Guide to hiring freelance developers and software engineers

Technology is everywhere and few companies can go without IT professionals. This reflects on the talent market. Top-tier tech specialists are challenging to hire full-time — and that’s why many companies are considering freelance software developers.

Wondering if this is the right option for you? In this guide, we explain when hiring freelance developers makes the most sense and how to do it without stress. 

Full-time software developers vs freelancers vs agencies: Which option to select?

The project's specifications, budget, and schedule will suggest whether you should go with a full-time developer, freelancer, or software development agency. 

Full-time developers can work on the project long-term and provide continuity. A freelance developer is a good option if you need someone with a specialized set of skills and/or short-term. Agencies offer access to a larger pool of talent and can handle more complex projects. But they are also more expensive to partner with. 

To help you decide, we’ve rounded up a list of pros and cons for each option. Keep reading! 

Pros of hiring full-time developers

Full-time software engineers know the ins and outs of the products they are working on. This knowledge, paired with active mentorship, means that you have an A-level team at the vanguard of your tech efforts. 

• Continuous work. You have the right talent in place to pursue long-term tech initiatives and ensure continuous support of your growing IT estate. When you know your capacities, you can better evaluate project feasibility, timelines, and budgets. 
• Institutional knowledge. Full-time staff apprehends the complexities of your IT architecture, code quality standards, and core business processes. In other words, they understand how the “tech” component fits into the wider range of your business goals and work towards them. 
• Direct supervision. You can proactively manage your teams’ performance levels by improving operational processes, setting KPIs, and cross-training your staff. Your IT team members bond together and work better as a unit. 

Cons of hiring full-time developers

Having software engineers on the payroll is the go-to talent management strategy. But since everyone is looking for IT staff, it’s getting harder to hire the right fit for the optimal cost. 

• Ongoing IT talent crunch. Over 95% of companies hiring tech talent have faced a skills shortage in 2022. This year, things aren’t looking much better. Unemployment rates in developed economies are at an all-time low — while the IT job market in the US alone is projected to add 174,000 new positions this year. The demand outweighs the supply. 
• Higher overheads. Salary, benefits, taxes, and overhead recruiting costs make hiring in-house software developers expensive. In big tech hubs (think the Bay Area, London, Berlin, or Singapore), smaller employers also get outpriced by Big Tech firms or larger enterprise conglomerates. 
• Talent retention. Quiet Quitting is replacing the Great Resignation (which still continues in some markets). In-demand IT professionals don’t shy away from job-hopping due to low engagement and job satisfaction. Recent IT graduates often change job titles after receiving the coveted X years of experience for their resume, meaning extra turnover costs for employers. 

Pros of hiring freelance developers

Western Europe alone is home to some 6 million highly-skilled freelancers, including all types of IT people — from project managers and business analysts to app, web, and database developers. Even more talented IT freelancers live in other areas: North and South America, Eastern Europe, and Southeast Asia — and are available for hire. 

• Access to niche skill sets. Hire people with technical competencies you can't easily find locally to “fill in the gaps” on a temporary or semi-permanent basis. By using freelance developers, you can make faster progress on key projects, while you search for full-time staff.  
• Lower hiring costs. When partnering up with independent IT contractors, you don’t necessarily get lower hourly rates. But your company can save on employer taxes and benefits, as well as misc admin costs such as hardware purchases, office space, etc. 
• Scalability. Increase the IT team headcount in weeks (rather than months) to handle increased seasonal workloads or complete a laundry list of slightly overdue tasks. Also, you can staff R&D projects without wondering what you’ll do with the hired IT talent if they aren’t as qualified as you hope they would be. 

Cons of hiring freelance developers

Freelance software developers can cover critical gaps in your capacities. But you’ll also have to adjust your project management practices to make the most out of your freelance workforce. 

