Freelancer vs. Independent Contractor: What's the Difference?
Updated March 10, 2023
When looking for jobs, you might see listings for freelance workers and independent contractors. While contractors and freelancers are similar, these roles involve different standards and benefits. Before accepting a contractor or freelancer position, it is essential to know what these terms mean and how each designation can affect your hours, pay and schedule.
In this article, we discuss how freelance workers and independent contractors differ and determine which may be best for you.
What is a freelance worker?
A freelance worker is a nonpermanent, self-employed worker who provides products and services to multiple organizations. These professionals can work for as many clients and take on as many projects as their schedule allows. As a freelancer, you can set your own rates, process tax payments independently and choose where to work. Examples of freelance workers include journalists, copywriters, graphic designers and web programmers.
What is an independent contractor?
An independent contractor is a temporary employee who may work for many clients at once. These specialists usually take on larger projects for longer-term clients. As a contractor, you might work on-site in a client’s office or your own workspace, and you may accept clients through an agency. Doctors, dentists and lawyers are examples of independent contractors.
How are freelancers and independent contractors different?
Freelancers and contractors both work for organizations temporarily. They have greater financial and professional independence than the typical employee who receives a salary and benefits for part- or full-time work. However, freelance workers and independent contractors differ in several key ways:
Taking on projects
Establishing time frames
Choosing a work location
Since most freelance jobs are part-time or limited in scope, freelance workers often take on more than one client at once. As a freelancer, you can accept as many clients as you choose.
Independent contractors can also work with as many clients as they can manage. As an independent contractor, you may take on larger projects, which means you typically have fewer clients at a time. In this role, you may also work for an agency that acts as an intermediary between you and your clients. You can still select your clients carefully when you contract with an agency, but your direct client interactions may be limited.
Taking on projects
Freelance workers have almost complete control over choosing which jobs to do and which projects to reject. As a freelancer, you can opt to work on one or two major projects that take up most of your working hours. If you would rather work on a wider range of small projects, you can pursue several side jobs instead.
As an independent contractor, you can also choose your projects. Unlike freelancers, however, contractors often take projects with larger scopes, but in lower numbers. When you work as a contractor, you may oversee an entire multi-faceted project rather than completing a single deliverable. If you contract with an agency, they negotiate project scopes and expectations.
Read more: 20 Side Jobs To Generate Additional Income
Establishing time frames
Freelance roles have predetermined time frames. As a freelancer, your jobs may last for part of a day, an entire week, a month, a year or even longer. As long as you are working as a freelancer, all the positions you accept will be temporary.
Like freelancers, independent contractors also take on temporary roles. However, independent contractors often accept jobs with longer time frames. Although independent contractors or their agencies almost always define end dates for their projects, these time frames may be flexible or extendable.
As a freelancer, you control your own schedule. You typically need to meet deadlines and adhere to timelines, but you can do your job on your schedule.
As an independent contractor, your schedule might look more like a traditional employee’s. Many contractors agree to work certain hours, such as from 9 a.m. to 5 p.m., but some set their own schedules.
Freelancers are in charge of setting their own rates. Depending on the job you are doing, you can decide whether to charge by the hour or by the project. Either way, you are responsible for deciding what to charge and negotiating rates with each client. As a freelancer, you also have to manage invoicing and following up on payments.
When you work as an independent contractor, you work on an hourly or project-based rate that may vary from client to client or job to job. If you work independently, you have control over setting and negotiating your rates. If you contract through an agency, you rely on the agency to establish and secure an acceptable rate for each job. Similar to freelancers, contractors may handle invoicing independently.
From paid vacation and health insurance to retirement contributions, freelance workers and independent contractors are responsible for supplying their own benefits. If you work in either of these capacities, you serve as your own human resources department. For example, your clients likely do not provide paid vacation, but you can factor the cost of taking time off into your rate. You can also assess any health or business insurance requirements and handle them independently, incorporating costs into your rates.
You handle income taxes independently whether you work as a freelancer or a contractor. Both roles require you to pay self-employment tax. You may pay quarterly taxes and can expect to receive a 1099 form from each client at the end of the tax year.
When you take on self-employed jobs as a freelancer or an independent consultant, you can expect to sign formal agreements. These contracts typically outline the scope of the project, deliverables, time frame and cost. These agreements may also include legal clauses to confirm key aspects like the owner of the work, responsible parties and courses of action either party should take in the event of unexpected circumstances. Independent agreements protect both the contractor and the client, and both parties often have input regarding how the agreement reads.
Independent contractors and freelance workers purchase any equipment needed for projects. From faster computers and ergonomic chairs to specialized devices, you will develop your own equipment budget. Since purchasing equipment is a normal cost of business, you can plan to incorporate these essential expenses into your client rates.
As a freelance worker or an independent contractor, you are responsible for everything from office supplies and conference fees to education costs and travel expenses. Before signing a freelance or consulting contract with any client, carefully consider expected expenses. Some clients may cover essential expenses like travel-related costs. However, you may have to incorporate optional expenses like conference fees and continuing education costs into your standard rate without positioning them as additional expenses.
Choosing a work location
As an employee, your company decides where you work. You might go to the same office each day, or you might have to travel to various work sites each day of the week.
When you work as a freelancer, you choose where you work. You might have a home office, or you might rent office space in your local area. Sometimes, you might even work from cafes, libraries or other public spaces.
If you are an independent contractor, you might negotiate your work location for each project. Sometimes, you might work in your client’s office, or you might maintain your own workspace.
Read more: Work From Home Jobs That Pay Well
When you are self-employed, you can hire employees or bring on contractors. As an independent contractor, you might own your own business. That means you can hire employees to do ongoing work or contract out smaller projects to freelancers.
While freelancers often work independently, they can seek help with completing projects. If you take on projects that require more time or expertise than you have, consider subcontracting work to other capable freelancers.
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