and data scientists are just a few examples.
Technology is also automating certain aspects of work that humans have traditionally done: even though robots have been assisting in manufacturing for decades, in 1997, a computer beat one of the world's best human players at chess – and it wasn't even close. Technology is also impacting more established forms of employment: rideshare services have already put taxi drivers out of business in many cities worldwide.
AI and automation are the way of the future, and the job market is changing as a result. Companies must be aware that many of their employees will be working for them in a different capacity than before and must switch from relying on a team member's mind and body to depending on their mind alone. This can be a frightening prospect, but it also presents tremendous opportunities.
If a business can identify which positions will still require human input and which positions can be left to machine learning, they could hire contract workers or find freelancers who are much more cost-effective than keeping one full-time team member. Remote talent also benefit from working from anywhere – the business won't have to worry about paying for office space or many expenses that come with getting traditional employees up and running.
2.1 Staff augmentation: what it is and how it fits in
So, how do you merge the benefits of freelance and contracting, such as a larger talent pool and a cost-effective solution for battling the costly salaries of skilled and niche devs, with the pros of a traditional workplace, like a good culture fit, feeling of loyalty and belonging, and helping your employees thrive under your leadership?
The answer is staff augmentation.
Staff augmentation is a growing trend in the field of technology. It involves hiring employees who work remotely to supplement existing staff rather than hiring full-time employees in your own country and physical space.
It is a type of outsourcing that involves hiring workers from a third-party company to perform tasks on your behalf. Essentially, for businesses, it is a method of using remote employees to supplement a company's workforce or build one from scratch. It is often used when an organization needs to scale up or down quickly or when they want to assign engagements to a new team member without having to commit to full-time employment.
This practice is often used to complete tasks that require specific skills or expertise that are not currently available within the company or local talent force. The company may use it to handle engagements that do not require constant attention.
And when it comes to remote work, staff augmentation is an especially good option because it allows you to get high-quality professionals without having them physically present in the office every day.
With remote work, there’s often a tradeoff between culture fit and expertise. If you want someone who shares your vision but doesn't necessarily have the skills (or vice versa), then it might make sense for them to spend some time working for you face-to-face before hiring them permanently. With staff augmentation, however, your team members are vetted before they start working with you so that they can bring their skillset along with their cultural fit from day one.
Staff augmentation can be beneficial for both the company and the temporary worker. The company benefits from having a team member with the skills necessary for the job, but without having to make a long-term commitment. The worker has access to more opportunities than if he or she could only find employment with one company.
With staff augmentation, the company has more time to focus on its core competencies while outsourcing other tasks and quickly increase its productivity without having to invest in new equipment or hire additional employees.
Staff augmentation can be useful because it gives you access to experts who are experienced in specific areas that may not be within your organization's skill set, such as Machine learning, Data visualization, Data warehousing, Data science, and much more.
- Staff augmentation is cost-effective. The cost of hiring a full-time team member in most local markets is much higher than the cost of hiring a team member via a third party like Proxify.
- You don't have to make a long-term commitment – this gives your company flexibility if you need to change direction later on.
- You don't have to train anyone in their new role – they already know what they're doing because they've done it before.
- It can improve productivity and efficiency in your organization by allowing you to hire more people at once without overburdening your existing staff or infrastructure.
- It allows you to focus on what matters most – being efficient and innovative – without worrying about managing employees or keeping track of their time sheets every month.
- You'll also have less overhead costs because these remote workers don't need expensive office space or equipment at home for their job duties each day.
- You won’t have the benefit of working in the same office with a remotely distributed team.
- You will have to invest more time on onboarding and engagement than in a traditional, non-remote team – this doesn’t come naturally, like just being in the same office every day.
- If your local workforce market has a lower standard than the hourly rates of distributed developers via a platform like Proxify, it is not affordable to adopt this solution.
2.2 How is staff augmentation beneficial for a merging culture?
Staff augmentation is beneficial for merging cultures because it allows companies to bring in new expertise from outside the organization rather than relying on internal employees to absorb and adapt to the new culture. This can be particularly important when a merger occurs between two organizations with different cultures. It can help ensure that employees from each company feel welcome and respected in the new environment.
