There are many different considerations that need to go into running a small business. Understanding your revenue vs your profit, meeting the needs of your customers, managing the process of making products or delivering services, and finding the right team to support you are just a few of the things on your mind.
When you have a few projects that need to be done that don’t require the hiring of a full-time employee to fill a full-time position, there are a few different types of workers you can look at.
Freelancers and contract employees are the two main options you can select from to fill your needs.
But what are the differences and similarities when it comes to freelance vs. contract employees? And which is the best option for your business?
In this article, we’ll take a look at those questions and help you understand once and for all what freelance vs. contract employee really means.
What is a Freelancer?
A freelance worker often called a freelancer, is a self-employed individual who is able to provide services to a wide number of organizations.
These workers will pick their own clients and projects and manage them on their own as part of their scheduling and planning.
A freelancer will set their own rates and select the work they complete on a client by client or project by project basis. They choose where they want to work, usually from home or from a shared office space, and are in control of the type of work they want to do.
Because a freelancer can work from anywhere in the world, there is a wide range you can pick from to find the right fit for the project you have in mind.
They also tend to be less expensive than a full-time employee, so businesses that are just starting out or just want small projects are done here and there and can find many benefits in using freelancers.
Freelancers commonly do work like:
- Journalism
- Copywriting
- Graphic design
- Social media
- Web programming
- App design
- SEO
- Branding
- Etc.
What is a Contract Employee?
A contract employee, also known as an independent contractor or temporary employee works for a business for specific long-term projects. While a freelancer might be hired to write a single article or design a single page, a contract employee is there for a more significant amount of time.
Contract employees often will only have one or two clients at a time, and will often work within the office of the business they are working with.
They are more engaged with other members of your staff, and really become a part of your team, albeit for a short amount of time.
The contract you have with your contract employee defines the scope of the work that they will do for you and the terms around that work.
Contract employees are often:
- Lawyers
- Doctors
- IT professionals
- Project leads
- Software developers
- Accountants
- Contractors
- Dentists
Freelance vs. Contract: Similarities and Differences
Now that you have a better idea of what a freelancer vs. contract employee is on a surface level, let’s dive deeper into the similarities and differences between the two different types of workers.
That will help you get a better understanding of which will be better for your business.
Differences
To begin, let’s take a look at the differences between freelance vs. contract employees. While both work for businesses temporarily, they still have some very key differences and factors.
Clients
When it comes to clients, freelancers will typically have several different clients that they are working for at once. Because the type of projects they complete tend to be smaller in scope and time commitment, it’s easier for a freelancer to juggle between clients and projects throughout the day.
They also can choose as many or as few clients as they want to meet their money or time goals.
While in theory independent contractors and contract employees can also work with as many clients as they want, in actuality they tend to have much fewer clients as the work they are contracted for are much more complex.
At times a contract employee might also only have one client, especially if the work you require is time-consuming.
Schedules
A freelancer is able to make their own schedule and control the hours in which they work. Some freelancers work early mornings while others work late nights.
They also pick the amount of work they want to accomplish within a day. While they do have deadlines to meet that you set for each project, they can pick and choose which hours they work during the day.
A contract employee much more often has a work schedule like a regular full-time employee, where they work from 9 – 5.
This is in part because of the type of work they do and also because they are working much closer with a team rather than completely on their own.
Rates
While both freelancers and project employees will set their own rates, the way in which they go about doing it are different.
A freelancer sets their own rates per project and can charge either by the hour or for each project individually. They are responsible for negotiating and communicating their rates with you.
A contract employee, on the other hand, will have more clear rates that you can have some room for negotiation on as you create a contract. Establishing a rate will be an important part of your relationship.
Similarities
Now let’s look at some of the similarities between the two.
Taxes
Both freelancers and contract employees will independently file taxes rather than be processed through your business like a full-time employee.
Be sure that you are working with the right tax documents, and you can ensure that you are compliant as required by the tax officials.
Equipment
Both freelancers and contract employees are responsible for their own equipment. While you might want to be offering some equipment to contract employees who are working within your office, it often isn’t a requirement unless you need them to accomplish specific goals.
What is the Best Option for Your Business?
Now let’s take a look at what options are the best fit for your business goals and needs.
The Amount of Work Needed
How much work needs to be done? Think about how much work is involved in the project you are setting. Do you just need a quick one-off project done? Or do you have much more complicated tasks coming up that having a contract employee on hand will be helpful for?
You might also want to refer to the typical jobs performed by both freelancers and contract employees to find out what types of jobs are better suited for each different type of employee.
Costs
On the whole, freelancers tend to be less expensive than contract employees. Because a contract employee is coming on for a longer period of time, they tend to have higher rates as they are also working with fewer clients at once.
However, it is possible to have an expensive freelancer, all dependent on the type of job you need to be done and how accomplished you want your freelancer to be.
Project Length
As mentioned earlier, contract employees tend to work on longer-term projects while a freelancer works on shorter projects that tend to take just a few hours.
Being clear about the scope of a project internally will help you know which role is a better fit for what you have planned.
Level of Control
Freelancers tend to work completely on their own. That means that they don’t check-in or have ways for you to monitor their work until it is completed and in your hands.
A contract employee, especially if they are working in your office, will give you some more control over what they do and how they comply with your needs.
Think about how much the employee needs to be monitored and what types of work you have them do. If it requires a level of control, you might want to avoid a freelancer.
Wrap Up
Finding the right person to support your business growth needs is important. For different circumstances you might want a freelance worker, in others, you might want a contract employee.
But no matter who wins in the freelance vs. contract debate, the goal is to find the right fit for your team and your business needs.
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