When we launched Ascendia Works we were big fans of using online freelancers because it has a time and place when “bootstrapping” and trying to get your idea off the ground. Also, many of our clients started their offshore outsourcing efforts by experimenting with hiring online freelancers too. However, as time passed, they all outgrew the model and needed something more robust, secure, and scalable.

When Australian entrepreneurs look at the options with hiring offshore staff, they often start with using online freelancers for the following reasons:

1. When you’re a start-up you need to “run everything off the smell of an oily rag” and it’s incredibly cheap. Having said that, it’s cheap because you only need to pay a fee for the project or the freelancer’s time, and you don’t need to pay for:

• Government mandated contributions (equivalent to superannuation, payroll tax, etc).
• Sick leave, annual leave, and other entitlements.
• Employee bonuses or incentives.
• 13th month salary (for example, in the Philippines you are required by law to pay an additional month’s salary in December prior to Christmas).
• Overtime or working on public holiday penalties.
• The equivalent to Medicare in Australia is called PhilHealth in the Philippines, which has limited healthcare coverage. Thus, a freelancer would need to personally enroll in PhilHealth and supplement that with self-funding HMO coverage (which is has a higher leverage of coverage for health-related issues).
• Staff entertainment or culture building activities.
• Staff management overheads (payroll/accounting, operations management, customer success, human resources, recruitment, etc.).
• Provisioning for or paying for redundancy payments.

2.   You only pay when the project is complete, and you can withhold payment if the work doesn’t meet your expectations.

3. If you don’t need to commit to a full-time headcount with ongoing work, you can simply assign a small project or commit to a limited number of hours.

However, many entrepreneurs outgrow the online freelancer model for one or more of the following reasons:

1. Control. You require control over your team’s time (to be 100% committed to your work) and don’t want to compete with your freelancer’s other clients. For example, freelancers might start brilliantly but can disappear online when a big paying client takes priority. Also, you can’t dictate when a freelancer works, which makes meeting deadlines very challenging.
2. Data and IP Protection. You need a contract that’s legally enforceable in Australia. Whereas hiring a freelancer online your intellectual property and data may not be protected. Therefore, a freelancer could steal information or claim ownership of their work. Even if you have an agreement with your freelancer to enforce the agreement you would need to travel to the Philippines and pursue the matter with the Philippine legal system.
3. Cyber Security. You require an enterprise grade security posture to protect your business against cyber-attacks.
4. When you are Time Poor. You need someone to leverage your time, provide you with operational, customer success and IT support, to keep your offshore team productive and on track.
5. Talent Acquisition. You need a strong employee proposition in the market to attract top talent.
6. Culture and Environment. You understand that hiring someone with the skills to do the job is only half the battle. You need to create an online environment that’s conducive for your team to do their best work.
7. Close the Cultural and Communication Gap. You see the value in having a partner be a conduit between your world and the offshore world to help you address and close the cultural and communication challenges.

Starting with an online freelancer is a good idea but if you find you outgrow this model then it’s time to develop a relationship with a partner that can deliver more value.