Freelancer vs Contractor: Definitions & Differences

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freelancer vs contractor

The freelancer vs contractor distinction is not a clear one. This can lead to some confusion when looking for one or another type of professional assistance. In this post, we hope to clear that up for you. This way, you will be able to ask for exactly what you need, and attract the right candidates. Eliminating confusion helps both sides to avoid misunderstandings that can generate bigger issues in the future.

What is a Freelancer?

Freelancers are basically independent professionals. They offer their skilled services to clients like an employee works for a business. However, they are not tied to that company exclusively. This means that they can work with several clients at a time. 

Freelancers are not salaried workers, and therefore typically get paid by the hour. Some charge on a per-project basis for one-off projects and fixed deliverables. Others may also get paid a retainer for regular, ongoing work with set outcomes. As nonpermanent, self-employed workers, freelancers set their own rates and process their own tax payments. 

The client a freelancer works for also has fewer responsibilities towards the freelancer than they would an employee. For instance, clients do not have to give freelancers paid sick leave and vacation time, medical and dental coverage, and other common employee benefits. 

What is an Independent Contractor?

Independent contractors can work in conditions that are just like the above. Contractors also charge more or less the same rates as freelancers. They may, however, take some pay cuts in exchange for more job security. Independent contractors might take on work through an agency, which requires longer-term contracts than most freelance gigs. 

Traditionally, an independent contractor would actually have to be employed by a vendor or an agency. They would therefore report to agency executives and get paid through these agencies. However, this is not necessarily true anymore. Like freelancers, they might provide expert services through their own companies, working for themselves and not for an agency. 

The Rise of Freelancers and Contractors in the Workforce 

freelancer vs contractor

Before the advent of the internet, freelancing and independent contracting was mostly frowned upon. Companies and workers alike valued the stability of long-term commitment. This was mostly because part-timers and temps were liable to lose their jobs at the drop of a hat.

Alongside that, a negative impression of freelancers and contractors was growing out of a misconception. If they were really that great, why couldn’t they get “real” jobs? People who preferred the freedom that came with not being an employee were looked at as being less reliable. This is far from the truth, however. 

Today, companies no longer see freelancers and independent contractors simply as backup plans. They are not just people who can fill in holes here and there if someone is sick or quits unexpectedly. Many companies no longer hire them only until a “real” worker can take their rightful places. 

The History of Freelancing and Contracting

The spread and advancement of the internet and online tools has fostered growth in contractual employment. Most people today actually prefer to work independently. Freelancing and contracting gives them more freedom and control over their lives. And they are able to pick and choose because employers now realize the manifold benefits on their end. 

Hiring nonpermanent, self-employed workers means doing away with the need for many of the traditional company trappings. Employers do not need to pay for work spaces and equipment. If you’ve ever rented an office, you know how expensive that can get. Employers don’t have to pay the usual benefits, either. The government only demands companies to pay these to regular employees. And that’s just the beginning.

The Importance of Freelancing and Contracting

We must also emphasize the fact that hiring independents keeps a company’s workforce agile. They can hire more people when business is booming, and cut back when the demand dips. When new opportunities arise, they can bring on the talent they need to test out expansion. Or, they can hire additional help to tide them over when they face certain challenges. Swift adaptation can mean life or death for a company in today’s climate. Hiring in-house simply isn’t flexible enough to meet these needs.

Part of this agility and opportunity is the ability to hire exactly the talent that a company needs. Employers can search for a remote virtual assistant from almost any place on the globe. This takes off all previous geographic limitations. No more paying people extra to move to your city. No more having to meet a competitor’s offer to snag the best among limited talents. A business can find exactly the person they need for almost any position by hiring remote freelancers and independent contractors.

Agility in hiring can also mean significant costs savings for any business. This refers to both actual hiring costs and not paying opportunity costs. First, remember that you can find freelancers and independent contractors from almost anywhere in the world. This means that you can pay less but still pay them well by their country’s standards. 

freelancer vs contractor

Similarities Between Freelancers and Contractors

Much has changed in nonpermanent work, and this has brought freelancing and independent contracting closer together. Below are the major areas where they now overlap.

Flexible work arrangements

Both terms cover work that isn’t tied to any company or location. Often, it isn’t tied to any specific schedule, either. However, contract work does sometime necessitate fixed hours. This can also be true if a freelancer prefers to organize different client hours this way.

Working on projects for multiple clients

All independent professionals are free to take on multiple clients without legal or moral repercussions. As long as the clients are aware and amenable, they are free to moonlight.

Being responsible for their own taxes

Being self-employed, independents must pay their own taxes, just like any other solo proprietor.

Differences Between Freelancers and Contractors

Because there are many similarities between freelancers and independent contractors, many use these terms interchangeably. Wherever this can cause confusion when setting expectations, we recommend that you make your meaning clear. This is why we have this post to tell the difference between them.

Client obligations

Freelancers generally have more autonomy in choosing clients because some independent contractors work through agencies. This is because contractors must meet the requirements set by their employing agencies. This also means that contractors can more easily maintain longer-lasting relationships with clients. The agencies have a vested interest in keeping clients on long term, so contractors benefit from all the wooing. This, of course, doesn’t mean that freelancers are incapable of maintaining long-term clients. In fact, a freelancer who can keep a client can drum up loads of business from referrals. Plus, they don;t share any proceeds with any agency because they are on their own.

Project types

The title of independent contractor usually means that the individual works full-time for one client. They are not employees with the same job security that regulars enjoy. They do, however, tend to take on firmer commitments. Contractors can still take on more than one client. In this regard, they are similar to temp workers. We simply tend to refer to those who prefer larger projects for longer-term clients as independent contractors rather than freelancers. Still, this does not exclude them from taking on short-term projects. It also does not mean that freelancers can’t do long-term work.

Work arrangements and location

While freelancers tend to prefer working remotely, contractors might work in their clients’ offices if that’s more convenient. This usually depends on how many hours they work for each client, if they live in the same city. Still, with the move to remote work, this distinction is fading.

Frequently Asked Questions

1. Are there different legal considerations when hiring a freelancer vs contractor?

Any independent professional will be responsible for paying their own taxes. The client’s obligation is to report from their side all the details of that arrangement that they are required to. If a contractor works through an agency, then you are technically contracting with the agency. You will therefore be responsible for paying the agency. Paying the contractor and taxes and all that is not your responsibility. 

2. Can I expect different levels of commitment and availability between freelancers and contractors?

Not necessarily. Because the distinctions are now blurred, you can actually get the same from either. The only difference would be if you are working with an agency that contracts the individual. The reliability of the agency could complicate matters. Basically, if you set clear expectations when you delegate work, you’ll be fine. You can contract with a freelancer to work exclusively for you, if they’re willing. You can also arrange with an independent contractor to do gig work if they accept.

What Is Outsource School?

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This is the exact system Outsource School’s founders, Nathan Hirsch and Connor Gillivan, used to go from zero to 8 figures and 40+ virtual assistants with an exit in 2019.

Since being founded in 2020, Outsource School has helped 1,000+ business owners hire 2,000+ virtual assistants for their companies.

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Freelancers and independent contractors are no longer means to fill up temporary holes. These flexible additions to the workforce are indispensable in our modern business world. The lines often get blurred, but the main consideration is getting on the same page with an individual.

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