Freelancer vs Contractor: What Are the Differences?

In fact, a lot of remote workers have no idea about their job type, which is a huge mistake, since it may affect their legal status and taxing duties. Although freelancers and contractors are self-employed workers, contrary to popular belief they offer a distinct work experience. In other words, it’s crucial to know the difference between them.

What makes a freelancer and a contractor?

Freelancers

Just as the term implies, being a freelancer is all about freedom: self-employed workers of this category have the opportunity to establish presence on multiple freelance sites and be hired by more than one client at the same time. Being a freelancer also means you work from the comfort of your home and according to your own terms.

Freelancer assignments may cover any type of job that can be done remotely from a computer, but it’s creative, media and design gigs that are dominating on the freelancing market. In contrast with contractors, the scope of projects tends to be smaller, plus freelancers are paid by the hour or by the day – which is also a clear sign of a more straightforward relationship with clients.

A freelancer career is recommended for those who enjoy multitasking and have a strong self-discipline, since at home work can be quite distracting.

Contractors

Contractors are the other side of the ‘self-employment coin’, as they are usually bound to one client at a time due to their projects being longer and more complex. Since the employment involves a contract – which explains the origins of the term – it’s not rare that a contractor could work full-time for one client for at least half a year.

Contractors can be usually found in the IT industry, because developing an app or software demands higher skills and constant management – something that is not strictly required from freelancers. The firm grip on contractors also means that they are heavily screened during an interview to prevent fakers and less talented sole proprietors from taking the job from the truly skilled contractors. Additionally, it’s also fairly common that a worker is called in to fill a temporary gap in a development team.

The payment of contractors is dictated by the contract, often providing increasing payment levels with consecutive milestones. Home office work is rare in the lives of contractors, since companies either ask them to work on the spot or choose a professional coworking environment for them to join.

The common factors

Taxing

Although freelancing and contracting differ highly in terms of work style and assignment types, they are quite the same from a legal perspective. As mentioned earlier, freelancers and contractors are basically self-employed individuals who are not only responsible for registering themselves, but also for taking care of the self-assessment tax returns.

Insurance

Industry experts cannot stress the importance of having insurance enough, since it’s the only way to effectively protect yourself should the client make a compensation claim by accident. In the UK there is professional indemnity insurance for this exact purpose, while in the U.S. there are several small business liability insurances to choose from.

Branding

Branding seems a small task, but creating your own brand – whether you are a freelancer or a contractor – is highly recommended. With a properly built and advertized brand you can not only make yourself more visible to potential clients, but by providing quality service you can also continue to grow your clientele, generating more business.