Nowadays companies are hiring freelancers on their own when carrying out specific projects or to work regularly in the company, but these types of employees have different conditions than employees. There are many advantages that make an increasing number of companies want to have this type of employee in their templates.
Hiring a freelancer or freelancers can become a good solution when it comes to carrying out a specific project or giving way to tasks that within the company would take too much time or dedication. It can also be convenient because of the savings that companies can obtain. But is it better to have self-employed or salaried workers? In this post, we will tell you the advantages and disadvantages of each type.
Before focusing on the main topic, let’s make clear the differences between self-employed (self-employed) and employed (salaried).
Self-employed definition: A self-employed person is one who resides in the country whose income comes in a proportion equal to or close to 80% from the performance of commissioned work, such as activities of commerce, mining, fishing, sports, electricity and gas, wood industry, etc.
When we talk about self-employed is the same as saying self-employed or freelance. In this case, you work for yourself, you have to work hard and you must be in continuous recycling. This way of working can give a high quality of life, always with good advice and delinking the personal accounts of the professionals, in order to face the taxes with liquidity and the payments that may arise.
Definition employed by an employee: A person who works as an employee is one who is hired under an employment contract by an employer and is hired at least one hour a week and receives consideration for it.
In this case, as we have mentioned, we work with an employment contract where the working conditions are stipulated, both hours and payroll, an employee is limited, since he has a schedule to meet and economic expectations as he has agreed in the employment contract that he has signed with the employer, it is less flexible work than self-employment.
Differences between self-employment and working as an employee
- The person who works as an employee has a stable and fixed monthly salary, while the one who works on his own account will depend on the billing issued by the company.
- The employed person (employed) must be subject to the schedules, breaks and place of work established by the employer, while the self-employed person shall establish his schedules and breaks while choosing the place where he wants to work.
- The employee depends on his company: if it closes the worker also ceases his activity, unlike the self-employed who, if he loses a client, will go to another sector of the market looking for new customers.
- The employee to access a job must have more experience than the freelancer.
- To be self-employed, it is necessary to fill in Form 037 to obtain the registration of Economic Activity and to work as an employee, a model of an eventual, full-time, temporary or indefinite contract is filled in according to the type of contract.
- The employee has to pay from his gross salary the Social Security contributions and the withholding on account of the IRPF, but as the procedures are done by the company, many do not know how much and what they really pay. Like employees, the self-employed also contribute to Social Security by paying a monthly contribution and personal income tax is deducted. In addition to social contributions, the self-employed pay taxes, through Personal Income Tax and VAT. In relation to Personal Income Tax, if you have the bonus of a newly self-employed person it drops to 9%, if not, it ranges between 15% and 19% of income. As for VAT, they adjust accounts with the State quarterly: they pay the Treasury the difference between the VAT they have charged their customers.
Having seen the most important points to understand the types of employees that exist, it is important to point out that if there is something that has changed significantly it is the “wanted” permanent or indefinite job since it has been transformed. Now companies have skyrocketed the hiring of self-employed workers. It is a way for companies to significantly reduce labour costs. A study carried out by the American consultancy Tower Lane said that 54% of companies plan to increase the hiring of freelancers.
Working as a freelancer is “necessarily” fashionable, due to the situation of the country, because it is a model that triumphs abroad, but each scenario has its advantages and disadvantages, so each company must assess what needs it has and if it prefers to have a varied workforce of employees and self-employed or only of one type or another. Next, we tell you the different advantages of hiring a freelancer and an employee:
Advantages of a company for hiring freelancers:
- With the economic crisis, many of the companies began to bet on the self-employed instead of salaried employees. The main advantage for the company of hiring a self-employed employee versus a salaried employee is that the cost to the company is lower. If a salaried worker is hired, social security contributions are higher.
- If the company hires a self-employed person, he or she runs with social security contributions and taxes and his vacations are not remunerated as it happens when he is an employee. Yes, there are companies that are willing to pay the self-employed fee, since it is still cheaper than the social security contributions of a conventional employee, although it is strange that this happens.
- The employer has the advantage of not paying maternity leave or leave or any other justification to which he would be entitled if the employee were an employee.
- The fees paid by the company to the self-employed employee represent a tax-deductible expense for the company in concept of independent Professional Services, that is, it allows the company to deduct VAT every quarter.
- Companies that hire freelancers have fewer administrative ties. It is the self-employed who have to make their invoices and carry out their own management, compared to salaried workers where the company has to take care of their registration in the social security and pay the contributions.
- In most companies, if a salaried employee works more hours than those set out in his contract he has the right to free hours, but if he is self-employed the company does not have to give them to him.
Advantages of a company for hiring an employee:
- If the company intends to have a closer relationship with the employee and continuously in the hope that he wants to grow within the company, it is better to hire a salaried person.
- When the company wants to create a safety zone in the company and thus retain talent, it is better to hire employees. If someone has, even with a minimum wage, has the ability to cover their basic needs, if their salary is considerable like that of an executive, this will give them a financial level that gives a lot of security.
- In relation to the previous point, when the company offers this type of contract with a fixed salary, financial stability is created for the person and when someone has a fixed income, they can plan their life with a fair level of certainty and this makes the employee much more productive and motivated in the company.
- Companies that hire employees have employees in the company for a few defined hours. It is a very good thing when you want to have a follow-up and an order of work.
- Companies have the advantage of having people much longer, this translates into a greater experience of the staff that knows their functions well and that is prepared to grow professionally within the company.
- The commitment on the part of employees for the company is much greater with salaried employees than with hiring freelancers.
So what’s the best option for businesses? In reality, it is not a question of which is objectively better, but of what your priorities and needs are as a company according to the current situation and what is expected of the workforce.
In summary, we could say that if you are looking for employees to carry out specific projects it is a good option to hire a freelancer, but if you are looking for professional growth and attract the talent it would be a better option to hire a person as an employee.
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