Decoding Self-Employment: Freelance vs Contract Work

A freelancer shaking hands with a contractor
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Once upon a time, career possibilities were limited to traditional 9-to-5 jobs. However, thanks to the rise of the digital economy, that’s no longer the only option. Instead, you can opt for freelancing or contracting work.  

Both of these career choices offer advantages that traditional employment may not, such as flexibility, the potential for higher income, and a greater say in the work you do.

But what exactly is freelancing, and how does it differ from contract work? While the two terms are often used interchangeably, they represent different ways of operating and navigating the professional landscape. 

In this article, we will delve deeper into these career paths so that if you’re contemplating a move from the traditional employment setup, you can make an informed decision that aligns best with your life and goals. Plus, we’ll go over the pros and cons, choosing between the two based on diverse situations and how they compare to permanent employment. 

What is Freelancing?

Freelancing, at its core, is about being your own boss. As a freelancer, you are self-employed and the master of your own time, projects, and work environment. Being independent, you have the freedom to choose your projects, decide your clients, determine your service fees, and create your own work schedule. In simpler terms, you’re at the helm, guiding your professional ship.

Freelancing isn’t restricted to any particular industry either. From photography to web development, digital marketing to consulting — the opportunities to be a freelancer in today’s digital era are vast and multitudinous.

However, while enjoying such freedom and diversity, it’s also humbling to remember that as a freelancer, you’re like a one-person business. You are the marketing, sales, accounting, and customer service branches all packed into one resourceful entrepreneur. It’s a road that requires not just skills and talent in your chosen field but also a dash of business acumen and a whole lot of self-discipline.

What is Contracting or Contract Work?

In the world of work, contracting, or contract work, is another popular option, just like freelancing.  Simply put, when you’re a contractor, you perform specific tasks or projects for a client under a contract, hence the term ‘contractor.’ 

Sounds like freelancing, right? 

But here’s where it differs: as a contractor, you typically work for one client at a time for a specified period and are often dedicated to one significant task or project. Unlike freelancing, where you juggle multiple clients, a contract role is more like a temporary full-time job. 

Industries where contracting is frequently seen include Information Technology (like the aforementioned software development), Construction (think project managers or electricians), Health Services (such as traveling nurses or medical coders), and even Education (like curriculum consultants or short-term teachers). In these fields, work is often project-based, and companies need experts to step in for a fixed period.

As a contractor, you get the freedom similar to a freelancer but with more stability, since you’re tied to a single, in-depth project for a set period. 

Similarities Between Freelancing and Contracting

Freelancers and independent contractors, though not traditional employees, play invaluable roles in the professional landscape. As such, although they’re not the same thing, there are several key similarities between these two careers, such as: 

  • Flexible work schedule: Many believe this flexibility boosts creativity and productivity, which is so often cramped by rigid 9-to-5 schedules. Suppose you have a surge of energy at midnight or prefer working in a cozy coffee shop.
  • Ability to work from anywhere: Many freelance and contract positions allow you to work remotely, letting you choose the environment in which you operate. 
  • Level of autonomy over tasks and projects: Nobody looks over your shoulders, making you conform to a cell within a big corporate matrix. Instead, you take charge of your work — you select impactful projects that resonate with your skills and passion. 
  • Potential for higher income: Traditional employees are limited to their monthly salary, no matter how hard or how much they work. But as freelancers or contractors, you can take on as many tasks or projects as your capacity allows.

Despite the differences, freelancing and contracting share these liberating similarities, which can be very attractive to many job seekers out there.

Differences Between Freelancing and Contracting

Now, while we’ve covered some similarities between freelancing and contracting, there are still a fair number of differences. Let me break down some of what these are in greater detail to give you a more solid understanding of what sets each one apart. 

Stability and Security of Work

As a freelancer, you might wind up juggling multiple projects at once or even find yourself in a situation where work is scarce. You’re continually on the hunt for your next gig, and sometimes, it can feel like a rollercoaster. 

Contract work, on the other hand, typically provides more stability for the duration of the contract. During this period, you can rest assured knowing where your next paycheck is coming from, but what happens after that contract ends is a new challenge.

Issue of Payment and Rates

As a freelancer, you have the luxury of setting your own rates based on your estimated value of the work.  On the contrary, as a contractor, your pay is typically defined by the terms of the contract and often determined by the client or agency that hires you. 

Nature and Duration of Relationship with Clients

Freelance work often involves short-term relationships with clients. Once a project is completed, the client might not need your services again, or it might be a while before they do. 

However, contract work often implies a longer duration. You could be engaged for several months to a year, depending on how long it takes to finish the project. In this arrangement, you form a more in-depth relationship with your client.

Pros and Cons of Freelancing

As with any style of work, freelancing comes with its pros and cons. Knowing what these are can give you a better understanding of how operating as a freelancer works. 

In terms of the pros, a few things you can enjoy include: 

  • Flexibility: You can decide where and when to work. Whether you’re a night owl who’s most productive at midnight or you enjoy working in the sunlit corner of your local cafe, the choice is yours.
  • Autonomy: You can choose the type of work you want to do, tailoring your job to your skills, interests, and career goals.
  • Variety of projects: Diverse projects can keep your work exciting and challenging. Working with various clients across different industries ensures that your work never becomes monotonous.

