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Freelancing vs. Contracting

Lee Scott by Lee Scott
17 February 2023
in Business
Reading Time: 13 mins read
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Table of Contents

  • Freelancing vs. Contracting.
  • Who is a Freelancer?
  • Who is an Independent Contractor?
  • Understanding how Freelancing Works.
  • Understanding How Contracting Works.
  • Difference Between Freelancers and Contractors.
    • 1. Flexibility.
    • 2. Tax obligations.
    • 3. Job Security.
    • 4. Establishing Time Frames.
    • 5. Setting Rates and Time Frames.
  • How Much do Freelancers Make?
  • How Much do Independent Contractors Make?
  • Which is Better – Freelance or Contract Work?
  • Final Thoughts.

Freelancing vs. Contracting.

One of the biggest debates within the freelancing world is whether to work as a contractor or an independent freelancer.

Both options have pros and cons.

Deciding which is right for you in the freelancing vs. contracting debate can be challenging.

However, both options are no doubt attractive for anyone looking to run their own business or make money from the comfort of their own homes.

You will have the benefits of working with multiple clients, choosing the projects you want to take on, and setting your hours with both contract and freelance work.

In this article, we’ll share everything you need to know about freelancing vs contracting. 

We’ll look at the differences, how to decide which one is right for you, and everything else you should know.

Who is a Freelancer?

A freelancer is a self-employed person who works as a temporary employee for a specific project or job. 

These jobs can be both home-based and office-based. 

A freelancer isn’t bound to any one employment contract and can choose the projects they want.

They also have the freedom to set their working hours and decide how much they charge for their work.

Unlike full-time employees, freelance workers don’t get paid a salary but are paid for each project or task they complete. 

Freelancers are often referred to as independent contractors or self-employed workers.

Freelancers are very skilled, complete individuals with solid portfolios. 

The freelancing market is highly competitive, and freelancers must constantly be upskilling themselves to remain competitive.

They can also work with multiple clients simultaneously, making freelancing very profitable and allowing freelancers to acquire a range of diverse skills.

Who is an Independent Contractor?

A contractor is an individual who works under contract as part of a larger organization or company. 

Contractors usually sign a fixed-term agreement with their employer.

They outline the terms and conditions of the job, including duration, payment, and other details.

Independent contractors are temporary workers who can work simultaneously for many different people or companies.

They usually work on big projects for people or companies they have worked with for a long time.

Independent contractors, such as dentists, doctors, and attorneys, can work in clients’ offices or workspaces. 

When looking for clients, they may choose an agency or another method that suits them best.

The key benefit of being an independent contractor is the potential to make more money than a regular employee. 

This is because contractors tend to charge higher fees for their services.

They also have the freedom to decide which projects they take on.

Understanding how Freelancing Works.

When it comes to freelancing, you are essentially an independent business owner. 

Freelancers have complete control over the type of projects you accept and how much to charge.

They can set your hours and work as much or as little as you want and determine your rates.

You can determine how you accept payment, and when to invoice your clients.

Working with various clients allows you to gain experience in multiple industries and expand your skill set.

As a freelance worker, you must have equipment and systems in place. 

This includes a reliable computer, high-speed internet access, reliable software and tools.

Don’t forget you will also need the necessary legal documents, such as contracts and invoices.

You also have to be able to market yourself and network effectively. 

You need to build relationships with clients, offer value beyond the scope of your project, find business leads, and network with other freelancers.

Finally, to be successful as a freelancer, you need to develop practical time management skills. 

You have to be able to manage your workload while staying organized and meeting deadlines. 

This is essential to maintain a good reputation and attract new clients.

As a freelancer, you must remember that only the result matters, so you must focus on delivering the best quality work to your clients. 

Developing strong communication skills, a good portfolio, and being proactive and flexible are also crucial in this endeavor.

Understanding How Contracting Works.

The freelancing vs. contracting debate is fierce because Individual contractors work differently than freelancers. 

They generally take on fixed-term projects from the same client, and the scope of each project is determined ahead of time.

Contractors typically work in an office setting but can also work remotely for specific clients. 

Understanding any legal requirements for your industry and obtaining the necessary licenses or permits before starting any project is essential.

Contractors can work individually or through an agency, which allows them to take on larger projects and access a broader range of clients.

When working with an agency, you will be expected to sign a contract outlining each project’s scope and associated payment terms.

As a contractor, developing strong communication skills and maintaining professionalism is essential.

You can also work with more than one client or multiple employers simultaneously. 

Understanding the legal issues surrounding contracting is essential to remain compliant and protecting your rights as a contractor.

You will have better financial control and the ability to create a passive income if you are able to build up a client base and manage multiple projects at once.

Difference Between Freelancers and Contractors.

Now that we know a little more let’s examine the differences with freelancing vs. contracting.

1. Flexibility.

One of the main differences with freelancing vs. contracting is the level of flexibility. 

Freelancers often have a lot of freedom to decide when, where, and how they work. 

They can take on multiple projects at once, working whenever best suits their schedule.

