Freelance vs. In-House Developers: Main Differences

Did you know revenue from IT services — an industry where software developers operate — is set to rise by 6.15% annually between 2024 and 2028? This is a testament to the growing need for software development. Whether in health care, marketing, insurance, or finance, software developers play a positive role in helping institutions operate or deliver value to clients.

When looking for IT experts, two hiring options are on the table. You can either choose to engage freelance developers or hire in-house development. Both freelancers and in-house employees possess valuable skills, experiences, and qualifications, meaning they can be valuable team members. But they operate under different terms.

Don’t know which hiring option is best for you? In this article, we’ll discuss the differences between freelance and in-house developers, highlighting the pros and cons of each group. We also perform a situation analysis to help you figure out the best group to hire, depending on your specific needs.

Freelance vs. in-house developer basics

Freelance and in-house developers are both exceptional in what they do: manage the software ecosystem. However, they operate under different terms and conditions. In this section, we help you understand who freelance and in-house developers actually are.

Freelance

Freelance developers are independent contractors who provide various services to clients on a project-by-project basis or under a contract. They can work directly with businesses and individuals or via freelance platforms like Upwork.

Due to their independent status, freelance developers are highly flexible, meaning they can work on projects with varying scopes and deadlines. With their diverse skill sets and knowledge, freelance developers can take on projects varying from mobile application development to system design, web development, and software maintenance.

What’s more, freelance developers can work from anywhere, saving clients the costs of maintaining physical offices and equipment. The flexibility and diverse experiences that freelance developers possess make them appealing to businesses looking for specialized skills or cost-effective solutions.

In-house

An in-house team of developers consists of employees with a long-term commitment to the company. Rather than working in silos, these teams collaborate with different departments to develop and maintain various software solutions to support organizational objectives.

In-house teams typically have a deeper understanding of an organization’s vision, internal strategies, and other processes and are thus better placed to create more aligned solutions. In-house team members easily communicate and collaborate with stakeholders to execute the company strategy. Effective collaboration and swift communication enable in-house teams to be agile and respond quickly to emerging conditions.

By using in-house development teams, organizations have more control over the software development processes. This allows business owners to swiftly make changes or update existing applications in real time.

Companies regularly invest in in-house teams to boost their productivity. For starters, organizations can invest in training and development programs to ensure their employees stay updated with the latest skills and technologies. Companies can also offer competitive salaries and benefits to lower turnover, boost retention, and increase employee morale. Additionally, businesses typically invest in physical offices and equipment, ensuring in-house teams have the right tools and environment to deliver positive results.

Key differences

While both freelancers and in-house teams possess the technical skills and knowledge to undertake software-related projects, different factors set them apart. Here are the critical differences between freelance and in-house development:

• Cost-effectiveness. For in-house teams, companies have to pay higher costs for salaries, benefits, and other perks. Organizations also bear the cost of setting up and maintaining office spaces, purchasing equipment, and managing other utilities. On the other hand, freelance software developers are more flexible and tend to charge hourly or per project. The hourly rates may vary from one freelancer to another, and also depending on the software development project requirements. Freelancers also operate using their own equipment, saving organizations from extra overhead costs.
• Project management. In-house development teams benefit from direct management oversight, enabling efficient communication and swift issue resolution. Their deep integration with company culture enhances project cohesiveness. Freelance developers offer flexibility and a fresh perspective from their varied experiences, enriching projects with innovative solutions. With targeted communication and integration efforts, freelancers can quickly align with company goals, complementing in-house capabilities.
• Quality assurance. In-house software development teams leverage their intimate knowledge of company standards and operations to deliver precise outcomes, supported by a strong internal feedback loop. Freelance developers, though initially less familiar with specific company protocols, bring diverse insights that can introduce new quality assurance practices and elevate product standards. Through clear guidelines and collaborative refinement, freelancers can produce work that meets company expectations while injecting industry-wide innovations.
• Scalability. In-house teams offer quality but have limited scalability, bound by fixed personnel capacities and the costs of expanding or contracting the workforce. Freelancers provide flexibility to scale development efforts up or down efficiently, aligning closely with project needs and timelines without the significant overhead of hiring or layoffs. The freelance model allows for quick adjustments to the team size based on project demands, without long-term commitments.