Staff augmentation is also beneficial for merging cultures because it allows companies to fill positions more quickly than they could if they were only hiring internally. When an organization is starting up or expanding rapidly, it may not have the time or resources necessary to bring in new employees who are already familiar with the company's culture – staff augmentation allows them to hire people who already understand what they're looking for. This means that companies can hire more quickly and efficiently than they would if they were only internally.
Other benefits of staff augmentation:
⇾ It allows staff to be rotated in and out of positions so that people from different departments can learn from each other and get to know each other. This helps to break down silos, which are often an issue when merging cultures.
⇾ It also allows for a greater sense of shared ownership among employees because they feel they have a stake in the company's success – and its culture.
⇾ It helps with cultural change because it enables new employees to get up-to-speed more quickly on company values and processes than if they were starting from scratch.
2.3 The Proxify model & vetting process
At Proxify, we are committed to hiring the best software developers in the industry. We know how important it is to find talent that can help us continue to grow and provide our clients with the best possible service.
We believe that it's beneficial for employees to work from home, whether they're in the same city or across the world. We also believe hiring qualified remote workers is crucial to our success as a company.
That's why we take great care when vetting our candidates for employment.
We take a lot of time to evaluate our potential employees, and we look for the following qualities in each candidate:
✅ Excellent technical skills
✅ Strong work ethic
✅ Good problem-solving skills
✅ Ability to work with others
✅ Ability to learn quickly
To ensure that only the best developers join our team, we perform a rigorous vetting process before bringing them on board. Here's how it works:
When developers join our network, we take a series of steps to ensure they have the right skills, experience, and professionalism, to help our clients build the best possible product.
Before joining the Proxify network, developers take a self-assessment quiz; after that, they take a technical examination and screening interview, a coding test, a technical discussion, and a final review.
We have a variety of technical quizzes in our database. Our software tests for several skills. Besfort Shehu, Technical Interviewer at Proxify, lists them as follows: ☞ C
☞ Python (Django)
☞ C# (.NET)
☞ PHP (Laravel, WordPress, Symfony, Magento, Drupal)
☞ Ruby (Ruby on Rails)
☞ Dart (Flutter)
☞ IOS (Objective-C, Swift)
The coding test will challenge you to write code that solves a specific problem. This helps us see how well you can think abstractly about issues with no obvious solution.Besfort Shehu
“An assessment takes approximately three hours to complete. It includes three tasks with different difficulties,” Shehu adds.
Our coding test is specifically designed to test the developer's ability to work quickly under pressure and their knowledge of multiple programming languages. The test requires that each developer complete a specific task within a given time frame. It is evaluated on two criteria: how well they can use the technologies needed for the job and how quickly they can complete it. The coding test has proven very successful in identifying developers who can work quickly under pressure and have real-world experience in their chosen field.
During the screening process, we also test the candidate’s professionalism, how well they speak English, their overall enthusiasm, and so much more! This gives us a good idea regarding whether they will fit into your company’s culture, if there will be any language barriers between the developer and the client, and generally, the type of person we will be working with.
Finally, there is a final review where we check in again with all of our developers on their progress over time – we want them all to do well!
After passing this last step, the developers are ready to partner with us and join our network.
3. Factors to consider when choosing the right hiring model
As the CTO of a startup or enterprise, one of your key responsibilities is to build and lead the engineering team. Choosing the suitable hiring model for your company is crucial to ensuring the success of your business.
Once you've decided to hire a new developer, it's time to figure out how you'll go about selecting the right person for your team.
It's important to consider your hiring needs, as well as the type of company you're working with and its size. This will help you determine what kind of hiring model is best suited to your needs.
There are many factors to consider when making this decision. Still, as a CTO, there are three key areas you must focus on.
3.1 Small businesses
Small businesses are a vital part of our everyday lives, providing everything from the goods we purchase to the food we eat. With 30.2 million small businesses in the U.S., which account for 99.9% of all businesses in that specific market and employ nearly half of the country’s workforce, it’s no surprise they play such an essential role in society.
No matter the industry, nowadays, small businesses are also in need of developers to keep pace with giants. Here’s an example: you run a bookstore that might go out of business because Amazon has a better, more extensive selection and cheaper prices. You’re small, but you need to stay afloat, so you’ll need to provide a webshop as well. And you’ll need a developer to figure it out for you.
If you relate to the bookstore owner, before deciding whether to hire a remote or full-time team member, you should think about the kind of work your company does and who you're hiring for that work. There are typically two kinds of work in a small business: ongoing and more project-based tasks that can be completed within a specific timeframe.
