Interim v. Perm: the reality of costs and flexibility

Interim v. Perm: the reality of costs and flexibility

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Summary

There are 260 weekdays per year but a permanent employee, on average, will work only 223 days. Taking this into consideration, the effective average day rate for a permanent employee is £411. National insurance and pension contributions from the employer represent permanent employee costs that are usually not considered as high as they really are. In value, these contributions represent more than 10% of the total annual compensation for permanent employees. These costs don’t exist when you hire a freelancer.

When comparing day rates to permanent employee costs, the gap between interim and permanent pay can look quite large.

However, the gap begins to decrease with seniority.  And hiring permanent employees comes with hidden costs.

In reality, interim hires have a comparable cost to their permanent counterparts.

 

Effective number of working days

 

One of the main differences between interim and permanent employees is that you pay freelancers based on the actual number of days they work on your project. When it comes to permanent hires, it’s a bit different. You have to consider sick days, paid holidays, bank holidays or even weekends. There are 260 weekdays per year but a permanent employee, on average, will work only 223 days. Taking this into consideration, the effective average day rate for a permanent employee is £411.

 

National insurance & pension contributions

 

From the employer, these represent permanent employee costs that are usually not considered as high as they really are. In value, these contributions represent more than 10% of the total annual compensation for permanent employees. These costs don’t exist when you hire a freelancer.

 

Onboarding and offboarding

 

You’ll invest more time in the onboarding process for a permanent employee. Also, you’ll have to consider training costs. Because you hire freelancers for their expertise, onboarding will take you less time. A freelancer will be ready to work as efficiently as possible faster than a permanent employee. We often hear companies say that it takes 6 months until a permanent hire adds value in high-end professional services, while a freelancer adds impact almost instantlyRegarding offboarding: interim contracts can be ended with little to no notice. There are a number of reasons why you may need to let people go. Termination of permanent employment brings costs that don’t apply to freelancers. Hiring freelancers also means hiring at a lower risk, knowing sunk costs will be minimal if the contract has to be ended.

 

 

Freelance consultants v. permanent employees: Flexibility & quicker hiring process make for comparable effective costs 

 

Freelance contracts can be ended with little to no notice

 

There are a number of reasons why you may need to let people go. Valuable permanent employees may also decide to leave – according to Payspective data, most employees now change jobs every 2.5 years. Termination of permanent employment brings costs. These costs, by and large, don’t apply to freelancers. So you can hire at a lower risk, knowing sunk costs will be minimal if the contract has to be ended. Freelancers can lead to a permanent employee: you save yourself a lot of time and effort in recruiting and de-risk the recruitment of an important role.

 

Freelancers can be hired much faster than permanent employees

 

Recruiting for a freelancer can take just a few days on movemeon. Freelance interview processes are generally fast as hiring managers are focused purely on competency, not team fit. In contrast, recruiting for a permanent employee takes a number of months. During this time, businesses may suffer simply because there is nobody in role. Simply put, there is an opportunity cost to the business.

 

Freelancers are industry specialists & always bring their ‘A’ game

 

A freelancer’s livelihood depends on their reputation so they will always do the best job they can. As they have the freedom to choose their own projects, they are also more likely to have a focused portfolio, which means you get deeper industry expertise at a lower cost than that of the equivalent permanent employee.

 

To summarise

 

When deciding whether to hire a freelancer or permanent employee, it’s important to consider these factors before making the final decision. How important is it that they make an instant impact? Is this going to be a long-term role or a short-term one? How exciting is the role? Could you use the path to take a freelancer onto a permanent role? After answering these questions you should hopefully be able to make the right decision.

 

Are you looking for freelancers? Do you need some more info? Don’t hesitate to drop us a line at info@movemeon.com or to visit our contact page.


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