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Freelancing vs. Outsourcing: Know the Difference

Shumaila Saeed
By Shumaila Saeed || Updated on December 25, 2023
Freelancing is self-employment on projects; outsourcing involves hiring external entities to perform tasks.
Freelancing vs. Outsourcing

Key Differences

Freelancing involves individuals offering their expertise to various clients, working on multiple projects at their discretion. Freelancers are self-employed and choose whom they work for and the type of work they do. They may balance several projects simultaneously, offering flexibility to both the freelancer and the client. Outsourcing, however, is when a company hires an external organization or individual to complete specific tasks, manage operations, or provide services that are either difficult to manage in-house or are costlier to do so.
Shumaila Saeed
Shumaila Saeed
Nov 25, 2023
While freelancers are autonomous and often work on short-term tasks or projects, outsourcing can involve long-term contracts with third-party providers. Freelancers often have a direct relationship with their clients, enabling personalized service and individualized attention to projects. On the other hand, outsourcing can sometimes involve less direct interaction between the company and individuals performing the tasks, focusing more on the relationship between organizations.
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Shumaila Saeed
Nov 25, 2023
Freelancing offers the freedom to work from anywhere and usually entails working on multiple small projects or with several clients. Freelancers market themselves and their skills, maintaining control over their workload and business operations. Conversely, outsourcing is used by businesses to streamline their processes and can involve transferring significant company functions to third-party firms, which could be located domestically or internationally.
Shumaila Saeed
Shumaila Saeed
Nov 25, 2023
The concept of freelancing is centered around the individual, highlighting personal service, skill, and flexibility. Freelancers retain control over their methods and output standards, often leading to innovative and personalized solutions. Outsourcing, though, emphasizes efficiency and cost-effectiveness, with a focus on delegating tasks to specialized firms or individuals to capitalize on economies of scale, lower labor costs, or specialized expertise.
Shumaila Saeed
Shumaila Saeed
Nov 25, 2023
In freelancing, payment is usually per project or on an hourly basis, directly proportional to the work delivered. For outsourcing, payment arrangements can be more complex, involving retainers, long-term contracts, or performance-based payments. While freelancers might handle everything from production to customer service, outsourcing agreements might divide these responsibilities between the hiring company and the service provider.
Shumaila Saeed
Shumaila Saeed
Nov 25, 2023
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Comparison Chart

Nature of Work

Project-based, often short-term
Can be long-term and ongoing
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Shumaila Saeed
Nov 25, 2023

Employment Status

Self-employed individuals
External organizations or contractors
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Shumaila Saeed
Nov 25, 2023

Control Over Work

High personal control over workload
Company has control, less personal
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Shumaila Saeed
Nov 25, 2023

Scale of Operation

Individual or small-scale operations
Can involve large-scale operations
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Shumaila Saeed
Nov 25, 2023

Relationship

Direct with clients
Through a third-party firm
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Payment

Per project/hourly
Contractual, may involve different models
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Shumaila Saeed
Nov 25, 2023

Flexibility

High flexibility in choosing projects
Defined by contract, less flexibility
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Shumaila Saeed
Nov 25, 2023

Purpose

Diverse exposure, autonomy
Cost reduction, efficiency, expertise
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Shumaila Saeed
Nov 25, 2023

Location

Often remote or client-preferred
May involve offshoring to other countries
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Shumaila Saeed
Nov 25, 2023

Taxation

Managed by freelancer
Managed by the outsourcing firm or the client
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Freelancing and Outsourcing Definitions

Freelancing

Self-employed status offering services to businesses or individuals.
He enjoyed freelancing because it allowed him to choose his work hours.
Shumaila Saeed
Shumaila Saeed
Nov 08, 2023

Outsourcing

Hiring third-party vendors to perform tasks or services for a company.
The company began outsourcing its customer service to handle increased call volumes.
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Shumaila Saeed
Nov 08, 2023

Freelancing

Working independently on a task-by-task basis for various clients.
She started freelancing as a graphic designer to diversify her client base.
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Shumaila Saeed
Nov 08, 2023

Outsourcing

Delegating non-core business activities to outside firms.
They considered outsourcing the delivery service to focus on food quality.
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Shumaila Saeed
Nov 08, 2023

Freelancing

Engaging in multiple short-term contracts rather than a single employer.
Freelancing allowed him to gain experience in various industries quickly.
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Shumaila Saeed
Nov 08, 2023

Outsourcing

Using external resources to perform functions traditionally handled in-house.
Outsourcing payroll processing became a common practice for the business.
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Shumaila Saeed
Nov 08, 2023

Freelancing

A flexible work model with no long-term employer commitment.
Freelancing gave her the opportunity to work while traveling.
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Shumaila Saeed
Nov 08, 2023

