Freelancers instead of permanent employees: Advantages and disadvantages for entrepreneurs

Some companies resort to the help of freelancers in order to adapt their staff to individual situations at short notice. In many cases, this provides more flexibility. However, it can also mean less planning security. We have taken a closer look at this business model and examined the benefits for companies.

Employing freelancers in addition to the permanent staff often opens up new opportunities. Short-term bottlenecks can be compensated or missing qualifications can be expanded. Nevertheless, the use of freelancers is also associated with many rules and additional work. In addition, they are not suitable for every assignment.

Differences between freelancers and employees

The two employment models offer different advantages and disadvantages. The biggest difference is that a freelancer does not receive a fixed, regular salary. In addition, there are other criteria that make the difference clear:

  • The freelancer pays the social security contributions himself.
  • There is no protection against dismissal for freelancers.
  • Freelancers are not bound to company-internal working hours.

The classification of freelancers is also important. Different professional groups and their activities are already clearly defined here in the Income Tax Act (§ 18 EstG):

  • Doctors, dentists, veterinarians
  • Lawyers and notaries
  • Surveyors
  • Architects
  • Auditors and tax consultants, tax agents
  • alternative practitioners and physiotherapists
  • Journalists, photojournalists, interpreters, translators

When is it advisable to use freelancers?

A mere comparison of the costs incurred – salary and fee – is too short-sighted. Other factors must also be taken into account.

Freelancers are ideally suited to compensate for personnel bottlenecks or for a lack of qualifications in project management. An extensive study in the IT sector has found that the employment of freelancers is cost-effective there, especially for short-term assignments in a period of less than nine months according to the classic cost-benefit model. According to this model, they would need a much shorter start-up time until the beginning of productivity (one month) than permanent employees (three months). The progressive cost-benefit model shows an even greater cost advantage.

Possibilities for restructuring

In uncertain times, employing freelancers offers the necessary flexibility to react precisely to the current need for personnel. It can therefore be very cost-effective to employ a larger number of freelancers instead of an extensive permanent staff.

Those who want to reduce the number of their permanent employees have various options. Instead of dismissal, older employees can be offered partial retirement or severance pay.

In order not to be bound to longer notice periods, a termination agreement can be a good alternative. However, the employee’s consent is required here. Although there is no legal entitlement to severance pay in this model, it can be contractually agreed. The termination agreement offers both parties more freedom to shape the end of an employment relationship in a self-determined manner.

Fixed costs for personnel are still among the highest regular expenses of a company. Freelancers offer more leeway here to be able to react to short-term fluctuations.

Advantages for the employer

As the study confirmed, employers can benefit from the fact that freelancers quickly learn new areas of responsibility and achieve high productivity in a short time. In addition, they often have a wealth of experience due to the different projects they have already worked on. They can look at a subject area from different angles, which is often a great advantage.

Freelancers are usually special experts in a very specific field. This expertise can be used specifically for a precisely defined task. The qualification is therefore usually the main criterion when choosing the right freelancer. A relatively high fee can certainly pay off. Due to the great competition among freelancers, a high level of performance can also be expected.

The recruitment costs for freelancers are much lower than for permanent employees. Above all, special recruitment platforms and relevant project exchanges make it far easier today to find a suitable freelancer at relatively low cost.

If the freelancer does not work directly in his own company, but works with his own infrastructure (computer, telephone, office space, etc.), there is also a cost advantage here, as no working environment has to be provided.

A freelancer is not protected by safety mechanisms under employment law. In case of problems, the cooperation can be terminated at short notice. In addition, poor performance does not have to be paid. For this it is important to precisely record the goals of the cooperation in writing.

Disadvantages for the employer

A certain level of trust is necessary for a successful collaboration with freelancers. They often get an extensive insight into the company and also into processes and details that should not be disclosed to the outside. A confidentiality clause in the cooperation agreement creates a certain degree of security here.

Freelancers prefer to work according to their system and also work most efficiently.

After the cooperation, problems may therefore arise if the work has a different structure than is usual in the company. Approaches that make sense in the short term may have disadvantages at a later date that were not initially considered. Permanent employees often think more sustainably and long-term here – among other things, because they also have a deeper insight into the company structure.


Freelancers can offer a decisive advantage with their high level of expertise, fresh ideas and speedy approach to many projects. Especially when it comes to costs, they are a good choice for shorter collaborations. They make it possible to balance out or expand areas of work that are not covered or not sufficiently covered by in-house staff within the company. Time bottlenecks can also be absorbed well.

When calculating, hidden costs such as contributions to the artists’ social insurance fund should not be forgotten. If you want to profit from a work result with freelancers in the long term, you should make sure that internal company standards are taken into account to a particular extent. For projects that require a deeper insight into the company, freelancers are not so well suited.