For a project-based task, outsourcing makes a very logical choice: no strings attached, a bigger talent pool, and no legal ramifications for discontinuing the collaboration.
But, if you need a long-term collaborator, do you have to hire someone in-house? Not necessarily.
The decision to hire an independent developer or full-time employee is not a question with a clear answer. It depends on various factors, and weighing them all when making a choice is essential.
When hiring an in-house or remote team member, small business owners should consider factors such as
- How much freedom do I want my developer to have in determining how they complete their work?
- What is the nature of the work I am giving them?
- How long will it take?
- Is there a possibility that I will outgrow my current developer?
- Is it possible my developer will outgrow the task and description I am hiring them for?
- Will this position grow in the future?
- Who else can I hire with the available time and money?
3.2 Startups & scaleups
If you're a startup or scaleup, you don't have time to waste. Hiring the right people can make or break your company, so it's essential to get it right the first time. You must quickly identify the most talented candidates and move on from those who aren't a good fit. The size and scale of your startup will have a significant impact on the hiring model you choose. For example, startups and scaleups typically move faster and more flexibly than larger enterprises. They also tend to have less money and resources, so they need to be more creative in their approach to hiring.
The most crucial factor to consider is the company’s stage of development. Startups and scaleups are typically in a period of high growth, which means they need employees who are able to adapt to change and handle ambiguity.
If your startup or scaleup has experienced rapid growth over the last few years, you may be looking for more than just a top-notch developer. You may also seek someone who can take on more responsibility and help lead other developers in their work. In this case, hiring a senior developer could be an ideal solution for your company.
As a CTO, it's essential to consider other factors, such as
🕐 How much time do you have? You need to be able to find a team member who can start on your team as soon as possible.
💲 What is your budget? How much are you willing to spend on hiring? The more money you have, the more you can afford to pay for talent.
😵💫 How complex is your product/service/platform? If it's very complex, it will likely take longer for someone to learn how everything works and get up-to-speed on their role in the company.
🏢 What is the size of your company? Startups and scaleups are usually much smaller than enterprises, which means you need employees who are comfortable working in a more intimate environment.
🎩 How diverse is the talent? You also need employees willing to wear many hats and take on responsibility for multiple engagements.
If you're an enterprise that has been around for several years, you will likely already have a team of full-time developers who work on specific engagements within your organization.
However, if there are any gaps in your current staff members' skillsets or skill levels (or if there's someone who can help fill those gaps), then hiring an apprentice developer would be ideal for filling those roles without disrupting your existing team structure or workflow processes.
There is no single answer regarding the best hiring model for enterprise CTOs. The decision depends on several factors, including
🪢 Organizational size and structure: The larger the enterprise, the more complex the technology needs and the greater the need for a CTO with a broad range of skills.
💻 The industry: Consider whether the enterprise is in a traditional or cutting-edge industry. In a traditional industry, enterprises may be more risk-averse and less willing to invest in new technologies. In a cutting-edge sector, enterprises may be more open to new technologies and be willing to invest in them.
Specific industries have unique requirements that must be considered when choosing a staffing model. For example, in highly regulated industries such as financial services or healthcare, a managed services provider (MSP) may be necessary to comply with regulations.
⛳️ The company culture: Consider whether the company is conservative or innovative in its approach to business. A conventional company may be less willing to invest in new technologies, while an innovative company may be more open to new technologies.
🏦 Budget: The budget is always a consideration when choosing a staffing model. Managed services providers (MSPs) typically offer discounts for volume hiring, making them a more cost-effective option for large enterprises.
Ultimately, the best staffing model for an enterprise CTO will be one that meets the specific needs of the organization while also being cost-effective.
3.4 The critical logistical differences between distributed teams and traditional employment
The choice between hiring distributed teams and in-house work is often a matter of personal preference. Still, there are crucial differences in what you can expect from each situation.
Let’s imagine a best-case scenario. When you're hiring for a full-time position, there's a lot of paperwork to go with it.
- First, you must find qualified candidates who fit well into your business.
- Next, you need to screen them for any disqualifying factors.
- Next, you have to interview them to learn more about their skills and personalities.
- If they pass that round of scrutiny, they should be eligible for a job offer (even if it's something like an internship or unpaid work) that outlines the details of their new position and the expectations of both parties.
