Pros and cons of hiring individual contractors vs agencies

Outsourcing is one of the best solutions for businesses to tackle functions or projects that don’t fall within a component of the core business. It’s a particularly effective strategy for small businesses and startups, as an alternative to expanding the in-house team of employees.

When looking to outsource outside of your company, you can either hire an agency or enlist the help of any number of independent contractors. Both options allow you to fill any skills gaps in order to achieve your goals, yet each comes with advantages and disadvantages. Examine the pros and cons of hiring individual contractors versus agencies, so that you can make the best choice for your company.

Hiring contractors

Contractors, or freelancers, work independently and aren’t attached to a company.

Usually self-employed, they offer their professional services to clients directly, negotiating their own terms and rates. Almost every type of service can be provided by a freelancer, with some common ones including marketing, design, coding and writing.

Affordability

Contractors negotiate their own terms and prices without a third party in control of their rates. The cost of hiring an independent contractor is typically lower than signing on an agency, as there’s no middle person and they have lower running costs, unlike the hefty overheads of an agency that employs whole teams of people. If you’re a startup with a limited budget, hiring a highly skilled independent contractor with a diverse skill set might be a more affordable option than a full service agency or an in-house person. For straightforward and uncomplicated projects, there should be one to suit your organization's needs.

Dedication to quality

Independent contractors have to work hard to be better than the competition. Client referrals and word of mouth are often crucial to maintaining a steady income. Being solely in charge of their own reputation, how they’re perceived, and the quality of their work are important factors in being able to get consistent work.

In order to remain competitive, a good independent contractor will place a high value on their relationships with clients, invest time in keeping up to date with new trends, tools, and skills, and be dedicated to delivering top quality work. They’re typically armed with a suite of other skills, too, as they run their own business and do their own sales.

Flexibility

Independent contractors are often able and willing to be a lot more flexible than agencies. It’s much easier to negotiate changes in a contract with one party and one decision maker than it is with an agency, which will often require multiple people to sign off on changes, if changes are permitted at all. When it comes to the timing or scheduling of a project, freelancers are much more likely to be able to adapt to your needs than an agency.

Inconsistent work processes

Each contractor works to their own unique schedule and framework, so you may find vast differences between how two contractors each approach their work. It’s important to specify any formal structures or boundaries during the negotiation process to ensure that they will be able to work to your expectations.

Risk and compliance issues

It’s considered best practice to have a contractor sign a contract, to ensure the deliverables are mutually understood, and to ensure both parties stay onboard for the duration of the project. It’s also important to prepare any necessary non-disclosure agreements (NDA) to protect your business. Any reputable freelancer won’t have an issue with signing these standard documents.

Compliance can also be a pain point for business owners. It’s important to understand your obligations, what policies apply to you and to take measures to protect yourself against false self-employment. A contractor management system can help you ensure you avoid these risks.

Less supervision

If your contractor has more than one project, with multiple priorities and stakeholders to manage on top of the actual services they provide, naturally, this can raise concerns that your project will fall to the bottom of the pile. Unlike at an agency, where there’s often a team lead to oversee your project on your behalf, nobody is supervising the work of independent contractors unless you do. This means you’ll need to take an active role in checking deadlines and milestones. This is where a contractor management system can also carry a lot of the load.

Hiring agencies

While agencies and contractors can deliver similar types of work, there are differences between the two kinds of services. An agency is a company that employs full time experts with skills covering various disciplines such as design, product development, and marketing. Having permanent teams of people, agencies are able to provide one-stop, tailored solutions to any number of projects.

More resources

Agencies have a wider pool of resources, with multiple people working across a variety of disciplines. So, if you find mid-project that you need to bring in a new skill, chances are you’ll be able to source that from the agency you’re working with, rather than spending time finding and vetting someone independently.

Quality control

Agencies typically have standardized processes and structures, ensuring there is consistency to the approach, the quality of work, and how it’s delivered. So, if you have multiple people working together, you know that an agency will do the work of ensuring that each person delivers high quality work. You’ll usually have one key contact who will manage the rest of the team. In contrast, if you manage a pool of freelancers, you will be the one to supervise and ensure quality control, communicating with each contractor individually.

Verified skills

The skills of agency employees have already been verified and proven. By hiring an agency to do the job, you can put your trust into the agency’s ability to source top people for the job, which removes one often tedious step in choosing and vetting freelancers to work with.

Costly

Agencies tend to be much more expensive than independent contractors. While the investment may be worthwhile for a large project, it’s not always cost effective for smaller projects, which can be better handled by a team of a few freelance experts.

Less flexibility

Once you’ve signed with an agency, it’s much harder to modify details or renegotiate a contract to incorporate new requests or changes. Agencies are less willing to do additional work outside the scope of the original agreement, and any add-ons can really add up, when compared with independent contractors.

Communication can be slower

While you’ll usually have one key contact at an agency, such as a project manager, there could be several people working on your project. Communicating any questions or changes can be a much slower process than if you’re liaising directly with freelancers, as you often have to go through multiple people to get answers from the people who are actually doing the work.

Only you can know whether an agency or an independent contractor is best for you and your business. Finding the right balance between paying high fees to engage the services of an agency, or spending time and energy managing a team of freelancers depends on factors such as the size of your business, the complexity of the project, and of course, your working budget. With independent contractors and agencies each have a reputation to uphold, simply do your research, obtain quotes and look for references from organizations with similarly sized projects or goals.