By Nick Mann 🔹
Freelance marketplaces like Upwork, Fiverr, Freelancer, and Guru have become incredibly popular platforms for connecting freelancers and clients. As of late 2023, Upwork alone had over 18 million freelancers and 5 million clients across 180 countries.
Services run the gamut and include writing, marketing, sales, design, and AI services just to name a few.
The question is, does it make more sense for small business owners to use freelance marketplaces like this or hire independent contractors directly? To find out, let’s explore the pros and cons.
The Pros of Using Freelance Marketplaces
Perhaps the biggest benefit is the sheer volume of freelancers you can connect with and the wide range of skills they possess. While the exact number of freelancers you can access will vary depending on the platform, the candidate pool is truly astounding.
For perspective, Upwork offers freelancers in “12 industry verticals with over 10,000 available skill sets,” and Fiverr has “more than 500 available skill sets across 9 industry verticals.”
Source: Upwork
Even if you choose a smaller platform like Freelancer or Guru, you can still find professionals to handle nearly any digital job you can imagine.
The other main advantage is that you can usually find a freelancer quickly. According to Upwork, it takes an average of three days to hire a freelancer on their platform. And, in some cases, clients can even hire a freelancer overnight.
This is something I can personally vouch for, as I’ve worked as a freelance writer on similar platforms in the past. With such a large amount of freelancers available all over the world, most jobs go quickly.
On the other hand, if you hire directly, it may require a time investment to fill a position, as you have to:
● Create a job posting
● Review resumes and portfolios
● Back-and-forth with candidates
● Set up interviews
● Hold interviews
● And more
Or, you may need to ask your business network if they have freelancers they’ve successfully worked with that they recommend — something that also takes time.
The bottom line is that if you’re looking for a wealth of qualified candidates and want to hire quickly for a project, using freelance marketplaces is usually the best option.
The Cons of Using Freelance Marketplaces
For most clients (as well as freelancers), the biggest issue is the fees. Here’s how the fee structure breaks down on top platforms as of early 2024:
● Upwork - 3-5%
● Fiverr - 5.5%
● Freelancer - 3%
● Guru - 2.9%
While I wouldn’t say that any of these fees are excessive, they are an additional charge you must contend with that you don’t have if you hire directly. And the more you pay per project or the more you pay a freelancer per hour, the higher the fees will be. Also, keep in mind that freelancers have to pay a 10% Upwork or 20% Fiverr fee, so they may need to increase their rates to recoup their lost profit margin, which can impact how much you ultimately pay.
Note that posting job ads can cost money as well. While some platforms like Indeed have free options, others like ProBlogger, a popular resource for finding writers and SEO specialists, cost at least $80 to post. However, once you’ve paid the fee, you no longer have to keep paying.
Source: ProBlogger
Also, the learning curve that comes along with learning freelance marketplaces is another issue to take into account. Upwork in particular has a lot of features, which is nice, but it can create complications for both clients and freelancers when learning the ropes. Fiverr is less feature-rich, but as with learning any new platform, it takes time to get into the groove.
So that’s a time investment to take into account when making your decision.
One other potential issue is if you choose a freelancer that’s located abroad, you might encounter communication delays because they’re based in a non-US time zone. If this is the case, it could slow down your project.
The Pros of Hiring Directly
Usually, the biggest reason to hire directly is that it spares you from paying any client fees. Again, most freelance marketplaces charge at least 3%, while some charge more than 5%.
However, if you skip these marketplaces and handle hiring yourself, you pay 0%. And that can go a long way in increasing your profitability over time, especially if you work extensively with freelancers.
Given that 20-30% of the American and EU-15 workforce was part of the “gig economy” in 2023 (roughly 162 million working-age people), it’s fair to say that a lot of businesses are funneling big money into hiring freelancers. If you fall into this camp, hiring directly can result in significant savings.
Besides that, you don’t have to deal with the learning curve of freelance marketplaces or worry about changing policies. You’re in full control of the hiring process and can implement specific practices to make sure you pick the best candidates. If you plan on working with a freelancer long-term, this is often the best way to go.
The Cons of Hiring Directly
If you run a small business that lacks a formal hiring team and has limited experience making hires, this approach may not be right for you. While there have been plenty of cases where small or even micro-sized businesses have successfully hired freelancers directly, it can be trying if you don’t have the proper hiring infrastructure in place.
I’ve personally worked with multiple clients that fit this description, and it’s worked out fine. But many would have probably been better off using freelance marketplaces because of the built-in assistance that comes along with them.
Note that we’re currently working on a course toolkit called “Navigating Contractor Hiring” that’s focused on providing small business owners with the tools to hire contractors directly. It will also include information about freelance marketplaces if you want to learn more about them. Cove members will have access to all courses, and non-members will be able to purchase individual courses.
If you’re doing this on your own, however, you don’t have access to these resources, which may be problematic for small or new business owners.
The Verdict: Use Freelance Marketplaces for Small Projects and Hire Directly for Long-Term Partnerships
Using freelance marketplaces and hiring directly both have their pros and cons. What’s ultimately best for you at the end of the day just depends on what your specific needs and goals are.
If you want access to a massive volume of freelancers, want to fill a job quickly, don’t mind paying a small fee, and feel comfortable learning a new platform, using freelance marketplaces is likely your optimal route. This is especially true if you’re a new or small company that lacks an internal hiring team or you only plan on working with a freelancer for a limited time (just a project or two).
Conversely, if you want to avoid paying fees, don’t want to deal with the complexities of learning a new platform, don’t necessarily need access to a huge volume of freelancers, and don’t need to fill a position right away, then I usually recommend hiring directly. And if you’re looking to form a long-term partnership where you plan on working with a freelancer for six months or more, this tends to make more sense.
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About the Author
Nick Mann is a freelance writer/content strategist focusing on business, marketing, finance, and tech. Through his content, his goal is to help small businesses generate quality leads to grow and thrive.
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