What’s the difference between a contractor and a freelancer? Both were once viewed by businesses as a fallback option to substitute for full-time staff on leave or to get through periods of increased workload. However, today, you will struggle to find an organisation that does not use external workers in some way. According to World Bank data, 46.4% of all workers worldwide are self-employed. 

Due to the inclusion of external labour becoming rapidly popular in recent years, many managers are unfamiliar with the terminology. This essay clarifies the differences between the two categories of external workers that are frequently mistaken. 

What is a Freelancer? 

A freelancer is a self-employed individual who provides services, frequently working on many projects for various clients at once. Freelancers typically charge hourly or daily rates for their job, earning money on a per-job basis. Typically, freelance work is temporary.  

A freelancer may be subcontracted by other companies even though they are not technically their employers. It’s typical for freelancers to work on numerous assignments or projects at once, however certain contracts with clients may limit the number of other clients the freelancer can work for until the project is finished.  

The creative industries, such as graphic design, copywriting, website development, or photography, are often some of the most popular freelance occupations. However, freelancers can work in practically any sector that provides services, including translation, consulting, and catering. 

What is a Contractor?

Contrarily, an independent contractor is actually an employee of a vendor or an agency. They are paid on a regular basis by these agencies, who also serve as their managers. These are highly qualified individuals who operate their own businesses, offer specialised services, and work for themselves rather than an organisation. Consider a customer care representative, IT infrastructure support, or a project manager. 

Given that independent contractors and freelancers have comparable levels of autonomy, many managers misunderstand the two categories of workers and use the phrases interchangeably. When it comes to setting expectations, establishing terms and conditions, purchasing the appropriate management tools, and filing taxes, this causes all kinds of uncertainty. Therefore, how can you distinguish between your external employees and prevent this type of misclassification? 

The Hiring Process 

You can identify if an outside employee is a contractor or a freelancer by the hiring process. For instance, if your business wishes to outsource a specific task, you could contact a third-party agency or vendor. You pay the vendor at the end of the month, and the vendor then pays each individual contractor.  

On the other hand, freelancers always operate alone. You can contact freelancers directly as an employer; you don’t need to go through an agency or vendor. Likewise, payments are done immediately. You pay the freelancer the agreed-upon sum in full after the assignment is finished. 

Contract Lengths 

The average hiring term for contract workers and independent contractors is usually lengthy – from three months to a year, possibly even more. Additionally, the engagement is typically more time-consuming, with contractors typically devoting all of their working hours to a single customer for the period of the agreement 

Freelancers, on the other hand, are typically considerably shorter. Many businesses use freelancers for a particular assignment or even just one day. The freelancer may just need to commit a few hours per week to a single client as part of the agreement. Given the brief and rapid nature of their contracts, a freelancer typically works for numerous clients at once. 

Rates 

Freelancers will typically set their own fixed rates. They can choose whether they would rather be billed by the project, by the day, or by the hour. Additionally, they are in charge of handling their bills, requesting payments from clients, and negotiating pricing with them. 

When it comes to contractors, who are typically employed through an agency, the situation is very different. It is the agency’s responsibility to determine a rate and inform the client of it. Some contractors, however, are independent and, like freelancers, are in charge of choosing their own fees and managing their billing on their own. 

The ability to maximise the performance of your external workforce is what matters, regardless of whether you use contractors or freelancers. You can only properly set expectations and brief external workers if you are able to distinguish between these two categories of personnel. ReedPS can help you find the right candidate for your job, with a huge Talent Pool of industry experts to choose from. Contact us today. 

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