• Limited scope of work.  You can’t expect a freelance developer to work just like a payrolled employee aka attend every stakeholder meeting, reply to emails within an hour, or jump on urgent tasks outside of the pre-agreed scope of work. You have to plan and formalize most work tasks upfront.  
• Different management style. Freelance developers don’t hold the same institutional knowledge as your in-house team. Therefore, you’ll have to share knowledge with them to avoid information asymmetry, plus spend more time on establishing the planned scope of work, set of deliverables, and quality controls. Most freelancers have a longer project planning window than in-house employees, meaning you’ll sometimes have to adjust based on their schedule. 
• Accountability issues. Freelance developers may not be as vested in your product success as a FT team member (who’s also motivated by performance-based bonuses). Likewise, freelancers may not always be able to accommodate last-moment changes or fulfill them as fast as you’d want them to. 

Pros of hiring a software development agency 

Software development agencies are another piece of the external workforce puzzle. Similar to freelancers, they can deliver well-scoped IT services on-demand but can cover more work at a time. 

• End-to-end project execution. Rather than hiring individuals, you can onboard a cross-functional team, which can handle more complex projects (e.g. design, code and test a mobile app, rather than just write the necessary code snippets in Kotlin). 
• Lean processes. Agencies have repeatable processes for delivering software development projects on time and on budget, so there’s less project management work on your side (as long as you get them properly briefed from the get-go). 
• Vetted talent. Software development agencies function in two ways: You can either take part in selecting preferred developers from their talent pool or fully rely on their staffing decisions. Unlike freelancers, you don’t need to worry about doing qualification tests or background checks. 

Cons of hiring a software development agency 

Software development agencies can expertly deliver IT services, but the costs may be too high for the type of services you’re getting. 

• Costs. Agencies charge a hefty premium for their services, meaning you’re paying more for the project (or outsourced process) compared to hiring IT freelancers or assigning FT team members. Also, higher-tier agencies have a minimum project budget threshold (e.g. at least $150K) to sign you on, which can limit your choice of vendors. 
• Longer commitment. Agencies rarely handle on-off or on-demand tasks. It just doesn't make economic sense for them to pursue small-ticket services, unlike freelancers. Many also package their services as retainers, meaning you have to commit to them for at least X months.  
• Lack of service model standardization. Software development companies offer a variety of service models — staff augmentation, end-to-end projects, dedicated development teams, etc. Those terms rarely indicate the exact scope and quality of services you’ll receive in return. So you’ll have to do thorough vendor research. 

Freelance software engineering roles your business needs

Though each company has different staffing needs, here are several common IT roles, freelancers take:

• Mobile app developers develop Android, iOS, and cross-platform applications. They are proficient in programming languages like Java, Kotlin, Swift, and React Native, plus understand the UX/UI constraints of smaller screens.   
• Front-end developers create the presentation layer of your website or web application aka they write code to power responsive, visually appealing, and interactive interfaces. They work closely with designers, back-end developers, and project managers.
• Back-end developers are responsible for creating the server-side logic of a website or an application. They use programming languages such as Python, Ruby, or Java to build and maintain databases, web servers, and application programming interfaces (APIs) to create secure, scalable software products. 
• Cloud architect is the mastermind behind your cloud infrastructure design. They can audit your current infrastructure, recommend missing cloud solutions, prepare cloud migration plans, or design reference architecture for cloud-native solutions. 
• Big data engineers help you set up the necessary infrastructure for processing and analyzing large volumes of data. They use tools such as Hadoop, Spark, and Kafka to create data pipelines, and configure data lakes or data warehousing solutions, which are required to support all sorts of advanced analytics projects. 
• Cybersecurity consultant hardens your IT infrastructure to prevent targeted cyber attacks and accidental data leaks. They assess your cybersecurity levels, look for possible vulnerabilities, and implement security measures such as firewalls, intrusion detection, and prevention systems to safeguard your IT estate. 

Where to find the best freelance developers?

Xolo makes hiring freelance developers a breeze, by making sure every project you have receives the exact talent it needs. Contacting the Xolo crew and informing them of your project goals and requirements, means you’re just a few business days (or less) from hiring amazing freelancers.

We’ll review some useful alternatives to Xolo today, and give you a chance to decide which fit works best for you. Freelance developers are often found through referrals, personal research and specialized communities like GitHub, Stack Overflow, and Reddit. You may also connect with vetted freelance engineers via talent matchmaking platforms like Codeable, Gun.io or other popular freelance marketplaces. 