- Finally, they'll be entered into payroll and trained on specific tasks they'll be doing in that role.
At every step along the way, there is a risk – you might not find the right person or hire someone who doesn't work out in the long run – and each round requires time and resources that are best spent on already-existing employees when possible.
Contrast this with hiring remotely. Freelancers are generally a lot more independent than traditional employees, but they do not have the same level of job security. In some instances, like with working with Proxify, for example, you don't have to worry about things like recruitment paperwork, pre-screening, or vetting their technical skills because those are responsibilities handled by our professionals.
4. How the recruitment process differs for distributed teams and traditional employees
For businesses, no matter what size, recruiting the right talent is a complex issue. Various industries have different needs, so finding one-size-fits-all solutions to hiring is challenging.
Depending on how a company chooses to structure its workforce and the nature of its industry, there are several ways for businesses to attract potential employees. Freelancing, contracting, and traditional employment each come with their advantages and disadvantages.
There are differences in the recruitment process for businesses hiring a remote or traditional team member to fill an opening.
Proxify’s Head of Talent Marketing, Barış Gürbüzler, talks about the difference he has noticed when hiring talent.
“The biggest difference starts with the general expectations and needs. In most cases, freelancers are recruited for shorter-term projects, meaning the hiring process is shorter and easier than hiring contractors and traditional employees.”Barış Gürbüzler
He adds that the financial side of the process is also taken into consideration. Common questions a CTO should consider are how much this person will cost you and whether you will deduct taxes.
“These answers change whether you are recruiting a freelancer, contractor, or traditional employee; it also changes the financial planning process. Finally, especially for traditional employees, cultural fit becomes more important than for freelancers.”Barış Gürbüzler
There is little commitment from either party when hiring remote talent. The business can employ and release workers as needed without much commitment from the team member's end. If workers do well for a company, they may be given more work or referred to others. However, if they don’t perform well, they can be let go without much consequence for the business.
When hiring a traditional team member, however, the employer will feel more obligated to keep employees on staff if they need to work out better. Employers will have to pay benefits whether a person is working well, so there is less flexibility in letting a team member go; employers must take care of their employees instead of just seeing them as short-term resources to be used when needed.
Furthermore, traditional employees may feel more obligated to work hard because they have signed a contract with the company and accepted wages. This means that the business is likely to get higher quality work out of traditional employees and are more likely to stay on staff long-term instead of being replaced by freelancers or contractors if they do not perform as well as desired.
When asked whether he thinks it is easier to hire a freelancer compared to a full-time staff worker, here’s what Barış had to say.
“Of course, it depends on the engagement scope and everything [else], but hiring a freelancer will be easier since you probably won’t be hiring the freelancer full-time, making it affordable. As mentioned above, there won’t be as much need for cultural fit as full-time staff. You won’t have to plan that freelancer’s career path, motivation, benefits, etc. However, as in every case, this comes with a price in project management, outcome, etc.”Barış Gürbüzler
Most businesses have a recruiting process for finding employees, whether for traditional full-time jobs or freelancers, contractors, and other part-time workers. Here's how those processes differ:
4.1 Why an effective strategy is vital
When you're looking to hire a team member, the same general principles apply whether you're looking for a contractor or someone permanent. To find the right person, you need to define the job and its responsibilities, create a recruitment strategy, and put the right tools in place to attract candidates.
You want to ensure you get all the information you need from each candidate. You may not end up hiring them, but you can still benefit from the knowledge they provide. For example:
- Set up interviews with every candidate
- Ask about their skills and experience
The first step is identifying the need for a new employee. If you're looking to hire an employee full-time, you'll have to post job listings and wait for applications. You can also hire freelancers or contractors on an as-needed basis.
Food for thought
💡 For a business looking to fill one or more positions with a full-time employee, they might use the tried-and-true methods of posting on relevant job boards, networking through industry associations, or actively seeking candidates. However, as it is becoming more common in remote work and freelancing, their search may turn to LinkedIn and Upwork to find individuals with specialized skills. They'll likely want to know what professional certifications or training those individuals have received, if they're available immediately, or if they need some time to get up to speed before starting. Most businesses don't need to worry about whether an individual will be able to meet with them in person during this step because the individual will likely be turning in a resume or filling out an application online instead of meeting face-to-face. This is advantageous for businesses that are located far away from where the potential hire lives.
