The independent contractor and freelancer are two titles that apply to people who are not employees. They are an emerging force: freelance workers make up 20% to 30% of the working-age population in the United States and Europe, according to a survey conducted by the McKinsey Global Institute in 2016.
What is the difference between a freelancer and an independent contractor?
Freelancer: A freelancer is a person who provides their services to multiple companies at the same time. A freelancer can work on short-term projects and perform work from home or outside. Payment is typically made per project, but it can also be per hour or per piece.
Independent contractor: An independent contractor works on larger or long-term projects. An independent contractor may work in long-term contractual jobs. These temporary contractual jobs are completed for a specific project within a set timeframe, for a specified amount. A “contract-to-hire” position may start like an independent contractor job, but can transition into a full-time position when the contract ends. The work may be performed by the independent contractor at home or on-site. Payment is usually made hourly.
Examples of Jobs
Examples of freelancers include editors, photographers, writers, designers, and other creative fields. Freelance jobs may also include translation, data entry, and even online teaching.
Examples of independent contractors can include software developers, cloud engineers, and security specialists working on contractual jobs. Independent contractors may also work in construction, marketing, sales, project management, and business consulting. Technical writers typically work on a short- or long-term contract basis.
Responsibilities of Freelancers and Independent Contractors
Both freelancers and independent contractors are responsible for:
- Budgeting for federal and state taxes
- Purchasing health insurance for freelancing or contracting
- Providing retirement savings, such as a 401(k) plan for freelancers
- Administrative tasks, including obtaining and maintaining business licenses, managing accounts, marketing, obtaining business insurance, and managing any investments
Which is right for me?
If you hope to work for yourself, you may want to consider which approach suits you best. Are you interested in the stability that comes from long-term contracts and projects with fewer clients, which you might find as an independent contractor? Or do you prefer the variety and novelty of short-term projects with more clients, as is typical for freelancers? If you’re looking for more stability, consider long-term contract jobs or positions that could transition into full-time roles as an independent contractor, but be sure to understand your tax situation and whether it will change over time.
Conclusion
The Internal Revenue Service does not differentiate between freelancers and independent contractors. In today’s working world, these titles may describe two roles and different types of self-employment. Freelancers may have more variety but less stability. Work burdens, clients, and projects may change monthly. Independent contractors often work with fewer clients on longer contracts. Remember your responsibilities as a self-employed individual regarding taxes, administrative tasks, health insurance, and don’t forget to save for retirement.
Frequently Asked Questions
What is the difference between an independent contractor and an employee?
According to the Internal Revenue Service, you are an employee if your employer controls the details of your services (what needs to be done and how to do it). You are an independent contractor if the buyer of your services does not have the right to control or direct the work to be done and how it is to be done – only the result.
Which is better to say, “freelancer” or “independent?”
That
It depends on the market for your service or products and who you are talking to. Although freelancers are independent, they usually provide services to multiple companies. The general term “freelancer” can also include owning a clothing store, a beauty salon, or any other business that offers products or services to the general consumer. While you may have heard of a “freelance graphic designer,” you might not have heard of a “freelance boutique owner.”
Source: https://www.thebalancemoney.com/are-freelancers-contractors-or-independent-contractors-3515143
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