• General freelance marketplaces like Toptal or Upwork. The talent choice is ample on marketplaces. But you’re more likely to find junior to mid-level IT specialists. Use this sourcing strategy for smaller, simpler projects (e.g., WordPress website development or database performance optimization). 
• Tech talent matchmaking agencies like CloudDevs or Arc. Such companies match you with pre-vetted freelancers (who have already completed a tech interview with the team and have a proven track record of experience). You pay either a one-time or ongoing service fee for accessing their talent pipeline. This is a good and relatively fast way to find seasoned talent. 
• Remote tech job boards like RemoteOK or Wellfound (formerly AngelList Talent). Post a job description and wait for applicants to show up. The downside is that it may take more time to go through all the applications and find the best hires. But the advantage is that you’re not paying any ongoing fees. 
• Independent research: The freelance economy runs on referrals. Ask around for recommendations in your personal network. Browse LinkedIn and tech communities like GitHub to find developers with a “freelance” title. Or run plain old Google research to get some names. Check the person’s portfolio, schedule an introductory call, and evaluate the provided project proposal. Most senior software developers work with clients directly, so this is your best (though not the fastest) option to find the best freelance developers. 

How much do you pay freelance software developers? Rates by location & expertise 

Globally, the average rate of freelance software developers is $81-100/hour. Though, the prices vary significantly depending on the project type, the required tech stack, and the freelancer’s location. Though location shouldn’t be a decisive factor. 

Just because a freelance developer lives in a lower cost of living area (LCOL) doesn’t mean that they should earn less than an equally qualified peer from an HCOL city. Pay your freelance developers equitably, based on their qualifications and the complexity of the project you’re giving them.

Below are sample freelance developer rates for different locations and expertise levels. 

European Freelance Software Developer Rates

Freelance developers based in Europe often quote day rates — a flat fee for each day the person works on your project. Though fixed-price quotes are common too for smaller projects (e.g., creating a 5-page Shopify website). 

According to a Malt survey, German freelance developers charge €735 per day on average, French — €492 per day, and Spanish — €230 per day. In the UK, the average daily rate charged by freelance software engineers is £417. 

Remember: the above are ballpark numbers. You may receive a higher quote if you’re looking for help with data science or a consult from a senior cloud architect. Likewise, junior developers can go lower for simple tasks. 

US Freelance Developer Rates 

According to the Freelancer Map Study, American freelance developers bill a median rate of $96/hour. But the prices can differ a lot, depending on skill set and experience levels. 

For example, freelance data engineers in the US command an average hourly rate of $127. Or an average annual compensation of $152,306 if they bill 35 hours a week for 11 months.

Senior DevOps consultants, in turn, receive an average compensation of $143,000, according to crowdsourced data by 6figr. 

Southeast Asia Freelance Developer Rates 

SEA is home to a rapidly growing population of tech talent. India, the Philippines, Vietnam, Indonesia, and Malaysia are among the most popular markets for sourcing freelance development talent. In many cases, you can get qualified IT specialists for a lower rate. Although the best tech talent typically charges as much as their global counterparts. 

According to Contractes database, mobile app developers in India and Malaysia bill $26/hour on average. Full-stack engineers in Indonesia ask for $50 an hour, while in the Philippines the go-to rate is $55/hour. Backend engineers in Pakistan charge $30/hour on average.  

Rates by Expertise 

It’s no secret that some IT skill sets pay better than others. Machine learning (ML), big data analytics, cybersecurity, AWS, Azure, or SAP are among the most in-demand IT qualifications — and also among the highest-priced ones.

According to a Freelancer Map Study, freelancers working with SAP systems command the highest hourly rate of $120. Tech consulting roles come in a close second at $119/hour. 

Source: Freelancer Map Study

Cybersecurity consultants, in turn, charge $146/hour on average across locations. In Canada, however, some specialists command over $230/hour. 

Freelance data scientists with natural language processing (NLP) expertise get an average rate of $115/hour in the UK. 

Ultimately, your best option to determine a good rate for a freelance engineer is by asking around for several project quotes. Then, compare the proposals to understand what type of services and commitment you’d be getting for your money. 

