Is a contractor the same as a freelancer? Though the terms are often used interchangeably, these roles refer to different types of contract work. Freelancers typically work with multiple clients and projects, offering services like writing, graphic design, or consulting on a per-project basis. Independent contractors (ICs), on the other hand, might have longer-term commitments with fewer clients, closely resembling traditional employment but without employee benefits such as health insurance.
Choosing between these paths depends on your career goals and desired work style. Understanding the differences between freelancer vs independent contractor can help you determine which path aligns best with your professional aspirations and personal needs.
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What is a freelancer?
Freelancers represent the core of the gig economy, managing diverse tasks and clients while maintaining full autonomy over their schedules. This allows them to choose their workload and work environment, providing a level of freedom that can be highly appealing.
“A freelancer commonly refers to a self-employed person who works for various clients with no long-term commitment,” says Lucas Botzen, CEO & HR Expert at Rivermate. “This usually means they work on projects one after another, having considerable control over what they do.”
Freelancers must handle their own business aspects, such as marketing and financial management, and constantly seek new clients and projects. Additionally, they do not receive employee benefits and must arrange for their own health insurance.
What is an independent contractor?
Independent contractors usually engage in contracts that last months or years, offering more stability and a predictable income stream. This setup requires a higher degree of commitment to a particular client’s needs and often resembles traditional jobs, with set hours and responsibilities. ICs benefit from having a more stable workload and a clearer sense of job security compared to freelancers, even though they do not receive employee benefits.
“An independent contractor is typically hired by a single company or a few clients to work on certain specified tasks or projects, and while they enjoy independent status, their engagements at times can also be long-term and more structured compared to freelancing,” Botzen says.
(For insights on transitioning to an independent contractor role, check out these 8 steps to become one.)
Freelancer vs independent contractor: Legal considerations
According to the IRS, the self-employment tax rate is 15.3%, which includes 12.4% for Social Security and 2.9% for Medicare. All self-employed individuals, including freelancers and independent contractors, are responsible for calculating and paying these taxes themselves, as they do not have employers to withhold them.
While both freelancers and independent contractors are considered self-employed and therefore share many tax responsibilities, their work arrangements can differ in terms of contracts and the nature of their work relationships. “The major legal differences between freelancers and independent contractors are whether they are entitled to some benefits,” Botzen says. However, when it comes to filing income and handling taxes, they are treated similarly under the law.
Both freelancers and independent contractors are required to file self-employment taxes and make estimated quarterly tax payments, including those for Social Security and Medicare. Additionally, both can deduct business-related expenses, such as office supplies and travel costs, to reduce their taxable income. This ability to deduct expenses is a crucial aspect of tax planning for all self-employed individuals.
To comply with tax requirements, freelancers and independent contractors must report their income and deductions using Schedule C (Profit or Loss from Business) along with their personal tax returns. This process ensures they accurately report their business income and take full advantage of available deductions.
Future trends and opportunities
Staying informed about the trends in the job market can help you make a more strategic choice that aligns with future opportunities in your field. “We see the rise of gig platforms and opportunities for remote work, which start to blur the lines between these roles,” Botzen says. “Another important trend that sets the future for both is increasing demand for specialized skills.”
“Both groups are seeing new opportunities for remote work and flexible schedules that digital platforms provide,” says Dalya Harel, HR manager and CEO at Lice Busters. “For freelancers and contractors, this means more freedom to choose their projects and clients, often working from anywhere in the world.”
As the gig economy trend grows, experts expect there will be more opportunities for both groups. “With more competition, experience and networks matter more,” says Dylan Cleppe, CEO of OneStop Northwest. “I see companies opting for more ‘contingent workers’ over employees, benefiting freelancers and contractors.”
What’s more, the increased reliance on non-employees may result in better protections, benefits and job security for gig workers. “There's a growing discussion about whether gig workers should receive protections like health insurance and retirement plans, which are typically reserved for employees,” Harel says. “This has led to talks about new policies, such as creating a third category of worker status or implementing portable benefits that would follow workers across different gigs.”
Independent contractor vs freelancer: Which work model to choose?
Choosing between being a freelancer and an independent contractor depends on various factors such as career goals, work style preferences, and the level of stability you seek. Here are some key aspects to consider when deciding which work model suits you best:
Flexibility and control
Freelancers often have more flexibility and control over their work schedules and project selection. This working model allows you to pick projects that align with your interests and expertise, providing a varied and dynamic work experience. If you value independence and enjoy managing multiple clients, freelancing might be the ideal choice.
Stability and predictability
Independent contractors, on the other hand, benefit from more stable and predictable income streams due to long-term contracts with fewer clients. This setup can offer a sense of security and a clear understanding of project expectations. If you prefer a more structured work environment and consistent income, working as an IC may be more suitable.
Financial and legal considerations
Freelancers and independent contractors both bear the responsibility for handling their own taxes, including self-employment taxes and quarterly payments. Despite differences in their work arrangements, they are treated similarly under tax law. Both can deduct business-related expenses, but the more stable income of independent contractors might make tax planning easier. Legally, the main difference often lies in contract specifics and potential eligibility for certain benefits.
Skill development and career growth
Both work models offer opportunities for skill development and career growth, but in different ways. Freelancers can gain diverse experiences by working on various projects with different clients, enhancing their adaptability and broadening their skill set. Independent contractors may develop deeper expertise in specific areas through long-term engagements, which can be valuable for career specialization.
Work-life balance
Assessing how each work model affects your work-life balance is essential. Freelancers can often set their own hours and work from home, which can lead to a better work-life balance if managed effectively. However, the constant search for new clients and projects can be demanding. Independent contractors may have more regular work hours, contributing to a more balanced lifestyle but potentially at the cost of flexibility.
By carefully evaluating these aspects, you can make an informed decision about whether freelancing or independent contracting is the right path for your career aspirations and personal needs.