Is There a Difference Between a Freelancer and a Contractor?

You might have heard of the “gig economy.” It’s based on independent people taking on temporary work assignments who are not employed by any one employer. They are free to advertise their services, make decisions for themselves, and set their own rates of pay. For the most part, workers who are part of the gig economy fall under one of two groups: freelancers and contractors. These terms are often used interchangeably, but they are slightly different. But what exactly are the differences? 

Freelancer 101

In short, a freelancer is self-employed, and takes jobs on a very short term basis with several employers. They can manage their own hours, and are usually very independent when it comes to how they finish a job. They tend to get a set fee for a project, and produce it based on a deadline. In most cases freelancers work alone, however they may on occasion outsource some of the tasks to another freelancer. While projects are short-term, they may be recurring on a weekly, monthly, or even seasonal basis. 

Contractor 101

An independent contractor also sets their own hours in most cases, and has control over the work they accept. However, with a contractor the projects tend to be larger, with several facets. These projects could be on-site or remotely, depending on what type of contractor they are. Contractors may also have staff at their disposal, since they are working on large projects that may need certain skills and talents. They can have several clients at a time if they can manage, but usually they work with just one. They often charge by the hour and negotiate a rate with the client. 

Benefits and Taxes

Both contractors and freelancers are responsible for their human resources and payroll tasks. They receive no benefits from the clients for which they work. They are only paid, and then they must pay their taxes and benefits through that. Freelancers and contractors fall under the same classification with the IRS. Contractors are also responsible for hiring their staff and being the HR department for them as well. In both cases, organization skills are crucial to make sure that they are always compliant with tax regulations.

Hiring

Contractors tend to have a more robust marketing budget since they handle larger projects. You might see and hear radio advertisements for contractors from certain sectors. However, you will very rarely see advertising for a freelancer. Freelancers find other ways to connect with potential clients. They call and email businesses who seem like they might need their services. They may also pitch to them in person. Employers looking to hire freelancers can do so through websites like Dormzi. These types of websites make it simple for freelancers to find work, and simple for clients to connect with freelancers. 

Paying Expenses

Another similarity between freelancers and contractors is when it comes to expenses. They are both responsible for their expenses, whether that be paying for equipment, office supplies, software, or anything else. If it’s something that is required for a specific job, they can build those costs into their rates so they are absorbed by the client. However, if there are ongoing costs, such as computers and wifi, then the freelancer or contractor will need to have a budget for it. It is not as clear cut as to how to bill the clients for those, other than to have rates that will allow for the required budget through the year. 

Flexibility

While an independent contractor and a freelancer both have some measure of freedom, it is more pronounced for a freelancer. In most cases, a freelancer negotiates a fee and a deadline with the client, and then goes about doing the work when and how they see fit. They have a lot of freedom to make their own hours and complete the work in any way they can. Contractors, by the nature of doing larger projects, have less freedom. They work closer with clients, and they have other competing factors, such as their staff and deadlines for one aspect of a project before moving on to the next. 

Some estimates show that there are approximately 60 million gig economy workers in the United States. That is a massive number that may grow as people find it hard to find work again after the pandemic slows down. Many people who do have 9-5 jobs are also looking for ways to change their lifestyle and work for themselves. Whether working as a freelancer or a contractor, you can certainly find the benefits if you work hard and make the right connections. However, you should know the difference between the two classifications. It may not affect how much you get paid in the grand scheme of things, but it might dictate what jobs you take on and how you structure your work and life balance.