For Employers: Should you hire a freelancer or set up a PAYE employee?
In recent years, particularly since COVID-19, there has been an increase in freelance roles submitted by employers on Creative Opportunities. With an uncertain economy disrupting recruitment cycles, freelancers have become a practical solution for delivering ongoing projects without committing to long-term contracts, especially for smaller companies.
For smaller organisations, hiring freelancers can be beneficial when you have specific, temporary project work requiring midweight-level industry experience or above. This can reduce the need to set up payroll, statutory benefits, and manage additional administrative and legal responsibilities.
This also includes IR35 compliance. Medium and large businesses are responsible for determining whether a freelancer is a “disguised employee,” and incorrect classification can lead to back taxes and penalties. Hiring an employee through PAYE can help reduce this risk.
However, if your business requires a team member for longer-term workflows, with a defined job role and consistent outputs, a PAYE employee may be the better option. This provides greater stability and allows you to establish a clear way of working.
Freelancers typically charge higher hourly or daily rates, depending on the brief. This reflects the fact that they are operating as independent businesses, covering their own:
- National Insurance contributions
- Pension
- Benefits such as sick pay and holiday
Freelancers will also usually provide their own equipment, software, and workspace, whereas employers are responsible for providing these for employees.
Employees have a lower pay rate but may involve a higher total cost for PAYE tax, NI, pension, and benefits, whereas a freelancer will handle this using a Self-Assessment tax form or through their own company. Freelancer rights mainly include health and safety, and discrimination, whereas a permanent employee has statutory rights such as parental leave. In this scenario, for a long-term workflow, it may be more cost-effective to hire a freelancer for specific projects because it lowers long-term financial liabilities and employment costs.
Employees, while having a lower base salary, may result in higher overall costs when factoring in PAYE tax, NI, pension, and benefits. Freelancers, on the other hand, manage their own tax through Self-Assessment or their own company. In terms of rights, freelancers are mainly covered by health and safety and anti-discrimination protections, while employees are entitled to full statutory rights such as parental leave.
For project-based work, freelancers can help reduce long-term financial commitments and employment costs. They also offer flexibility, with shorter or project-based notice periods, making it easier to adapt team size depending on workload. Freelancers often bring specialised, up-to-date skills that may be costly or unnecessary to maintain in-house. However, this approach does not build long-term company knowledge, and training employees may be more cost-effective over time.
In some cases, employers require more control over working methods, duration, and location. Employees work within defined structures, whereas freelancers typically have greater autonomy. Freelancers can often be onboarded within days, while hiring and onboarding an employee may take weeks or months.
A hybrid approach can be effective, combining:
- A core PAYE team for continuity and company culture
- Freelancers for specialist projects or increased workload
It is also important to consider that relying on freelancers may limit the development of a consistent company culture. Freelancers may work across multiple organisations, which can create potential conflicts, particularly around intellectual property and copyright. Employee contracts generally provide greater control in these areas than freelance agreements.
For businesses, the GOV.UK PAYE for Employers guide provide official compliance steps, and tools like the HMRC CEST tool can assist in evaluating current worker statuses.
If you are an employer looking for UAL student and graduates to make a creative impact, why not post your opportunities on Creative Opportunities? Run by Careers and Employability, it is the go-to hub for creative students and graduates. You can post jobs, paid internships, competitions, and volunteering roles. If you are looking for an art, design, communications, or a performance student or graduate, then this is the place for you! Our goal is to help you build your perfect creative team!