The next step is screening applicants. You'll want to look at each applicant's qualifications and experience level before deciding whether they fit your company well. If you're hiring distributed team members on an as-needed basis, this step will involve less work because there won't be any applicants waiting in line for interviews or other steps in the process (such as background checks).
After this comes the interview phase, where you meet with candidates one-on-one to discuss their resumes, qualifications, experience levels, and how well those things fit with what's needed at your company. You may even ask them about their personal lives if it seems appropriate (for example: if someone has young children who need childcare during work hours). This phase can also include phone conversations with references from previous employers if you're trying to determine whether someone would fit in with your company’s culture.
5. The difference in hiring costs for distributed vs. in-house teams
Hiring team members requires a lot of upfront costs to cover the expense of health benefits, payroll taxes, and other overhead. This means that an employer must have a steady stream of incoming business to pay for those expenses without going broke. Meanwhile, when you hire a freelancer, you're paying for their time, expertise, and any contractually agreed-upon deliverables – in other words, the freelancer is paying for all the expenses themselves. This means that a freelancer can accept a gig that will cost them money (if they're using their equipment or renting space) but still allow them to earn more from their time than they would otherwise.
In addition, there are most likely other costs that come into play when hiring either type of worker. Therefore, it's always wise to consider whether you need to provide training or educational materials to help your team member do what they need to do well or if you'll need to take on healthcare costs yourself as part of the hiring package. Those expenses aren't necessarily true with freelance workers (for example, you can hire someone who already knows how to do the work they're hired for). However, there are other costs unique to each type of worker.
Certain jobs can be done anywhere in the world. The right developer, data engineer, or data scientist could be hired in any major metropolitan area. But still, some cities are more attractive places to live and work than others.
Before we get into the logistics of how much a developer would roughly cost you, it’s important to remember that the average salary depends on the individual's experience. See below for an example of the cost estimate you are likely to pay per experience:
The USA, Australia, and the UK are consistently the highest paying and most competitive job market for developers. However, the average salary is higher than in most other cities worldwide due to a stronger labor market with fewer technical workers available than elsewhere. It is also home to several different development environments requiring different skill sets to succeed.
If you’re operating your business in these geographic locations, dispersing your team across the globe would make a lot of sense, wouldn’t it?
Here’s what you can expect to pay for freelance developers across the world:
United States of America – $96,999 per annum.
Latin America – $30,000 to $60,000 annually due to lower living costs and work-from-home jobs.
Argentina – Remote software engineers earn an average salary of $58,392 per year.
Brazil – $35,000 to $63,305 per year.
As competition for top software developers increases, many startups, companies, and businesses are offering benefits. These may include: unlimited paid leave, unlimited coffee, free gym memberships, and other perks to attract top talent. These costs should be factored into the cost of hiring full-time developers.
Staff augmentation is a cost-effective staffing solution for companies with high hiring volumes. Some of the expenses typically higher when you hire in-house include:
Office spaces and upkeep
The cost of office space for a team depends on the size of the company and if it’s shared with other companies. The cost of maintaining an office space increases as the company size increases.
You’re paying for the space, electricity, and other utilities your employees will use. It’s possible to find office space with lower costs than your regular office, but it’s also more complex.
You'll need an office space for your employees who don't work remotely. You'll also need to maintain this space once they're working there full time (including cleaning), so it's worth considering whether you want to rent an office or buy one outright.
Hardware can also be expensive, especially if you’re starting out. Most businesses don’t need a dedicated IT department yet, so they can use off-the-shelf solutions until they need more advanced equipment later. However, if you are looking at expanding into new areas and want to set up your own network, this can be costly.
While freelancers and employees cost money, employees require more hardware to complete the job. The most apparent difference between a freelancer and an employee is that a team member will have a desk in a shared office space, which means that the company will need to buy more desks and chairs than they would if they only hired freelancers. In addition, since most people prefer not to work in silence, companies may need to supply employees with some sort of white noise to drown out the distractions of others. In larger offices, it is also customary for companies to provide free coffee and tea for their employees. This increases over time, especially considering that some companies might have hundreds of employees.
With freelancers, you don't have to worry about providing the necessary equipment: a laptop and an internet connection are usually all workers need. However, although for most distributed team members, you aren’t legally obliged to provide hardware – it sure doesn’t do any harm in terms of helping them provide better work. It is an extra step that you as an employer can make in order to help your team members be well set up and productive.