On the other hand, contractors may be tied into more fixed contracts that dictate their workloads and may require them to be available during particular hours. 

This means less flexibility when it comes to the timing of their work.

2. Tax obligations.

Freelancers are generally considered self-employed and, therefore, subject to income tax rules for self-employed people, including paying self-employment taxes (Social Security and Medicare).

Contractors, however, may be classified as employees and may be subject to different rules, such as withholding taxes from their pay checks and the employer paying part of their Social Security, Health Insurance, and Medicare taxes.

3. Job Security.

Freelancing is often seen as less secure than contracting, with freelancers having to search and apply for work to maintain an income continually.

On the other hand, contractors typically have more job security as they are likely to remain in the same role for extended periods.

However, for freelancing vs. contracting, the quality of work and customer experience is essential to maintain a good reputation and ongoing work.

4. Establishing Time Frames.

Freelancing takes more time to establish as you need help to back you up, and it solely depends on your skills, experience, and connections. 

It can take years to become an established freelancer.

On the other hand, contracting requires fewer resources and can be set up in a much shorter time frame. 

It is much easier to find contracts as they generally have pre-defined terms of engagement. 

This makes it simpler to establish yourself quickly and earn money immediately.

You can also work with contracting agencies who can help match you with the right clients for your skills and experience.

5. Setting Rates and Time Frames.

Freelancing is all about negotiations, setting your own rates, and deciding how long a project will take. 

You are also responsible for finding new clients and managing customer expectations.

Contractors, however, generally have an hourly rate predetermined by the agency or client and will usually receive payment for the contracted period regardless of how long it takes to complete the project.

This means that contractors may have different flexibility to negotiate rates than freelancers.

How Much do Freelancers Make?

Freelance rates vary depending on the project’s scope, the industry, the skills required, and experience. 

Generally speaking, freelance rates start at around $20-$25 an hour for entry-level work and go up to $100+ per hour for more specialized projects.

Furthermore, some freelancers charge a flat rate instead of an hourly rate.

This is usually a one-time fee for completing a project and does not include additional services or other related costs.

It’s important to remember that the rate you charge for freelancing should be dictated by the value of your work and the amount of time it takes you to complete each task.

For example, if you are working on an intricate project requiring a lot of research and expertise, you should charge a higher rate than if you are working on something more fundamental.

Additionally, your experience as a freelancer will also affect the rate you can charge — the more experienced and qualified you are, the more likely clients may be willing to pay for your services.

Therefore, it is important to continually strive to improve yourself and your skills to increase the value of your services.

How Much do Independent Contractors Make?

Like freelancers, independent contractors are typically paid a flat fee rather than an hourly rate. 

The amount of money they make varies depending on the nature of their contract, the length of time it takes to complete a project, and the job’s complexity.

Therefore, independent contractors may earn between $1,000 to $20,000 or more for a single project. 

In addition, they may earn a percentage of the total cost if they work on a larger project with multiple milestones.

It’s important to note that independent contractors also have to pay their taxes and social security payments, which can significantly reduce their income. 

As such, it is essential to research the local laws and regulations on taxation before committing to any contract.

Overall, independent contractors can make a decent living if they are experienced in their field and have reliable clients who pay them on time.

It’s also important to negotiate reasonable rates with your clients so that you can make sure you are getting paid fairly for the work you do.

Which is Better – Freelance or Contract Work?

So now the main question is: Which type of work is better – freelance or contract work? 

The answer to this ultimately depends on your individual needs and preferences.

Freelancers may enjoy the freedom and flexibility of setting their rates and working schedules. 

At the same time, contractors may appreciate the security of a regular income stream and an employer-employee relationship.

It’s important to consider what type of work best suits your lifestyle and needs. 

Some people may prefer the stability of contract work, while others may enjoy the freedom that comes with freelancing.

Both freelancing and contracting are great career choices as they can offer the opportunity to make a good living while doing something you love. 

Ultimately, it’s up to you to decide which path is best for you.

Regardless, both freelance and contract work can be rewarding if you are passionate about the job and willing to put in the effort to succeed. 

With the right mix of hard work and dedication, you can make a successful career out of either type of work.

So, take your time, research, and decide which option is best for you.

Final Thoughts.

So there you have it! 

Now you know the difference between freelancing vs. contracting and the pros and cons of each. 

Ultimately, it’s essential to consider your individual preferences when deciding which work is best for you. 

With the right attitude and hard work, freelance and contract work can be rewarding. 

Good luck!


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Lee Scott

Lee Scott

Lee, now the author of Learn Life Money, has started businesses in various industries such as E-commerce to social media marketing. He is an award-winning entrepreneur having received awards from Dragons Den Theo Paphitis, and winning awards for the fastest-growing social media marketing agency in 2019, You can read his full story here. Lee helps people to start and scale their businesses using their knowledge and experience. He has a passion is to help others achieve the success he has achieved and wants to help people pave their path to financial freedom from making the right decisions with money to starting their own businesses.

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