Pros and cons

In-house development teams and freelance developers each have their pros and cons. In this section, we discuss the strengths and weaknesses of each of these hiring options.

For freelance developers

Freelance developers are available on short notice to assist organizations in dealing with different tasks. These developers possess diverse skills and experiences to execute different projects.

Some of the pros of hiring freelance developers include:

• Flexibility. Freelance developers can either work per project or on an hourly basis. Such flexibility allows businesses to easily incorporate freelancers in different areas of their operations.
• Cost-effectiveness. By hiring freelance developers, companies don’t have to budget for long-term costs like salaries and benefits usually associated with full-time employees.
• Vast pool of talent. Working with freelancers allows companies to collaborate with individuals from different cultures and geographical regions. These freelancers can bring in new ideas and boost overall creativity and innovation.
• Quick onboarding. Freelancers often possess a wide range of experience gained from working on different projects. As a result, they can quickly start working on the tasks at hand.
• Low overhead costs. Companies don’t have to provide office space and equipment or pay for other utilities when working with freelancers.
• Specialization. Whether working on mobile app development, web design, or other software-related tasks, freelance developers possess specialized skills to engage in different projects. Organizations can find suitable freelance developers to perform specific tasks without having to invest in training and development programs.

While hiring freelance developers has its advantages, it also exposes organizations to various concerns, including the following:

• Communication barriers. Freelance developers may come from different time zones and cultures — and speak different languages. All these factors can adversely impact communication, leading to slow responses and misunderstandings.
• Less control over the work process. Since freelancers work independently and manage their schedules, organizations have little control over them, which can affect project timelines.
• Challenges in ensuring quality consistency. Freelancers may not understand a company's culture, standards, and vision well. As a result, they may develop products inconsistent with the company's standards.
• Intellectual property concerns. Concerns about the work created by freelancers may arise. You have to ensure you have a comprehensive contract that specifically addresses the ownership of intellectual property.

For in-house development

In-house development allows you to use existing employees to build and maintain software solutions. You can also bring in new personnel to reduce workload and ease pressure.

Here are some advantages associated with in-house development:

• Team cohesion. In-house team members collaborate closely with one another to develop different products. This level of collaboration boosts productivity and facilitates faster achievement of goals.
• Ease of communication. In-house teams often operate in shared office spaces where they can quickly communicate. Their familiarity and shared understanding enable them to communicate smoothly, even when shifting to remote work.
• Streamlined project management. With in-house teams, business managers have direct oversight over the project. As a result, companies may have better control over product quality, project timelines, and overall progress.
• Knowledge retention. Though businesses may have to train in-house teams, the acquired knowledge and expertise are easily retained within the firm.
• Deeper alignment with company goals. In-house teams know the company’s goals, vision, mission, and objectives. These teams are better placed to develop products that align with key organizational values.
• Dedicated workforce. In-house teams have a long-term commitment to an organization. Having a committed workforce can assist organizations in achieving long-term business objectives.

In-house development also has its disadvantages. Here are some cons of hiring in-house developers.

• High fixed costs. Maintaining in-house teams requires organizations to pay more for overall compensation of salaries and benefits. Additionally, companies have to maintain office spaces and provide necessary equipment.
• Limited flexibility. In-house teams have limited flexibility when it comes to scaling operations. Apart from being time-consuming, organizations still have to incur additional costs to hire more personnel to perform extra work. Downsizing can also be expensive since companies may have to issue severance payouts.
• Reduced creativity. Over-depending on in-house teams may have an impact on the level of creativity. Full-time employees may lack fresh perspectives and ideas that freelance developers can bring to the company.

Situational analysis

Different situations can influence the decision to hire freelance programmers or utilize in-house development. Some organizations prefer a hybrid structure with a core team of in-house developers and freelancers coming in and out for specific projects.

