Freelancer vs Contractor – The Most Important Differences

Person working on a computer with text around them saying "Freelancer?" and "Contractor?"

Freelancers and contractors are both self-employed individuals hired to work on specific projects for different clients. Their roles have some similarities, but there are some key ways they differ as well.

In this guide, I’ll give a brief overview of what freelancers and contractors do, then I’ll go through the similarities in detail. This way, whether you’re hiring someone or looking for clients yourself, you’ll have a better idea of what the right choice is for you.

Note: This article is for educational purposes only, and we are not providing legal or financial advice. If you’re in any doubt about your employment situation or tax responsibilities, always check with your local government for more information.

What Is A Freelancer?

Freelancers are self-employed individuals, which means they manage their own schedules, choose their clients, set their rates, and often work on multiple projects at a time. This flexibility is a defining characteristic of freelancing, allowing individuals to tailor their workload to their personal and professional goals.

A freelancer typically specializes in a particular field or skill set, such as writing, graphic design, web development, or consulting. By focusing on their area of expertise, freelancers can build a strong personal brand and reputation, which is crucial for attracting new clients and retaining existing ones.

Unlike traditional employees, freelancers are responsible for all aspects of their business, from marketing their services and negotiating contracts to managing finances and filing their tax returns.

What Is A Contractor?

Contractors are workers that are hired by different clients on a contractual basis. The client and the contractor agree on all stipulations like pay rates, work hours, and designated periods of work.

Contractors are often required to work at the client’s offices, but sometimes they get to operate from their own chosen workspaces (it depends on the nature of the work). However, they still get to choose which clients they take on as customers. Common examples of independent contractors include lawyers, caterers, wedding planners, and tattoo artists.

Unlike a regular employee who is typically integrated into a company’s workforce, a contractor provides services as an external entity. However, if the contractor works on-site, it’s not uncommon for them to build relationships and integrate with the rest of the company for the duration of their contract.

Contractors are often hired for specific projects or for a set period, and they bring specialized skills or resources that the hiring company might lack internally. The contractor operates independently, managing their own work processes and usually using their own tools and methods to complete tasks.

Contractors are not considered employees, so (like freelancers) they don’t typically receive employee benefits like health insurance or retirement plans from the client. They are responsible for their own business expenses, taxes, and insurance. This arrangement offers contractors a degree of flexibility and autonomy but also requires them to manage the business aspects of their work, similar to freelancers.

Let’s now compare freelancing and contracting to see where the two types of employment differ.

Freelancers vs Contractors – The Main Differences

Can handle several clients at onceUsually working for one client at a time
Freedom to choose where to work fromNormally working at the client’s premises
Control over payment ratesOften have to work to the client’s rates
Freedom over working hours as long as you do the workMight have to settle with a 9-5 schedule
Mostly independent workOften have teams of other workers

Hiring A Freelancer vs Contractor

When deciding between hiring a freelancer and a contractor, the nature of the work and the desired level of engagement are crucial factors to consider. Freelancers are typically hired for their expertise in specific tasks or short-term projects. They are ideal for jobs requiring specialized skills for a brief duration, like designing a logo or writing content for your website.

In contrast, contractors are often engaged for more extensive projects that require a longer commitment, such as physical construction work or long-term software or website development projects. The choice between a freelancer and a contractor depends largely on the project scope, complexity, and duration.

Another aspect to consider is the level of involvement and supervision required. Freelancers usually work independently with minimal oversight, delivering their services remotely. This setup is ideal for tasks that need a high degree of specialization but not constant collaboration.

On the other hand, contractors might work more closely with the client’s team, sometimes even on-site, and could integrate more deeply into the client’s operational processes.

Payment Rates

Payment rates for freelancers and contractors can vary significantly based on factors such as industry, expertise, and market demand. Freelancers often charge per project, per hour, or per piece of work, like per article or design.

Freelancers usually set their prices based on the complexity of the task, the turnaround time, and their level of expertise. Since freelancers tend to work on shorter-term projects, their rates may reflect the need to cover periods between projects. They’re not always going to be higher than contractor rates, but they often are.