Taxes and benefits
Hiring full-time staff costs CTOs more than hiring distributed team members. This is because they typically have to pay taxes, benefits, and higher local wages than a contractor. This can be an essential consideration in countries with high taxes, such as Puerto Rico because it will make your company more expensive to operate without reducing its profitability significantly.
In contrast, when your employees work on a contract basis, they are required to file their own taxes, and you won’t need to worry about any additional paperwork from them or you.
If you do decide to hire full-time staff workers, however, there are some things that you should consider:
a) You'll want to make sure your business is profitable enough that it won't be affected by these costs too much - otherwise, you'll end up paying them anyway.
b) You'll also want to look into how flexible your contracts are to scale up or down quickly if necessary (for example, if your business needs more space but doesn't have room for another employee).
Paying only local wages
It's no secret that the cost of living is more expensive in some areas than others. That's why, for many companies, it makes sense to outsource labor to remote workers in countries with lower wages. But what happens when you're hiring a local worker who will spend most of their time working from home? This only comes up when hiring full-time employees because there are fewer legal and compliance reasons to hire freelancers on a per-project basis. However, companies that hire remote workers often have a hard time figuring out the cost of living in the area where they live compared to the cost of living in their own country.
In high-income areas like the USA or Western Europe, hiring remotely usually makes more sense. The overall wage compensates for the higher cost of living and allows companies to hire people who cannot relocate due to family commitments or other personal reasons.
Less flexible contracts
Because some companies do not want to risk losing employees, it may cause them to be inflexible in their contracts. This makes it hard for companies to let team members who are not a good fit for their company go, and also hard for employees to change jobs. While this might make sense for employers worried about losing highly specialized talent, it makes it difficult for a company whose needs may change quickly and frequently.
Less time and money are spent on job advertising
It's no secret that working with freelancers is more cost-effective than hiring full-time employees. However, there are some specific ways in which CTOs can realize savings when hiring remotely.
For one, there are fewer costs associated with office space and amenities when staffing is done remotely. The lack of a physical office means fewer expenses like utilities and maintenance; the lack of a physical workplace also means that the company doesn't have to pay for things like desks or cubicles. In addition, less money goes into advertising and recruiting remote workers than for those who will be working on-site.
In addition, there are savings potentials for the company's clients, who reap the benefits of increased productivity from remote workers and, therefore, a faster turnaround time on engagements. Hiring remote workers has become a vital part of several companies' business models – it frees up your time to focus on your long-term goals rather than worrying about day-to-day tasks like paying salaries and keeping up with overhead costs.
Weighing these factors, how do you decide whether it makes sense to hire locally or remotely?
The answer varies depending on the specific needs of your business. The cost of a full-time team member is more than just the salary, benefits, and taxes. Often, when companies are looking to hire new staff, it is either because they are growing or because the need for the role was not previously companies requiring other companies that require the same skillset. As a result, the candidate may be able to negotiate a higher hourly or daily rate than what was initially offered.
The cost of hiring remote workers is much lower because there are no relocation expenses and no need for housing. This allows companies to hire only the best candidates wherever they may be located. It also helps them access top talent pools in various countries where wages may be lower, but overall productivity remains high.
5.1 What are Proxify’s criteria when deciding a developer’s rates?
Contrary to Hollywood's rendition of the tech industry, a developer is not always a free-ranging, mischievous boy genius with an unquenchable thirst for adventure and a disregard for the laws of time and space (though there might be few who come pretty close).
On the contrary, finding a developer with all the qualities you need to build your product is quite challenging in today's market. For example, suppose you want to hire an expert programmer for a job requiring specific programming language knowledge. In that case, you'll have to pay more money than if you hire someone who will work with those languages but doesn't necessarily have an expert level of expertise. This is because if you're looking for someone with such expertise, there are probably only a few people currently who can do what you need to be done.
Consequently, hiring top talent does not come cheap – but why?
The main reason is that technology has become deeply entrenched in our lives. Many industries rely on software for their daily operations. This means a constant demand for new products and services that need high-quality software to accompany them. With increasing demand comes higher wages. And since developing software is much more complex than it was ten years ago, developers are constantly having to upskill themselves, resulting in them asking for more money.
