What’s the Difference Between Freelance and Contract Work?

If you’re someone who’s considering freelance work or is already freelancing, then you’ve probably noticed that the terms “freelance” and “contract” are often used interchangeably.

Are freelancers considered contractors? Are they part-time employees? With 78% of companies expected to rely on freelancers in 2023, it’s time to clarify the difference between freelance and contract once and for all. 

Before you comb through job listings or hop on a discovery call to land your next project, let’s go over the key differences (and similarities) between freelance and contract work so you have a better sense of which role is the right fit for you. 

What is a freelancer?

A freelancer is a self-employed person who provides independent services to a variety of companies. Freelancers are responsible for setting their own hours, setting their own rates, and choosing which clients or projects to work on. Freelancers can work with multiple clients at once and take on as many projects as they choose. 

What is a contractor?

A contractor, also known as an independent contractor, is essentially a temporary employee. Like freelancers, contractors are independent of a company as they don’t receive a salary or any employee benefits, and are responsible for handling their own expenses and taxes. Contractors can work with multiple clients at once, but this is dependent on the scope of the project as organizations typically bring in contractors to work on longer-term projects with set timelines (or with the potential of becoming a full-time job).

Key differences between freelance and contract work

Schedule 

As a freelancer, you set your own hours. If you get your best work done in the wee hours of the morning and want to take afternoons off? You can do that. If you only want to work nights and weekends, more power to you. Freelancers have total control over when and where they work. As long as you communicate to your clients when they can expect to hear from you, you’re good to go.

Many contractors are in the same boat as freelancers and can choose when they work. But there are some situations where a contractor may have less control over their work schedule. For instance, let’s say you’re being brought into an organization to oversee a three-month project as a contract project manager. If you’re leading an internal team, then your schedule may be determined by the company’s working hours (e.g., Monday through Friday, 9-5) to align with the people you’re working with. There are also contract-to-hire positions that are essentially temporary jobs with the potential to become full-time roles. 

Either way, independent contractors and freelancers are *not* employees, and can’t be required to work the same schedule as one. Look out for job listings that advertise as freelance work but sound a lot like a full-time job. These sneaky listings will typically call for a “contractor” or “freelancer” but will describe 40-hour work weeks, coming into an office, or being on-call — but don’t provide benefits or a salary. 

Scope of projects 

Freelancers take on a mix of projects. These projects can be one-off projects such as a website redesign or brand strategy, or ongoing work like social media management. Freelancers typically work with multiple clients at one time, whether they choose to take on a wide range of small projects or focus on securing a handful of larger projects.

Contractors are also free to take on multiple projects at once, but the difference is that many independent contractors tend to focus on long-term engagements. This means that they may work on fewer projects at once, and these likely won’t be one-off projects. Contractors may also take on contract-to-hire roles which means they are essentially taking on one job, though it’s temporary. 

How are freelancers and contractors similar? 

Benefits 

Both freelancers and independent contractors are independent from each of the companies they work with. This means freelancers and contractors do not receive a salary or any employee benefits from their clients. 

Without the cushion of employer-provided benefits such as healthcare, both freelancers and contractors are responsible for finding and paying for their own. Navigating healthcare on your own is no easy feat, but there are plenty of resources out there to help you figure out your healthcare options.

Taxes

Neither freelancers or contractors receive a salary or benefits from any company they work with, which means both are considered self-employed and use a 1099 instead of a W-2.

As Angie Moody of Ruby Money explains, “When you work as a W-2 employee, your employer will handle most or all of your withholding for you,” says Moody. “Once you break out on your own, you’re responsible for setting aside enough money to pay your taxes throughout the year at a rate that’s acceptable to the IRS to avoid penalties.”

Taxes that freelancers and independent contractors are responsible for paying can include self-employment tax, income tax, and quarterly taxes. Freelance taxes deserve an entire blog post of their own, but here’s a quick guide about taxes for self-employed people from the IRS to use as a reference.

There are also several tax deductions self-employed people can take advantage of, from office expenses to subcontracting fees to monthly subscriptions for the tools you use to run your business. These deductions can lessen the burden that comes with paying your own taxes. As always, consult with a tax professional before you dive into taxes to make sure you have all of your bases covered! 

Business expenses 

As mentioned above, business expenses are something both freelancers and contractors are responsible for. Fortunately, many business expenses can be deducted. Business expenses can include any of the following:

• Equipment used to run your business (laptop, phone)

• Subscriptions (Adobe, invoicing tool like Wethos)

• Marketing (website, social media ads)

• Subcontracting (paying other freelancers for projects they help you with)

Clients aren’t typically responsible for any of these expenses. Instead, freelancers and contractors need to hone their business savvy — or work with an accountant — to properly manage expenses and stay on top of bookkeeping. 

So, what’s the difference between freelance and contract work?

Simply put, there aren’t too many differences between being a freelancer or being a contractor unless you’re taking on a contract-to-hire role. The terms are used interchangeably, but both are considered self-employed. And when you’re self-employed as a service provider, that means you’re also a business owner — and you’re in control of accelerating your business growth.

The most important thing to remember is that neither a freelancer or an independent contractor are considered an employee which means clients cannot treat you as one. Unless your client is providing you with a salary and benefits package, then you’re free to design your independent business the way you want.