Contractors, in contrast, may have more stable and predictable payment structures. They often work under a contract that specifies a fixed rate for the duration of the project, which can be daily, weekly, or monthly. They’ll typically negotiate their rate at the beginning of the contract and it will reflect the scope of work, project duration, and the contractor’s experience and resources (i.e. similar to dealing with a freelancer).

Contractors’ rates might also include costs related to materials, equipment, or other resources necessary for the project. Overall, contractor rates are generally structured to cover the broader scope and longer duration of their projects compared to freelancers.

Contract Duration

Freelancers usually work on short-term projects, often working on several with different clients all at once. These projects can range from a few hours to several weeks, depending on the work’s nature. This short-term commitment allows freelancers to maintain a flexible schedule and take on a diverse range of projects, but it also means a less predictable workload and income.

Note: As with pretty much every difference I discuss here, there are exceptions. I’ve personally taken on freelance roles that had contracts of up to a year, and so the lines between the two are often blurred.

Contractors, on the other hand, typically work with one client at a time (although not always), and usually for longer periods. Their contracts can last several months or even years, especially in industries like construction or large-scale software development.

This longer commitment can provide contractors with a more stable and predictable work schedule and income. However, it also means less flexibility in terms of taking on varied projects or clients during the contract period.

Where & When They Work

A freelancer also (usually) gets to choose where they work from. They might work from their own homes, coffee shops, local libraries, coworking spaces, the beach, and anywhere else they can get a good internet connection. They might have to work on-site on occasion, but this is by far the minority of cases.

Freelancers usually get to work on any given day, at any given hour. This flexibility of schedule-making caters to morning people, night owls, and everyone else in between. However, to make it work, you need to be good at managing your time.

Some contractors might work from home, but many clients expect or require their contractors to work on their premises. Unlike most freelancers, they’re not always in control of this aspect. This is especially true if the work is of a physical nature.

Some contractors might be able to create their own schedule. But many of them need to work according to the client’s office hours, meaning their schedule is likely similar to a typical employee’s (a 9-5 job, for example).

Who They Work With

Freelancers usually always work on their own. They might be able to delegate some tasks to other freelancers, but it’s usually a solo venture. It’s not always the case, and freelancers often hire other freelancers to help with tasks. But when a client hires a freelancer, the expectation is typically that one person is carrying out the work.

Independent contractors on the other hand often have their own businesses, like flower shops or cake decoration boutiques. This means that it’s common for them to employ other independent workers whenever they take on bigger projects. Contractors working in the digital space are more likely to work solo.

What About Consultants?

Consultants occupy a unique position in the spectrum of independent professional services, distinct from both freelancers and contractors. They are experts in a particular field or industry and are hired primarily for their specialized knowledge and advice.

The role of a consultant often involves analyzing problems, devising strategies, and recommending solutions to their clients. This can range from organizational change and business strategy to specialized areas like IT, finance, or human resources.

Unlike freelancers, who are generally focused on executing specific tasks like writing, design, or coding, consultants usually provide a higher level of strategic oversight and expertise. They often fill the role of an advisor to a business, offering insights based on deep industry knowledge and experience.

How Consultants Work

Consultants may work with a client for varied periods of time. From short-term projects to address a specific issue to long-term engagements for ongoing strategic guidance.

In terms of working arrangements, consultants can resemble both freelancers and contractors. Like freelancers, they often handle multiple clients and may work on shorter-term projects, but with a focus on high-level strategic advice rather than task-specific work. They’ll often work on-site too, so they can get a true feel for areas of the business in need of improvement.

However, it’s not uncommon to see businesses hire ‘freelance consultants’ on a contract basis. So you can end up with a job title that pretty much encompasses all three!

Freelancing vs Contracting – Which Suits You Best?

As I’ve already said, the lines often blur between freelancing, contracting, and consulting. Which one is right for you might depend on what the client has put as the job title on their hiring post or advert.

However, if you want to learn more about freelancing specifically, you should check out our beginner’s guide to becoming a freelancer.

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