How to pay freelance software developers 

Freelance software developers can bill you in three ways: by the hour, using a day rate, or in fixed-price installments. Therefore, you should first agree on the optimal payment schedule. 

Ask about the freelancer’s preferred payment terms (e.g. Net 15 or Net 30) for the agreed billing model. Then, set your accounting system to accommodate payment runs.  

Most freelance developers accept payments via bank transfer. Some also use PayPal or Stripe for processing card payments (for smaller milestones). In each case, you’ll receive an invoice for the provided services, which includes a breakdown of provided services, the total sum due, payment terms, and applicable taxes (e.g., VAT or sales tax). 

To effectively manage payouts to freelance developers in any country, you can use Xolo. Our FMS includes a built-in, VAT-compliant invoice generator for freelance developers, plus flexible payment scheduling tools for clients. You connect your bank account and we’ll then handle payment processing for you. With Xolo, you can pay invoices as they come or consolidate them into one bulk invoice for faster, easier processing. With unlimited admin seats included in your account, you can invite your finance people to schedule and approve payouts, plus monitor spending. 

Must-know tips for working with freelance developers 

Treat your freelance developers the same way as your full-time staff. Be respectful of their working style and communication preferences. Trust their judgment and give them room to voice suggestions and ideas. Hire freelance developers to benefit from their expertise and industry knowledge, not to second-guess their abilities.

With the above in mind, here are some final tips for running a happy, productive freelance development team:

• Be upfront about expectations. During your intro meeting, talk through specific quality or performance metrics you expect the freelancer to meet. Provide references, tech documentation, and process guides to level-set the expectations.
• Host frequent demos. If you’re outsourcing a deliverables-based project (e.g. development of a new mobile app), schedule recurring product demos — meetings when the freelancer will show their progress and interim results. Demos help course-correct when needed. 
• Prioritize async work. Don’t expect your freelance engineers to always be on call (unless that’s part of your work agreement). Learn to give detailed written instructions and feedback in between your demo or catch-up sessions. 
• Throw all means at information asymmetry. Your freelance developers lack institutional knowledge which means they don’t know “how things are done” at your company. Progressively educate them on the whys and hows behind various processes, requirements, or feedback notes about their work. 

Steps to hiring freelance developers and software engineers for your business: Conclusion

1. Determine the hiring option: Assess the project's specifications, budget to determine whether hiring full-time developers, freelance developers, or a software development agency is the best fit.
2. Define the roles needed: Identify the specific IT roles required for your project, such as mobile app developers, front-end developers, back-end developers, cloud architects, big data engineers, and cybersecurity consultants.
3. Find talented freelance developers. Consider using socials like LinkedIn and Twitter, or marketplaces such as Upwork to discover developers. You may also consider a more modern approach to hiring. Let Xolo help →
4. Determine compensation rates: Research market rates for freelance developers in different locations and areas of expertise to establish fair payment structures. Consider factors like qualifications and project complexity when setting rates.
5. Agree on payment terms: Discuss and agree upon the billing model with freelancers, considering options such as hourly rates, day rates, or fixed-price installments. Set payment schedules and work to streamline your payment processing. Let Xolo help →
6. Foster effective communication and collaboration: Respect their working style and preferences, trust their expertise, and create a positive and inclusive work environment. Clearly communicate expectations and provide necessary resources for them to succeed.
7. Prioritize project management: Implement effective project management practices, such as hosting frequent demos, providing detailed instructions and feedback, and addressing information asymmetry to ensure smooth progress and high-quality deliverables.

Hire quality freelance developers and engineers with Xolo 

Xolo is changing the way you think about hiring freelancers — less hassle, less time and better results. Send your next project to Xolo, and let a dedicated industry expert curate three freelancers perfect for your exact mission to you in under three business days, leaving you with an easy decision.

And if you’re looking to build a team, Xolo has you covered from discovery to payday. 

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About Elena

Elena Prokopets writes content for tech-led companies & software development businesses, marketing to them. Her empathy for the customer, expertise in SEO, and knack for storytelling help create content that ranks well and drives industry conversations.

Elena uses Xolo so she can focus on her solo B2B content writing business without stressing over the compliance and admin overhead.