The world of work is changing. With the rise of the gig economy and independent contracting, more and more people are choosing to work for themselves.
In fact, did you know that your favorite delivery drivers are independent contractors using driver helpers, or that freelance work can help you earn more than traditional employment?
In this comprehensive guide, we'll break down everything you need to know about Independent contractors vs. freelancers so that you can make the best decision for your career!
What is an Independent Contractor?
An independent contractor is a self-employed worker who contracts with another business to provide services. In other words, some contractors are affiliated with agencies and companies, while others are not.
Unlike traditional employees, independent contractors are also typically not entitled to health insurance and paid time off benefits.
What are the advantages of being an independent contractor?
Independent contractors have a few things going for them compared to traditional employment. Here are some of the main advantages to being an independent contractor:
You're your own boss
As an independent contractor, you call the shots. You decide when and how much you work, which gives you a lot of flexibility and freedom.
That being said, many independent contractors, specifically delivery drivers, work with a specific agency or company, such as Doordash, or UberEats.
Flexible schedules
One notable benefit of being an independent contractor, especially if you have other commitments, is that you can often set your own hours.
Delivery drivers, for example, are free to choose their preferred working schedules and even use a Para app to make earning easier.
You set your own rates
One of the benefits of being self-employed is that you get to set your own rates. This can be especially helpful if you have specialized skills or experience.
Since you're not tied to a regular salary, you have the potential to make much more money than you would as an employee. However, this also means that you're responsible for paying your taxes and insurance.
What are the disadvantages of being an independent contractor?
There are a few downsides to being an independent contractor. Here are some of the main disadvantages:
You have to pay your own taxes and insurance
As an independent contractor, you're responsible for paying your own taxes and insurance. This can be costly, especially if you don't make a lot of money.
You're responsible for your own equipment and supplies
As an independent contractor, you're also responsible for buying your own equipment and supplies. This can be expensive, especially if you need to buy a lot of specialized tools or software.
What is a Freelancer?
Let's now take a look at the definition of a freelancer. A freelancer is someone who works for themselves, usually doing contract work in their field of expertise.
Freelancers are not affiliated with any agency or company and mainly only offer their expertise to clients on a project-by-project basis. In short, freelancers are not employees, and they do not have to pay any income taxes on the money they earn. Freelance work could include writing, programming, design, or marketing.
What are the advantages of being a freelancer?
Like independent contractors, there are several advantages to being a freelancer:
You're your own boss
As a freelancer, you're in charge of your destiny. You decide when and how much you work, and even who you want to work with, which gives you a lot of flexibility and freedom.
You can work from anywhere
Since they're not tied to a specific office or location, freelancers can often work from home, a coffee shop, or anywhere else that suits them.
You set your own rates
As a freelancer, you also get to set your rates. This can be especially helpful if you have in-demand skills or experience, such as being a skilled writer, or programmer.
You don't have to pay taxes on your income
One of the most significant benefits of being self-employed is that you don't have to pay income taxes on the money you earn. However, this does mean that you're responsible for paying your social security and medicare taxes.
What are the disadvantages of being a freelancer?
Just like there are disadvantages to being an independent contractor, there are also several downsides to freelancing:
You have to pay your own taxes and insurance
As we mentioned earlier, freelancers pay their own taxes and insurance. This can be costly, especially if you don't make a lot of money.
It can be hard to find work
Since there's a lot of competition out there, it can be challenging for freelancers to find work. And since you're not affiliated with an agency or company, you often have to pitch your services to potential clients yourself, which can take time and energy.
You're not protected by labor laws
For example, freelancers are not protected by labor laws, meaning they could be paid less than minimum wage or not be given overtime pay. There are also practically no benefits available to freelancers, such as health insurance or retirement savings.
You're responsible for your own equipment and supplies
As a freelancer, you're also responsible for buying your own equipment and supplies. This can be expensive, especially if you need to buy a lot of specialized tools or software.
No job security
Unlike traditional employees, freelancers don't have any job security. This means that you could lose your work at any time and be out of a job; which is why most freelancers make sure they're working for multiple clients at a time.
Are independent contractors and freelancers the same?
As you've probably guessed by now, contractors and freelancers share many of the same advantages and job descriptions, which is why many people use these terms interchangeably.
While there are some similarities between independent contractors and freelancers, there are still several key differences. Here are a few of them:
How they get work
Independent contractors usually get work through word-of-mouth or by being referred to a client by someone they've worked with in the past. On the other hand, freelancers often use job boards or social media to find new clients.
While many contractors are hired through an agency or company that supplies a particular service, freelancers find clients directly and without a middle man. Because of this, payments by clients are also all directed to the freelancer.
Employment period
Another key difference between these two workers is their employment period and how the work is done. Independent contractors are usually hired long-term for one specific project, while freelancers typically work short-term gigs for multiple clients at a time.
Employee benefits
Independent contractors often get work through word-of-mouth or personal contacts, while freelancers can use online marketplaces or job boards to find gigs.
Contractors are usually hired for a specific project and then released once that project is completed, while freelancers can sometimes continue working with the same client for years.
Freelancers typically don't receive employee benefits like health insurance or retirement savings plans, while contractors may have some access to these benefits depending on their contract.
Nature of their work
The work that independent contractors and freelancers do can also be quite different. Contractors are often hired for their specific skills or experience, while freelancers offer a broader range of services.
While this isn't a generalization or a rule, contractual work is often done with more technical or skilled tasks, while freelancing is often associated with creative work, like writing or design, with freelancing prevalent in the marketing or creative field.
Final Thoughts: Which is better, an independent contractor or a freelancer?
Ultimately, there is no easy answer when deciding whether being an independent contractor or freelancer is better. Both have their advantages and disadvantages, and what's right for one person might not be the best option for someone else.
That said, if you're looking for more stability, contract work may be a better choice. But if you're more interested in variety and working with different clients, freelancing could be a better option.
The best way to figure out which is right for you is to try out both options and see what works best for your situation. Good Luck!