Contracting verus Freelancing - What's the Difference?

Since the pandemic, the number of people entering freelancing and contracting roles has shot up. The need for employees to be permanent isn’t as vital as it once was, as employers now look at hiring independent professionals to complete tasks using their expertise and skills-set. Likewise, more workers are now exploring the benefits of acting as an Independent Professional, in comparison to that of a ‘permanent employee’.

While contracting and freelancing are similar yet different, it’s important to distinguish between them.
In this blog, we will break down both freelancing and contracting and show you the benefits and differences so you can decipher which title or path is best for you.  

Who are freelancers?

Freelancers are self-employed, non-permanent people who often work on short-term projects with various clients. Freelancers can work for as many clients and take on as many projects as their schedule allows. They generally operate on their own, developing, marketing and offering their specialised skills. Freelancers also tend to set their own rates, which may be on an hourly basis or on a per-project basis. Typically, freelancers work remotely on their own premises and are hired on a short-term basis, generally, to help complete a specific project.

It is important to note that freelancers receive no employee benefits from their clients and pay their own taxes.

Examples of freelancers

Freelances are common in the artistic/media industry. Examples of freelance workers include journalists, graphic designers, copywriters and photographers.

Who are contractors?

Contractors are also self-employed workers and, much like freelancers, are also expected to pay their own taxes and set their own hours. 

Unlike freelancers, the majority of contractors tend to take on one client at a time. The projects they work on can last weeks, months or, in some cases, even longer. Because of this, sometimes, they are recognised as a contingent worker. As a contractor, you could work on-site in a client’s office or your own workspace. You can also accept projects through a recruitment agency. Contractors are highly skilled professionals who provide niche expert services to clients on a longer-term basis. 

Examples of contractors

In Ireland, you’re most likely to come across contractors in the IT industry. IT contractors tend to be brought in for between six and twelve months initially to work on a specific project or to fill a temporary skills gap within a company. Other common contracting roles come from business consulting, healthcare and more recently, the biopharma and med-tech industries.

Given the similarities between contracting and freelancing, many managers can confuse the two kinds of workers and use the terms interchangeably. This can lead to all sorts of confusion when it comes to setting expectations and establishing terms and conditions. Therefore, it is important to differentiate your work and avoid misclassification.

The 4 Key Differences Between Freelancers and Contractors

Number of clients:

More often than not, freelancers take on more than one client at a time, whereas contractors most commonly work with one client at a time.
Freelance workers have complete control over choosing which jobs to do and which projects to reject. As a freelancer, you can choose to work on one or two major projects with one or two clients that will take up most of your working hours or work a range of small projects for more clients.

As a contractor, you may take on larger projects, which typically means you have fewer clients at a time. You may also work with an agency which may slightly narrow down the choice of projects you can work on, but similarly to freelancing, you have control in choosing your clients/projects.

Project duration

Freelancers usually work on shorter projects, while contractors work on longer and more involved projects. As long as you are working as a freelancer, all the positions you accept will be somewhat temporary compared to life as a contractor. Contractors often accept projects with longer time frames and more often than not, find their contracts extended to work on additional or new projects upon completion.

Your schedule

As a freelancer, you have full control of your own schedule. Although you typically need to meet deadlines and adhere to timelines, you can still do the job on your schedule.

As a contractor, your schedule can tend to look more like a traditional worker. Many contractors agree to work certain hours, such as from 9 to 5, but within this time frame, they can set their own schedules.

Choosing a work location

When you work as a freelancer, you can choose where you work. You could work from a home office or rented office space in your local area. Some even choose to work in cafes, libraries or other public spaces.
If you are a contractor, this may look a little different. You might negotiate your work location for each project. Sometimes, you might work in your client’s office or work remotely from your own workspace.

Now that we know the main differences between freelancing and contracting, it’s time to decide which best suits your lifestyle. At Icon Accounting, we deal with Independent Professionals every day and want to assist you in your journey. For more information, please do not hesitate to contact us on 01 8077106 or email info@iconaccounting.ie for further advice and assistance.