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Independent contractor vs freelancer: what’s the difference?

Did you know that around 36% of the US workforce are freelancers? If you’re already self-employed or thinking about going self-employed then one of the questions you may be asking yourself is how you define your worker status. There are a few different ways you can go in terms of independent worker status, most commonly you’ll hear the terms ‘contractor’ or ‘freelancer’ used – but what’s the difference, and does it really matter?


While the differences aren’t extreme, it’s good to know the different options available to you, and what is best suited to your desired working style. We’ve already covered the differences between employees and independent workers, and now we’re going to break down the difference between freelancer and contractor, so you can be clear on what the best way for you to work is, what the benefits of being a freelancer or a contractor are, and how to stay compliant in your worker status.





What is a freelancer?


A freelancer is an independent worker who works completely on their own. They typically have a number of different clients or projects at any one time, will choose where and how they work, and source all of their own clients too.


“Freelancer” isn’t a legal term, but it is a globally recognized label for those that are self-employed and they are expected to register as such and do their own taxes each year. Freelancers have a wide range of benefits such as setting their own rates, working where and how they want, and being able to tailor their working schedule in the way that suits them best. But bear in mind that as a freelancer, you are responsible for everything from marketing yourself to managing your own time and filing your taxes.


This type of independent worker is common in creative industries such as photography, copywriting, journalism, and design.


What is a contractor?


A contractor is another type of independent worker that typically only works with one or very few clients at a time but for longer periods of time. The scope of the projects is usually a little larger than freelance gigs, and in some sectors such as IT, work is often carried out on-site, in the client’s offices for example.


Just like with freelancers, contractors do have independent status, however, contractors may also work via a third-party agency as well as directly with a potential client. If this is the case then typically the third party will be the one to negotiate the scope of the project, deadlines, outcomes, and expectations.


As a contractor working with an agency, fees are still set by the Indy, but this is then negotiated and agreed between the client and the third-party agency, with the contractor very rarely having direct communication with the client when it comes to the how’s, where’s and why’s.


From a tax point of view, freelancers and contractors are virtually the same. They are both classed as self-employed and are both responsible for their own tax, and if you’re based in the UK, National Insurance contributions too.


Worker status classification


In the US, it is the organizations' responsibility to correctly classify their workers as either employed or self-employed, by filling out a W-9 form. From the outside looking in it can be tricky to notice the difference between contractors who are working on an hourly rate from 9-5 in the office of their client, and an employee who works full-time. This is where things can start to get a little hazy, so whether you decide to work as a freelancer or a contractor, it’s really important that you have a clear working contract and boundaries when it comes to how you work for an organization.


(If you’re an organization that’s worried about this, then check out our 5 tips for keeping your project compliant to find out more about worker classification.)


Which is more suited to you?

You may feel inclined towards freelancing if you enjoy variety and working on a diverse range of projects. If you’re quite independent and enjoy working remotely then freelancing will give you that flexibility to move around and work wherever you feel like from one day to the next.


However, if you want the freedom to be able to pick and choose projects but would still like a bit of structure in your day to day, then contracting can be a good way to secure an income for a longer period of time, and work on larger, meatier projects. As a contractor, you can often also find a great balance between independent working and still enjoying an office buzz on the days you’re working with certain clients.


If you’re new to self-employment or are considering taking the leap into self-employment, then you may also find our article on the benefits of independent working useful in your transition!

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