You may think, "How much would a developer from Proxify cost me?" It's easier to answer with context.
We consider a few things before we make a developer an offer. Here is a short list, but it’s not limited to:
We have a wide variety of talents and skills, but the overall cost of our work is based on the market value of a developer. The more in-demand a developer is, the more they will cost.
Emilia Ramé, Talent Acquisition Specialist at Proxify, shares her thoughts on negotiating salaries with candidates.
“We always try to find an in-between what the market is paying and the candidate’s salary expectations.” We aim for all our candidates to have similar rates and equal opportunities”Emilia Ramé
There's no way to know for sure without some research. We usually start by researching market value – what other companies are paying developers to do similar work. Then we figure out how much more or less money you might be able to negotiate.
Our developers are all professionals with years of experience, so a lower price point for their services would be disingenuous and might indicate a lack of quality to you as a client. We don't want to offer you what's perceived as a "bargain" when we know that is not a true value of our work, so we only charge what we feel comfortable charging – which we hope is still slightly below what our developers' professional value is worth.
Technical test results
Asking someone to complete a technical test usually helps us determine how well they can do their job.
“Our software tests for several technical skills. We also perform a language diagnostic test.”Emilia Ramé
The results of our technical tests help us estimate how much time the prospective candidate would take to complete the task(s) and whether they are as proficient in specific skills as they claim to be.
“We check if the candidate is technically good in the field that he is applying for. Tasks include real-life scenarios and algorithmic problems.”Besfort Shehu
Then, we consider the skills of the developer that we want to hire. This includes everything from coding languages and frameworks they know to specific products they've worked on. More particular tools allow them to complete engagements faster and with fewer problems than if they were using generic tools with little flexibility. The more skills they have, the higher their rate will be.
A developer should have the relevant skills and experience to fulfill a particular engagement. For instance, if you need a mobile app developed, you will need a specialist iOS or Android developer, not a web developer. If they have all of the skills required for their job description, then they'll likely charge more than someone who doesn't have those skills. The more experience they have with a particular technology or toolset, the higher their salary will also be.
Since we work with the best talent worldwide, we always consider fluctuating currencies. They can affect how much a developer charges – so we consider whether or not currency rates are going up or down when deciding on a budget.
If they've been doing this work for five years, they might be great with Django but if they've only been working on it for two weeks they may not be able to do as much work with it as someone who's been using it for five years.
“The number of years of experience the candidate has been working with a particular technology i.e., artificial intelligence, machine learning, etc is vital. At the moment, we want to raise our bar so we really want to hire developers who do exceptionally well in their technical interviews and tests”Emilia Ramé
🎯 While it is true that our prices are not the lowest on the web, it is also true that they are competitive and affordable. We understand that you have a choice when choosing a hiring partner, and we respect your hard-earned money.
We all want low prices, but when it comes to quality, there is no such thing as "the cheapest option." If the price is too low, the company you’re working with could set you up for disaster. Using an inexperienced or unreliable developer can cost you much more than if you had gone with us in the first place.
Here's why: 🥁
🔵 Inexperienced developers don't get the job done right the first time; they must go back and fix their mistakes – that's money wasted on shoddy work.
🔵 Developers without references are risky because you don't know what kind of work they'll do for you until after they've completed your project.
🔵 When you use a cheap developer, they may try to cut corners by using cheaper programming languages or software programs, which can give your website a cheap feel and make your customers want to engage with it.
So, what does this mean for you?
Proxify’s software developers are all highly skilled, with years of experience, and have passed our technical test with flying colors. They will be able to help you get the results you need at a cost that is right for your budget.
Find just the developers you're looking for, and discover a hassle-free way to hire for product companies. Whether you want someone who can complete an hour’s worth of work or if you’re looking for something more long-term, we’ve got you covered. Get all the flexibility of vetted on-demand developers with the peace of mind of a personal hiring team.
6. Are there different ways to engage freelancers, contractors, or traditional employees?
How you engage team members, remote or in-house, can have a tangible impact on the performance of your business. As a business owner, knowing how to engage these groups most effectively to get the results you want is essential.
Business owners can engage freelancers, contractors, and traditional employees in many ways.
Remote talent typically have a more fluid relationship with their clients. They are not bound by an employment contract or other legal obligations, so they can work on engagements that interest them most. Some freelancers even take on multiple engagements simultaniously to maximize their earning potential.
