In recent years, many workers have traded traditional employment for freelance work. But what is an independent contractor? We can explain.
The way we work has undeniably changed, and there’s no going back.
In 2021, the “Great Resignation” was a hot story in business and economic news. The COVID-19 pandemic shook up the labor market, and many workers quit their jobs in search of more flexible remote work. Employees in the hospitality and food services industry led the exodus, but its impacts are still felt across every industry. In the quest for a better way to make a living, many are considering working as an independent contractor, but they aren’t sure what it entails. So, what is an independent contractor?
A quick note: Here at Contra, we prefer “Independent” or “freelancer” over “contractor.” These terms highlight the entrepreneurial nature of the individual rather than the time-limited and economic connotations bound up in the word “contractor.”
What is a freelancer? 📖
A freelancer is a self-employed individual hired by a company for a set amount of time or work. Independents are often sought out by smaller companies that can’t hire—or don’t require—a full-time employee for a particular job. Job sites, such as Contra and LinkedIn, provide listings for contract opportunities.
For example, a company may want a handful of blog posts for its website. Rather than hiring a full-time SEO blog writer, whom the company may not need in the long run, a freelance writer can populate the site with a sufficient amount of editorial content and then move on to another project.
Here are some commons roles filled by Independents:
- Graphic designer
- UI/UX web developer
- Marketing consultant
- Social media manager
Independent contractors vs. employees 🧑🤝🧑
Independents and employees both sign a contract and are paid by a company for their time or work, but that’s where most of the similarities end. Before ditching a salaried position, bear in mind that freelancers don’t have the same legal protections, such as employee benefits, unemployment insurance, or protection under the Fair Labor Standards Act.
Other differences between independent contractors and employees include the following:
1. Freelancers work independently; employees depend on their company.
An Independent has a different working relationship with employers, offering far more control over when and how they work. They’re not required to be at their desk or workplace during set hours. An independent contractor keeps an eye on the deadline and meets it on their own terms, playing the role of employee and supervisor.
2. Independents choose where they work, while employees have a designated workplace.
Many Independents, such as writers or graphic designers, can work from wherever they please. This is certainly not the case for most full- or part-time employees, who must attend their workplace for a set amount of time.
3. Independents get paid by the hour or project, employees have an established salary.
Along with the freedom it affords, independence means dealing with the possibility of a volatile income stream. Company employees have a regularly scheduled payday, whereas freelancers often only get paid when they’ve completed their projects. If they’re paid by the hour, it’s up to the Independent to track and bill those hours. On the plus side, many Independents often make more per hour on their projects.
4. Independents are classified under different labor laws.
Independents are not covered under laws regulating the typical relationship between employer and employee. They also have to file taxes differently with the IRS, as state and federal taxes are not withheld from their paychecks.
Pros and cons of being an Independent ⚖️
Before making the move to freelance work, it’s important to first weigh the drawbacks and benefits of independent contractor life. Here’s what to keep in mind:
1. Flexibility and freedom.
A major benefit of independent work: No supervisor breathing down your neck and no daily commute. As long as deadlines are met, Independents have far more freedom than traditional employees.
2. Diverse projects.
One thing that draws people to freelance life is the variety it offers. Permanent employees who feel stuck in a rut might find this variety revives their enthusiasm for their work.
3. Potentially lower taxes.
Because an Independent is required to provide all the necessary materials and tools for a job, they may be able to claim these expenses during tax season. Not everything can be claimed, but it’s worthwhile to figure out what’s considered a business expense.
1. Lower job security.
Once a job is finished, there’s no guarantee a company will renew its contract with an Independent. It may happen, but freelancers are typically hired to fulfill a limited need. A major part of independent contractor life is finding the next job.
2. More budgeting.
Although an Independent’s expertise is primarily in their chosen field, they must also be financially savvy. Independents are responsible for tracking hours, sending invoices, accounting, and withholding their own taxes.
3. No employer benefits.
Independents have a lot of flexibility and freedom but rarely enjoy the safety net of paid time off, health insurance, sick days, or retirement benefits. Although some benefits can be negotiated, the vast majority of freelance workers must factor emergencies and long-term needs into their budget.
How to become an Independent 🧑🏫
If you’re questioning your position as an employee, independence might be the answer. Here are some essential steps to take when starting your journey:
1. Pick a job or industry.
Are you taking existing skills and redeploying them as an independent contractor, or are you jumping into a whole new field? Be sure you have the skills and experience to promote yourself as a contractor in whichever field you enter. The competition is often stiff, so plan ahead to make sure you stay ahead of the pack.
2. Set up your business.
Make sure you’re clear on what your area requires for your business to operate. Some freelancers don’t need to worry about this, but some industries require permits or certifications for work (e.g., home construction). A separate bank account for your business is a great first step.
3. Plan your business strategy.
Although you may be eager to start your business, we can’t overstate the importance of a good plan. Recent studies show that a business plan can significantly increase profits and the likelihood a business becomes self-sufficient.
4. Promote your work.
Clients won’t know what a valuable resource you are unless you get your name out there! Set up a business website and display your best work (perhaps with the help of Contra’s Portfolios), establish a social media presence for your business, and do some good old-fashioned in-person networking.
Start your journey as an Independent today 🛫Ready to take the plunge into life as an Independent? If the pros outweigh the cons for you, head to Contra to find assistance and inspiration for your new business. Our commission-free platform ensures that Independents are paid what they deserve. Helpful tools, such as our Slack chat and Discover feed, help freelancers feel like part of a community, even when working from a home office or local coffee shop.
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