Why do Freelancers earn less than employees?
Clearly: Freelancers are cheaper than employees.
In the IT domain, the difference is not as large as in other areas. However, it is evident, when you calculate all cost caused by an employee like paid vacations, work place and technology used, administrative support, training. Take the salary times 2.4 and you get the complete cost an employee causes.
I believe that there is always a reason for such differences. Money is taken so important by most people and therefore serves as an important criterion for decisions of all kinds. A thing´s price therefore measures its value. Not its objective value, but the subjective value. The price results from a measuring of forces of those who sell and those who buy.
As freelancers are cheaper than employees, this creates two questions which can discuss how the price differences was created and why it stays:
1.) Why do employers employ people if they can get
a freelancer cheaper? The naive reply would be that employers mainly pay for loyality and knowledge management. They need at least a core team which collects and conserves experiences, so errors are not repeated. However, their readiness to fire people shows this is not always the explanation. I believe it is like this: Each manager´s importance is measured by the number of his employees, not his freelancers. So, he has an interest in having employees below him to give him importance. It is the same for the company. A company´s size is measured in number of employees. So, by employing people, who might be more expensive and less productive than freelancers, the company buys reputation. I know only one exception: Private universities measure their size in number of students, not by professors or employees. So, they can work with few professors and many freelance trainers.
2.) Why do people work for less money, if as an
employee they could earn more? What do they pay this
financial price for?
There can be different reasons for this. The low income can be the prize of risk and opportunity. As a freelancer, you might earn several thousand a day, but it is also possible that you must work much for a low income. In average, it will be lower than for an employee, calculating all your overhead like insurances, training, income loss during vacations and all.
However, some have no choice. Being competent but having an unusual CV, they pay the price for going their own way before. Maybe, they were too eager and changed job for improvement too often, maybe they said their opinion too often or made important people their ennemies.
For me, the risk and lower income are the price of freedom. I can follow my own ideas, at own risk. Especially in terms of moral. No lying to customers, no intrigues in the "team", just results and quality. As an employee, I felt like by paying me a salary, I belong to the company completely, including my spare time and my opinions. My customers do not demand such things from me! I am not paid for having no own opinion, but I am paid for having one!
In the IT domain, the difference is not as large as in other areas. However, it is evident, when you calculate all cost caused by an employee like paid vacations, work place and technology used, administrative support, training. Take the salary times 2.4 and you get the complete cost an employee causes.
I believe that there is always a reason for such differences. Money is taken so important by most people and therefore serves as an important criterion for decisions of all kinds. A thing´s price therefore measures its value. Not its objective value, but the subjective value. The price results from a measuring of forces of those who sell and those who buy.
As freelancers are cheaper than employees, this creates two questions which can discuss how the price differences was created and why it stays:
1.) Why do employers employ people if they can get
a freelancer cheaper? The naive reply would be that employers mainly pay for loyality and knowledge management. They need at least a core team which collects and conserves experiences, so errors are not repeated. However, their readiness to fire people shows this is not always the explanation. I believe it is like this: Each manager´s importance is measured by the number of his employees, not his freelancers. So, he has an interest in having employees below him to give him importance. It is the same for the company. A company´s size is measured in number of employees. So, by employing people, who might be more expensive and less productive than freelancers, the company buys reputation. I know only one exception: Private universities measure their size in number of students, not by professors or employees. So, they can work with few professors and many freelance trainers.
2.) Why do people work for less money, if as an
employee they could earn more? What do they pay this
financial price for?
There can be different reasons for this. The low income can be the prize of risk and opportunity. As a freelancer, you might earn several thousand a day, but it is also possible that you must work much for a low income. In average, it will be lower than for an employee, calculating all your overhead like insurances, training, income loss during vacations and all.
However, some have no choice. Being competent but having an unusual CV, they pay the price for going their own way before. Maybe, they were too eager and changed job for improvement too often, maybe they said their opinion too often or made important people their ennemies.
For me, the risk and lower income are the price of freedom. I can follow my own ideas, at own risk. Especially in terms of moral. No lying to customers, no intrigues in the "team", just results and quality. As an employee, I felt like by paying me a salary, I belong to the company completely, including my spare time and my opinions. My customers do not demand such things from me! I am not paid for having no own opinion, but I am paid for having one!
AndreaHerrmann - 12. Apr, 14:53
