The gig economy is here to stay, and freelance work is surging in popularity, but is this increasingly common method of work right for you? There are around 55 million Americans doing contract work, according to a survey commissioned by the Freelancers Union in 2016. That’s around 35 percent of the total workforce. This number is expected to reach 50 percent by the year 2020. IT and technology workers have a higher percentage of people working on a contract or freelance basis. Learning more about the differences between a contracted or freelance worker and a full-time employee can help you determine which model is right for your needs.
Contract Work vs. a Fulltime Job
A contract worker is hired for a specific task, but is not tied to the company and does not earn a regular, fixed salary. An employee works for a specific organization, using company equipment and tools and is paid a regular salary or wage.
What are the Pros and Cons of Contract Work?
Freedom and flexibility. Contract work gives you a tremendous amount of freedom. When you are self-employed, you choose your own clients, your work schedule and even your own rate of pay. You can even work remotely – from your couch, at a cafe, or by the beach. As long as you deliver the work that is expected of you, it doesn’t matter where you are, and you’ll be able to work with several companies all at once.
Fewer Limitations on Income. A talented freelancer can often make more money than a full-time employee. In the US, compensation is generally based on a 40-hour work week. With contract work, there is no limit; you can work more or fewer hours depending on your needs and rates.
Down time between gigs. You can work in various industries, sample different employers, take on different contracts, and even take a rest in between projects. You can take a vacation anytime you want.
Work an hour, get paid an hour. Some contract work arrangements require clients to pay for a set number of hours. Once you’ve completed those hours, you have no obligation to work beyond the stated time.
No office politics. Contract work is all about deliverables. What matters to the client is the results that you produce. The probability of getting involved in workplace politics is v very low if you are not employed.
Setbacks of a Contract Work
No job security. Although there are plenty of opportunities for contract work, the fact remains that each gig is temporary. There are contracts that last for years but most provide work for only a few weeks or months.
No benefits. Contractors are not entitled to the same benefits as full-time employees. These include overtime pay, holiday pay, health care coverage, tuition reimbursement, training allowance, disability benefits, life insurance, and worker compensation. There will also be no severance pay at the end of your contract.
No upward movement. If you have aspirations to move up the corporate ladder, then contract work is not the way to go. While growth potential is unlimited, you’ll need to generate the work yourself – you won’t be able to get a promotion.
Pay for your own insurance. Health insurance mandates can make it expensive to insure yourself and your family; for a full time worker, insurance is usually partially paid by an employer. Independent contractors pay for the cost of a plan entirely out of pocket.
Pay your own taxes. Your client won’t deduct money for taxes like an employer would – it’s up to you to save money and even pay quarterly taxes as needed.
You are an independent contractor if:
- You have a defined project, scope of work, and timeline
- You may hire other people to be part of a team for a specific project
- You control your work hours
- You can negotiate job specifics and compensation
- You do not receive overtime pay, benefit packages, health and safety protections, and pensions
- You are often the operator of your own independent business
What are the Benefits of Full-time Work?
On the other end of the spectrum, fulltime work offers a stability and often, a package that would benefit both the worker and his or her family. Most fulltime jobs include:
- At least some job stability
- Benefits package
- Coworkers and a social environment
- Company-sponsored training
- Taxes are deducted for you
- Reliable, steady income without surprises
The Cons of Full-time Work
If you find it difficult to commit to working long, fixed hours, then full time work may not be your best match. Some other setbacks of full-time work include:
- You are expected to show up even when not needed
- Work hours can be more stressful
- Office politics can get ugly
- You are not allowed to work for any other firm (potential conflict of interest)
- You can’t grow as quickly as you would as a freelancer.
You are a full-time employee if:
- You have a fixed work schedule (often 8 hours a day, 40 hours a week)
- You have a fixed salary
- You receive training from the company
- You work is under company supervision
- You work with tools or equipment owned by the company
Determining which model is right for you is a matter of deciding how confident you are in your abilities and how comfortable you are with risk. Full-time work provides a more permanent and stable source of income. But then again, no job is secure these days. Contract work can be an ideal option for you depending on your personality and financial goals.