There was a time when companies were freelancers and contractors as backup plans when they were short-handed. Today, many companies hire these independent professionals to broaden their talent and hire experts for projects.
Whether you want to become an independent professional or are looking to hire one, ensure that you know the difference between freelance and contract. We have prepared this guide to help you learn the significant difference between the two. Let's begin!
Freelancers vs Contractors Freelancers work independently, creating their work schedules and finding clients autonomously. Conversely, contractors have fixed-term agreements with either employers or a third-party agency. In contrast to full-time employees, both control their work's manner, timing, and location as long as they meet their deadlines.
What is a Freelancer? Freelance workers are self-employed individuals who set their own rates and are not affiliated with any company or agency. They typically work independently, developing and offering specialized skills and services to multiple clients. Imagine freelance digital designers whose talents are required for a day and who are tasked to create a digital ad for a company.
What is a Contractor? A contractor performs contract work as an external employee. Traditionally, a contractor is employed by a vendor or an agency. They often report to managers at these agencies and receive regular pay from them, too. But in a more modern context, the term may refer to an independent contractor.
Contractors are highly skilled professionals who offer expert service, own their companies, or work independently instead of for an agency. Examples of contractors include an M&A Project Manager, IT Support, or Customer Service Support.
Due to the independent nature of contracting jobs like freelancing, many managers or headhunters confuse freelance and contract workers. They tend to use the terms interchangeably. How can you tell the difference between freelance and contract workers?
The 5 Major Differences Between Freelancers and Contractors To clear the hesitation, here are the five key differences between freelance and contract workers.
1. Hiring Process The hiring process is one way to determine whether they are freelance or contract workers. For instance, you may contact an external agency if your company wants to outsource a specific job. This agency assigns workers to perform the task required. These workers are called contract workers . At the end of the month, you pay the agency, who, in turn, pays each contractor.
It is important to note that you don't need to hire contractors directly. Since they own their business, you would deal directly with the individual instead of connecting with an agency.
Freelancers always work independently. They are self-employed, and you can talk to them directly as an employer. You do not have to negotiate with an agency to hire a freelancer.
Payments are also made directly. Once the project is completed, you pay the freelancer the total agreed-upon amount.
2. Contract Periods Contract workers are usually hired for extended periods, ranging from 3 months to a year or even longer. They typically work intensively with a single client throughout the entire contract.
On the other hand, freelancers usually have shorter agreements. Companies often hire freelancers for a single project or a one-day task. Unlike contractors, freelancers don't need to dedicate all their working hours to one client during the contract period. They might only need to spend a few hours each week on a specific project. Because of this, freelancers often collaborate with multiple employers simultaneously.
3. The Way They Work Depending on the task you need to complete, you require a contractor to work on-site or use your company's facilities. The job may require them to perform a specific number of hours, so they may be unable to choose their schedules. For instance, contractors are hired to provide customer support services. These professionals must be available when the company's support hotlines are open.
However, an employer cannot dictate when, where, and how a freelancer works. Freelancers can set their timings and plan their work days if they complete the deliverables by the agreed-upon deadline. They might want to work from home, cafés, or coworking spaces rather than in employers' offices.
In terms of tax payments, there's no difference if they are a freelancer or a contract worker. Everyone has a duty to pay their share of taxes. But, it is crucial to start with the IRS checklist.
4. The Kind of Work They Do The jobs of contractors may be different from the tasks that freelancers do. Many companies outsource regular, recurrent jobs to contractors. These may include tasks like analyzing data, providing security services, performing repairs, or managing teams.
Companies like Google have a massive contract workforce for crucial jobs that must be performed regularly. Some companies also hire skilled independent contractors for IT services like performing software updates, system maintenance, and data protection.
Since employers cannot control freelancers' schedules, locations, and other work details, freelancers are typically engaged for non-recurring and irregular tasks. Freelancers are popular in marketing, media, and creative industries. Professionals like graphic designers, content writers, marketing managers, UX/UI designers, and strategists frequently choose freelance work from home, providing their expertise to multiple clients.
5. Setting Rates Freelancers can set their pricing structures, choosing hourly, daily, or project-based rates. They take on the responsibilities of negotiating rates with clients, requesting payments, and managing their invoices.
In contrast, contractors often go through agencies, where the agency determines and communicates the rate to the client. However, some contractors, like freelancers, operate independently and are responsible for setting their rates and invoicing.
Conclusion Whether you engage independent contractors or freelancers, the key is maximizing the potential of your external workforce. Distinguishing the difference between freelance and contract workers lets you set appropriate expectations. This way, you can provide clear instructions for effective and successful collaboration.