Examples of factors likely to influence your hiring decisions include:

Short-term vs. long-term projects

If you have a short-term project, freelance developers are often the best option due to their cost-effectiveness and flexibility. They can be brought in to complete specific tasks and let go once the work is done. For example, if you want to create a website design, you can contract a freelancer to do the work.

In-house teams are more suitable for extended projects due to their long-term commitment to the firm. For example, an in-house team can be a good fit for those companies planning to revamp their entire digital platforms. In-house teams are also more familiar with the workplace culture, core values, and industry standards required to deliver consistent results over time.

Specific skill sets and new technologies

If you’re looking for specific skill sets, consider selecting freelancers. These experts can quickly come on board and provide the assistance you need to complete a project. For example, a freelance developer can be a good option if you need a professional to integrate artificial intelligence (AI) functionality into existing apps. Though qualified, in-house teams are more suited for supporting ongoing development needs such as maintaining existing technologies.

Startups vs. established companies

Startups might lean toward freelancers for flexibility and cost savings. On the other hand, established companies may prefer in-house teams for stability and long-term investment. These larger companies may have greater long-term needs as well, justifying sustaining a consistent team over time.

Hiring and management

You can find experienced and highly skilled freelance developers on platforms like Upwork. Attending local and virtual network events can also help you find candidates with the skills you seek. Additionally, actively engage on social platforms like LinkedIn and online communities on StackOverflow and Reddit, which freelance developers frequent.

When recruiting in-house developers, consider posting detailed job descriptions on platforms like LinkedIn, Reddit, Indeed, and Glassdoor, where prospective candidates will likely interact with the post. An employee referral program can motivate existing staff to recommend qualified candidates for various positions.

To get the best out of freelancers and new in-house team members, you must successfully integrate them into existing teams and processes. Here are tips for succeeding in the hiring process and onboarding new staff and freelancers and fostering a productive work environment.

• Effective communication. Ensure you regularly communicate with freelancers about the project requirements, milestones, and schedules to facilitate smooth workflows
• Access to information. While working independently, freelancers still require access to critical information and tools to perform their work
• Collaboration and project management tools. Grant freelancers limited access to the collaboration tools you use for efficient task management
• Structured onboarding processes. Ensure all new in-house team members pass through effective onboarding processes where they are introduced to the company culture, operations, and remainder of the team
• Mentorship opportunities. Have other employees mentor newcomers to help them settle in and align themselves with the company culture
• Quick feedback. Managers and supervisors should provide both freelancers and in-house teams with immediate performance feedback to enable them to adjust and increase their productivity

Many companies use project-based hiring, engaging freelancers as needed over the lifecycle of product development. This method allows you to enjoy flexibility when scaling up or down operations. The project-based approach also provides more control over costs since you don't have to pay hiring costs like benefits associated with full-time employees.

However, you must watch for pitfalls like setting unrealistic expectations or having unclear contract terms, which may lead to project delays and misunderstandings. Quality control and performance evaluation can also become an issue with project-based hiring and affect the overall project.

Find the right developer for your needs

Freelance developers and in-house teams have their strengths and weaknesses. Ultimately, the choice between freelance and in-house developers depends on different factors, including company size, project needs and requirements, and strategic goals.

Working with a mix of in-house and freelance developers can leverage the strengths of both groups, providing the flexibility and specialized skills of freelancers along with the stability and ongoing support of an in-house team. This hybrid approach can be particularly effective for scaling projects up or down as needed.

Additionally, starting with a freelance developer for a project offers a unique opportunity. If the freelancer excels and shows compatibility with your team and company culture, there's the option to bring them on board full-time. This pathway allows both parties to test the waters before committing to a permanent employment relationship, ensuring a good fit for long-term success.

Consider your specific circumstances and objectives when hiring developers. If you have a short-term project that requires specific skill sets, consider outsourcing software development services. Upwork can connect you to experienced developers with flexible rates to help you out. Get started today!