Challenging the in-house model
Organisations have used in-house staff for decades, why change that?
Firstly, our culture and attitude to work is changing, powered by technology. By 2020, the majority of the workforce in most developed markets will be freelancing. To continue to attract the best people, organisation will need to change how they resource projects.
There are also two good reasons why an organisation would embrace the elastic model right now.
Access to better quality
An organisation that limits itself to hiring people in a commutable distance from their physical location severely restricts their access to talented people. The world is a big place, with an ambundance of talent who live more than a 90 minute commute from your offices.
Advances in cloud computing, file-sharing and video-conferencing have completely negated the need for a person to be in the same room as you to collaborate effectively.
And by using a freelancer management system that enables seamless vetting and onboarding, you remove some of the factors that might affect quality.
This is probably the most common reason for using freelancers - the chance to reduce operating expense.
Whilst it's normally true a freelancer's day rate will be more than a traditional PAYE employees, an arbitrary comparison of day rates doesn't reflect true cost.
Let's look at an example of a mid-weight designer:
Day rate: £350
Equipment cost: £0
NI contributions: £0
Downtime cost: £0
Equipment cost: £2,000
NI contributions: £4,000
Downtime cost: £8,000 (80% utilisation)
The freelancer offers the benefit of 100% utilisation, controllable costs and no hidden overheads such as equipment costs, holiday pay or sick leave. The PAYE employee may be cheaper day to day, but in this example, the permanent hire will cost £46,000 whether they are working on a project or not.