Business owners who want to hire traditional employees must determine how much time they need the team member to work for them and how much money they are willing to pay for that time. Once those two factors have been determined, employers can begin searching for candidates who fit those requirements.
Any team member can benefit from an open, honest relationship with their employer. At the same time, freelance workers and contractors have different needs that should be addressed to provide successful collaboration between the two parties.
In the modern world of work, it's normal for people to work in several different capacities.
Employees may change jobs over their careers (or even within a year), or they might choose to supplement their full-time income with freelancing work.
The ideal engagement is one where both parties feel comfortable enough to speak freely about issues as they arise. The lines between employees and freelancers are blurring more and more every year as more people look for ways to make flexible employment arrangements work for them.
7. Where can I find more information on hiring freelancers, contractors, or traditional employees?
While you can find plenty of information on how to hire remote or in-house employees, it's up to you to become familiar with the legal and financial aspects of hiring people.
No universal truths regarding contracts, benefits, etc., apply across all businesses. The most important advice we can give you is to talk to other business owners in your field who have hired people before to understand how they handled the process better.
When you're CTO, it's your responsibility to ensure that your company has the talent it needs to grow and succeed. Unfortunately, tech is a competitive field, so finding great people – freelancers or full-time employees – can be difficult.
The sheer number of resources available today can be overwhelming to some, but there can be much value in seeking the right information to make a good decision. It doesn't matter if you're choosing between freelancers and employees or prefer to work with someone local or across the globe: there are plenty of places to find the information you need.
The first place you should start is with the leaders in your community. It's easy to search for local tech meetups and conferences on your website of choice (if you haven't already done so), but if you're unsure where to find these groups, ask around! Ask your friends with similar jobs or your connections about the networking groups they belong to, or post on Facebook or LinkedIn about what you're looking for!
So, where else can CTOs find more information on hiring freelancers, contractors, or traditional employees? Blogs and magazines also offer tips on how to spot the right candidate for your business, how to make sure you’re getting a good deal, and how to work through the cultural differences that can arise between those who are used to working with an office and those who are used to working from home.
You need to think about what your company needs. This could be an employee who will report to you directly or a freelancer who will help your team complete projects. If you’re thinking of hiring a contract worker, there are many things you need to consider. How long do you need their services? Is the engagement a one-time thing or something that will go on for months? Do you have the budget for this? What kind of experience do they have? Do they have any special skills or certifications? Are they available immediately, or do they have other clients they’re currently working with?
We have some great resources for you if you’re looking for more information on hiring freelancers, contractors, or traditional employees. Proxify’s blog is a great place to start. We post everything from hiring and retaining top talent to keeping costs down and improving your company's culture. You can also find links to some of our most popular articles here.
Traditional employment is a good choice to maintain a stable workforce. Contracting is best for companies that need specific skills or engagements but don't need a permanent team member. Freelancing may be the best option for companies with short-term engagements that require specific skills.
Different types of employers have different ways of getting work done. Some businesses thrive with a workforce entirely of freelancers and contractors, while others prefer to have their employees in the building. Some companies incorporate the best of both worlds and tap into the flexibility of freelancers when needed and having full-time, brick-and-mortar employees under one roof when they need them. Every company has its own needs, and no matter what those are, having a workforce with a diverse range of talents will be an asset to most businesses.
Suppose you’re a business owner 'toying' with the idea of what kind of employees to hire for your projects. In that case, William gives this advice:
“First advice I’d give is to foster a culture where there is no ‘us’ and ‘them’ between contractors and full-time employees. It should be crystal clear to your employees that you are not ‘outsourcing” parts of your business. Integrate your new colleague as if it was a full-time employee by inviting them to daily stand-ups and all other meetings you’d invite a ‘normal employee’ to.”William Svedström
Secondly, he suggests starting small and aligning on goals and objectives for the role or project.
“Thirdly”, he adds, “make your new colleagues' work visible and try to review work early and as often as possible.”
“Some Engineering leads spend so much energy on hiring that their product development and company growth are at risk. At Proxify, we want you to find just the developers you're looking for and discover a hassle-free way to hire for product companies. Our business model allows you all the flexibility of vetted on-demand talent with the peace of mind of a personal hiring team.”William Svedström
Your company hires happy, motivated developers that do not cost you an arm and a leg.