Full-time Developer vs Freelancer vs Software Development Company

Introduction

Let’s go back once again to the difficult decision of what to do when hiring a software developer. This is a strategic step that will decide the end product’s future, leading to success or failure with even chances.

And it’s not all about the cost – there are other vital considerations to take into account when hiring a freelancer, a full-time developer(s) or a development company. Also, bear in mind that none of these 3 options is better or worse than the other – each is solid and relevant for particular projects in particular circumstances. Overall, you should consider the following aspects.

Long-term or short term?

If a project runs for few months/years, do you have enough resources?

Will you need ongoing maintenance and regular updates for a product?

Or is your project going to take less than one year?

Project specifications

Do you have all the technical requirements and a list of features clearly determined?

Or do you need additional guidance on project specifics?

Of course, for technical expertise and/or business analysis, you’d want an agency.

Budget

The essential part, surely, defining what you’re capable of paying for, though not as one-sided as “with small budget, I’ll hire a freelancer, and with huge budget, a company”. Rather it depends on the project length too.

Say you have a one-year-long project:

An hourly rate basis or full-time employee, which would be more optimal?

Are there training, taxes, insurance, hardware expenses involved?

Business culture

What communication style do you prefer?

Two out of three hiring options imply conversing remotely, are you ok with that?

Are you open to new ideas and input that could result in project changes?

What project management tools/services are you comfortable with?

The choice between a full-time developer, a freelancer or a contracted company depends on your business (and personal) goals, location and economy, company style, etc. For some, freelance can be a good start, delegating smaller or short-term tasks and collecting experience. Others may need flexibility, mobility and guiding input by a trusted software development company along the way. Let’s see what the pros and cons of each option are.

Hiring a full-time developer: pros & cons

The full-time employee option guarantees that he/she works for you for the project timeline, typically devoting 40 working hours a week. A full-time developer may be paid on hourly basis or given a monthly salary, and the employer has to provide office space and equipment, taxes, insurance, vacation and other benefits.

Pros:

• Valuable member. A full-time developer employee will learn all about the business in detail, be a part of a corporate culture, promote your company/brand elsewhere. This is a worker fully accountable to perform the work, and you can measure it all the way through.
• Motivation. Being a part of company and working to retain permanent employment and income is motivating for full-time developers. In addition, they often work longer hours when there’s a set date for a software project. Plus, there are things like performance reports, management, work rules and a boss… just in case 🙂
• Ongoing training. As often there’s a need to switch to new technologies, tools and frameworks, having full-time employees will make this learning process a team and collaborative effort. Providing necessary training/courses to employee, in turn, ensures overall company competitiveness.
• Optimum scope of work. As an employer, you can demand what work and ways to do it from a full-time software developer. You can maximize his/her capabilities, assigning different tasks depending on skills or tasks at hand.

Cons:

• Compensations and taxes. On top of salary, a full-time software developer is entitled to compensation, such as paid leaves, health insurance, payroll taxes, etc. Those are usually deducted from salary and should be a part of the work contract, unless there are legal issues.
• Work efficiency. While full-time employees mostly tend to be motivated and eager to do the job, there’s also a flip side. Lost productivity issue is serious, some estimates state 700-750 hours a year are wasted on gossip, social media and coffee breaks. What’s more, superiors hovering over your shoulder and constantly pushing could demotivate some.
• Legal obligations. Surely, you are more secure with a full-time developer than with a freelancer, as he/she is more responsible and relies on the salary. However, it’s much harder to terminate an employee if things aren’t working out, and you have to take care of a severance package, legal issues, etc.

Hiring a freelance developer: pros & cons

Software developers can work in all three areas (freelance, full-time, contract) due to the fact that they can execute tasks remotely, and partially due to high demand as well. Typically, freelancers are hired for a particular project, and the agreement is plain: do the job and get paid. Freelance developers often undertake several projects at a time, which is a risky factor you have to be aware of.

Pros:

• Rates. Usually, freelance developers charge 203-% lower than software agencies. Also, employers do not have to cover health insurance, taxes, supplies, etc.
• Easy to find. With high demand, there is no shortage of platforms to find and hire any kind of freelancers: Upwork, Toptal, Guru, Crew, Gigster, Elance to mention a few. Agree upon the terms and start right away.
• Solid skills in a specific field. To be successful, freelancers tend to master their skills in one area, that’s only natural. With that and accumulated experience in that area, they can complete tasks and/or projects seamlessly.
• Fewer obligations. Contrary to full-time employees who have certain rights under the law and are entitled to work benefits, freelancers work under a contract and all you have to do is to pay for the job done.

