Should tech companies ONLY hire employees under their payroll?



When a business is expanding, more resources are needed in order to keep up with the operation. These could be new technologies, capital, inventories or even people. The way these are managed might influence what a company’s cost structure, company culture, and the way employees are supervised might look like.


A question that can be helpful in order to execute an effective expenses strategy is whether or not your tech company should only hire employees under your payroll. There are three key factors that can help determine what is best for your business: Cost, Control, and Culture.


1. Cost

The most apparent cost associated with recruiting a new worker is personnel cost, but it's not the only expense. Taking care of things like paying payroll taxes, worker's compensation, salaries and even the onboarding process can represent a costly expense.


2. Control

In order to ensure that the company's objectives are met and its employee policies are followed, companies need control. This refers to supervising and guiding employees' work in order to obtain the best results.


3. Culture

Culture values workers and their connection to the organization and its aims, resulting in a great employee experience. Staff members are more likely to be actively involved and passionate about their role when working in strong, positive, and intentional company cultures.


In order to accurately set a contrast between them, we will use the following hiring models for the analysis:


  • Direct Employees

A person who is employed by a business, under their payroll, and receives income from it.


This is the most expensive hiring model due to what it entails. Since most direct employees usually come from the same region where the operation is located, they need to take into account expenses such as local minimum wages, payroll taxes and labour benefits, just to name a few.


If the company operates out of Europe or North America, all of them will be quite expensive and can represent a hassle for a tech company in a scaling process, because of the laws and currencies that are used in their location. Hiring a direct employee might allow you to have top talent but at a higher cost.


Now, regarding control, when an employee is under your payroll, you could say that you have more control over them.


And since they are fully dedicated to your business, they can really take a grasp on the company’s organizational culture, which will be beneficial in the overall success of the organization.


  • Freelancers

A person who follows a career without committing to one company for the long term.


Hiring a freelancer might be cheap in comparison to hiring a long term direct employee since they get paid to do specific tasks over a period of time.


Given that freelancers work on different projects with separate employers, being able to supervise them and have overall control over their job might be harder.


Also, it becomes even more difficult to translate culture to them since they aren’t really committed to a given company for a significant period of time.


  • Outsourcing

Process of hiring a third party to accomplish a task or a specific job.


Outsourcing an employee might be similar to having a freelancer, the costs of hiring them is significantly lower than having a direct employee but the main difference is that when you outsource an employee, they are usually under another company’s payroll, usually these companies are specialized on the task the outsourced employee is performing, which makes control and translating culture to them virtually impossible.


  • TaaS (Talent as a Service)

Alternative model where top talent is hired under a third-party’s payroll on behalf of another company that wishes to create a team while maintaining control and having that team share their company culture.


It might sound similar to outsourcing but they are totally different. When you hire an employee under a TaaS model you get the benefits of having total control over your employees’ work, plus the certainty that they will be the right fit for your company because the party who provides the service ensures that your company’s culture is lived and breathed by them.


Additionally, the Talent as a Service model provides top talent in regions where wages are usually lower and currencies are cheaper than the employer’s location, which is beneficial for the company’s cost structure.


So you are getting the cost benefits of hiring an outsourced employee or a freelancer, without sacrificing control or anything related to your company culture.


At Scalefront, we help SaaS companies scale through our TaaS (Talent as a Service) model. It’s more than just outsourcing. We recruit and hire (on our payroll) the best talent, based in Latin America, which blends seamlessly with the companies’ teams as if they were direct employees. So you get fantastic and diverse talent at a fraction of the cost of US or European talent!