Outsourcing

Engaging with global talent by offshoring certain business functions.
Outsourcing software development helped them tap into a pool of international expertise.
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Shumaila Saeed
Nov 08, 2023

Freelancing

Offering specialized skills on a per-project or hourly rate.
Freelancing in web development, he set his rates based on the complexity of the project.
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Shumaila Saeed
Nov 08, 2023

Outsourcing

Contracting out business processes to external providers.
Outsourcing the IT department was a cost-effective strategy for the firm.
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Shumaila Saeed
Nov 08, 2023

Freelancing

Infl of freelance
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Shumaila Saeed
Nov 07, 2023

Outsourcing

To delegate (a task, function, or responsibility) to an independent provider
"Most retailers outsource the bulk of their manufacturing to Third World countries, where labor is dramatically cheaper" (James Surowiecki).
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Shumaila Saeed
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Freelancing

The act of performing one's duties outside of the chain of command and SOPs.
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Shumaila Saeed
Nov 07, 2023

Outsourcing

To relocate or transfer (jobs) to another labor market
"Although the absolute number of jobs outsourced from developed countries to China remains small, the threat that firms could produce offshore helps to keep a lid on wages" (The Economist).
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Shumaila Saeed
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Outsourcing

Inflection of outsource
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Shumaila Saeed
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Outsourcing

The transfer of a business function to an external service provider.
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Shumaila Saeed
Nov 07, 2023

Repeatedly Asked Queries

Do freelancers work for one company?

Freelancers typically work for multiple clients rather than a single company.
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Shumaila Saeed
Nov 25, 2023

Are freelancers self-employed?

Yes, freelancers are self-employed and must manage their own taxes and business operations.
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Shumaila Saeed
Nov 25, 2023

Do companies save money by outsourcing?

Companies can save money by outsourcing due to lower labor costs and increased efficiency.
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Shumaila Saeed
Nov 25, 2023

Is freelancing considered a stable career?

Freelancing can be stable if one consistently secures projects, but it generally lacks the predictability of a salaried position.
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Shumaila Saeed
Nov 25, 2023

How do freelancers find work?

Freelancers find work through networking, freelance job platforms, and direct marketing.
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Shumaila Saeed
Nov 25, 2023

Can outsourcing lead to job losses?

Outsourcing can result in job losses domestically when tasks are moved to external providers, often in other countries.
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Shumaila Saeed
Nov 25, 2023

Is outsourcing always international?

No, outsourcing can be domestic or international, depending on the company's needs.
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Shumaila Saeed
Nov 25, 2023

Are freelancers responsible for their own work schedule?

Yes, freelancers generally set their own work schedule and manage their deadlines.
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Shumaila Saeed
Nov 25, 2023

Do freelancers get employee benefits?

Freelancers do not receive benefits from clients and must arrange their own insurance and retirement plans.
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Nov 25, 2023

Can freelancers become full-time employees?

Freelancers may be offered full-time positions by clients if their contract stipulates such a transition.
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Shumaila Saeed
Nov 25, 2023

Can a company outsource any type of work?

Companies can outsource a variety of tasks, but they often retain core functions in-house.
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Shumaila Saeed
Nov 25, 2023

Can outsourcing improve business focus?

Yes, by delegating non-core tasks, a company can focus on its main business objectives.
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Shumaila Saeed
Nov 25, 2023

Is freelancing viable for all professions?

Freelancing is more viable for some professions than others, particularly where remote work is possible.
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Shumaila Saeed
Nov 25, 2023

Do freelancers pay taxes differently?

Freelancers pay taxes as self-employed individuals and often handle their own quarterly tax payments.
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Shumaila Saeed
Nov 25, 2023

Why do companies outsource?

Companies outsource to cut costs, access expertise, increase efficiency, and focus on core competencies.
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Shumaila Saeed
Nov 25, 2023

What is offshoring?

Offshoring is a type of outsourcing where tasks are sent to be done in another country, often to save costs.
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Shumaila Saeed
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Can freelancers work from anywhere?

Typically, yes, freelancers can work from any location unless the client requires a specific place.
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Shumaila Saeed
Nov 25, 2023

What are the risks of outsourcing?

Risks include loss of control over the task, potential quality issues, and dependency on the supplier.
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Shumaila Saeed
Nov 25, 2023

How do freelancers charge for their services?

Freelancers may charge an hourly rate, a per-project fee, or a retainer.
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Shumaila Saeed
Nov 25, 2023

Is outsourcing a long-term commitment?

Outsourcing can be short-term or long-term, depending on the company's strategy and the nature of the contract.
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Nov 25, 2023

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About Author
Shumaila Saeed
Written by
Shumaila Saeed
Shumaila Saeed, an expert content creator with 6 years of experience, specializes in distilling complex topics into easily digestible comparisons, shining a light on the nuances that both inform and educate readers with clarity and accuracy.

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