On the other hand, a couple of cons of freelancing include: 

  • Inconsistent work: One major challenge of freelancing is the inconsistency of work and income. Projects might come in waves, with busy and slow periods.
  • Lack of benefits: Another disadvantage of freelancing is the lack of traditional benefits such as health insurance, retirement contributions, and paid time off. An absent safety net can make freelancing a bit risky.
  • Need for self-promotion: As a freelancer, you’ll need to constantly promote your services to attract new clients. This might be hard for those uncomfortable with self-promotion.

Pros and Cons of Contracting

While some of the pros and cons of contracting can look similar to those of freelancing, some of them are a bit different, too. In terms of benefits, a few things contractors enjoy include: 

  • A guaranteed paycheck: Unlike freelancing, where work gigs come in flickers, contract work often guarantees a steady workload for a set period. This, in essence, means a steady paycheck. 
  • Higher pay: As a contractor, you are often specialized in your field and may be able to negotiate a higher pay rate, given your skills and experience.

At the same time, it poses a few unique disadvantages: 

  • Less control over your work: Contract workers typically have less sway over the jobs they take on. The hiring company dictates the projects they’ll tackle, conditions of work, and often the work hours.
  • Lack of employment rights: Depending on the contract, contractors might not be entitled to benefits like health insurance, time off, or pension contributions, which full-time employees usually receive — this depends on the jurisdiction as it varies by region and country.

Considerations When Choosing Between Freelancing and Contracting

Choosing between freelancing and contracting can be tough.  Both ways of working have their perks and challenges, but the one that suits you best depends greatly on your personal preferences, career goals, and financial needs.

Here are a couple of things to keep in mind as you choose between each one. 

Your Work Style

If you thrive on variety, enjoy juggling multiple clients at once, and aren’t fazed by the ebbs and flows of work volume, freelancing could be your niche.

On the other hand, if you like the stability of a defined role and a steady workload and enjoy diving deep into a project for a specific period, contracting may be your route. 

Your Financial Needs and Stability

Freelancing can potentially yield higher income, but it’s more unpredictable. You need to constantly find new clients to maintain cash flow. 

Contracting, on the other hand, provides more financial stability and a predictable income, but it might not offer the potential income spikes that successful freelancing can.

Your Skills and Demand in Your Industry

Certain skills lend themselves better to freelancing, such as graphic design, writing, or social media. Jobs that require a more extended commitment or are project-specific, such as IT implementation or construction work, are often better suited to a contract.

When is Freelancing the Right Choice?

As you venture into the world of work, you might be asking yourself, “Is freelancing the best choice for me?” While the answer can depend on a lot of factors, there are a few signs that this might be the career path for you. 

You Love the Variety of Different Projects and Clients

Let’s say you’re a graphic designer with a knack for creating unique and colorful logos. Freelancing allows you to work with different brands, from bubbly start-ups to established corporations. This diversity not only keeps your work interesting but also expands your portfolio, helping you attract more clients in the future.

You Place a High Value on Flexibility

If you desire control over your work schedule and location, freelancing can provide that freedom. Imagine being a freelance writer who loves to travel. You could be crafting compelling blog posts by the beach in Bali one week and then drafting informative articles in a cozy café in Paris the next. 

You’re Looking to Strike a Balance Between Professional and Personal Commitments

For example, if you’re a parent who needs to accommodate school runs or someone pursuing higher education, the flexibility of freelancing allows you to succeed in numerous areas of your life. 

You’re Transitioning Between Careers/ Exploring New Career Avenues

As a freelancer, you can take on projects in different fields, enabling you to gain a wider range of experiences and learn new skills.

When is Contracting the Right Choice?

Contracting can be a fantastic option for those who prefer a consistent workload, a more structured environment, and assured income. Let’s take a look at specific instances where contracting can be the better choice:

You Prefer a Steady Paycheck

If you prefer knowing exactly how much money will land in your bank account at the end of each month, contract work can provide that much-needed stability. It takes away the month-to-month income uncertainty common among freelancers, who may find their pay fluctuates based on the number and type of projects they get.

You Want Your Work Hours Defined

In most cases, contracts will stipulate the working hours. If you’re someone who prefers clear boundaries between work and personal time, you may appreciate this aspect of contract work.

You Prefer Long-Term Projects

If you enjoy seeing a project through from start to finish, you’ll likely find satisfaction in contract work. For example, you are contracted as a web developer for a start-up for six months. During this time, you focus solely on developing their app. You can develop a depth of understanding and connection with the project and the team.

You Don’t Want to Commit to Marketing Yourself

Contracting work is often long-term, which can mean less uncertainty, less time spent hunting for new work, and less need to market yourself constantly. Freelancers have to keep promoting their services to attract new projects. But, contractors can take on longer projects that don’t require them to be constantly looking for new work.

Choose Between Being a Freelance vs Contract Worker

Choosing between freelancing and contract work can be a pivotal decision in your career journey. Freelancers enjoy unparalleled flexibility, both in terms of the projects they take on and the schedule they maintain. It’s a model that can be incredibly freeing and rewarding but also demanding. 

On the other hand, contracting offers a middle ground of sorts. It provides a dash of stability compared to freelancing – after all, contracts are typically longer-term engagements. However,  it still offers some level of independence and the potential to work with multiple clients over time. If you’re someone who loves the freedom of freelancing but needs a bit more structure, contracting can deliver just that.

Ultimately, there’s no one-size-fits-all answer. It’s about understanding yourself, your goals, and what you want from your career. If you still need help understanding these considerations, check out our other career development articles. Together, we’ll help you choose the right job for you.

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