Cons:

• Reliability issues. Working on multiple projects simultaneously, there is a risk of them disappearing from contact for days or weeks. In some cases, confidentiality could also be at risk, and though an NDA is a common practice, you still have to be careful.
• Attitude. Not every freelance developer will care about product quality as much as you do. Most of them don’t even try to win returning clients, unlike companies who care about their reputation.
• Self-organization. While they may do the job just fine, they may be lacking skills necessary for planning and organizing the work process, which potentially leads to broken deadlines.
• No maintenance. Freelancers may build a website, design a mobile app, create a game, but once it is finished, so are they. Bug fixing, support and maintenance is your own agenda.

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Hiring a software development company: pros & cons

Hiring a software development company is the best choice in terms of professional work, working relationships, quality end-product and security. Such companies, as a rule, consist of all kind of experts (web/mobile developers, designers, analysts, project managers, testers, etc.) to ensure full-cycle of services.

The process is divided into small stages (sprints/iterations) for supervision and possible amendments. Two key payment options are ‘time & material’ and ‘fixed price’, and what is also important, is that an employer secures full rights to the product and the source code.

Pros:

• Full package. A proper software development company will provide all kinds of services, including business analysis and consulting, idea verification, monetization models, etc. More importantly, their teams consist of professional developers, designers, QAs and other experts, all under one roof.
• Smooth workflow and attitude. Working closely with project managers, checking reports and directing the work, planning the next stages… all in all, the workflow is established and deadlines are usually met. Software companies care about results in same manner as they care about their reputation. They are available anytime, open and responsible.
• Experience. A good company will have worked on many projects, and should have an extensive portfolio for everyone to see. Also, smaller agencies with 10-30 developers tend to be focused on one or two technologies (e.g. JavaScript, PHP, React, etc.) constantly building up expertise.
• No legal issues. As business entities, software development companies guarantee legality, reliability and stability. Works and financial records are almost always available. In addition, they prepare contracts and all the documents to get started on your project, you just have to learn what you’ll be signing.
• Up-to-date with technologies and trends. It’s in the interest of development companies to be constantly improving and to follow the latest industry trends, so that they are able to offer relevant solutions in terms of building your next product.
• Accountability. Probably the strongest asset, when compared to freelancers, is a guaranteed professional approach and reliability in terms of abiding by their contractual obligations and product delivery. All the work can be tracked down by the hour, every feature tested for being up to standard. In the big picture, companies prefer long-term trustworthy relations with clients, based on an individual approach and quality over quantity. Also, don’t forget that you’ll need further support and maintenance for a software, or even new functionality.

Cons:

• Higher cost. The clearest and inevitable downside are higher rates. Companies employ expert developers who cost more than freelancers, and if your project team consists of multiple developers who’ll be working for several months, the cost will be quite impressive.
• Rate differences. Hourly rates, sometimes, can be drastically different in various regions. From lowest in India ($10-20) to audacious $200-400 rates in US and Europe. Though, Eastern European companies, in particular, seem to be evolving fast as a “sane” mid-price alternative, it could be confusing to understand the difference behind such rates.
• A hard choice. One of the top directories for IT services, Clutch, enlists around 15,000 companies in Web development directory, 5,500 firms in Mobile app development directory and about 20,000 digital design companies. Imagine you know nothing or little about this area, which one would you choose and how?

P.S. Cost issues

In raw figures comparison, freelancers win against full-time developers and companies, of course. There are no additional costs except the rate. While development agencies have to deal with office rent, human resources, managers, marketing, accounting, etc., and they have to add those expenses into the cost of their services.

However, there are certain hidden costs, that could tip the scales back to companies.

Firstly, any recruitment efforts take time and money, and finding talented developers individually is going to be tougher than hiring them from a company staff.

Also, freelancers are a less stable option compared to companies, and the recruitment process could end up being more costly.

Regarding full-time developers to hire, consider the costs of hiring and training. For instance, a study by Center for American Progress estimates the cost of hiring a new employee for high-level positions can make over 200% of annual salary (thus, the cost to hire a software developer with $150,000 salary will actually be about $300,000).

Training usually takes several months and also is one of the most expensive investments.

Plus, there are often company-paid benefits, such as health coverage, leave, insurance, bonuses, etc.

Summary

Let us sum up what’ve discussed. What option is the best for your project?

In general, freelancers are the cheapest and good for short-term tasks. However, as they usually work on multiple projects at the same time, cooperation can be less predictable and could end up being more costly.

Hiring a full-time developer costs a lot of time, effort, and money. You also need to take care of the contract and all other legal obligations. The unquestionable advantage of having an in-house development is the freedom of assigning tasks at hand.

Working with outsourcing companies and development agencies is pricey but saves you a lot of time and effort, and ensures the highest quality end-product.

Luckily, this range of options for hiring allows enough freedom of choice for everyone.