The workforce is essential to any nation’s economic development as many industries often depend on them for their overall growth. But highlighting the importance isn’t why we’ve come up with this intricate piece. We’d love to answer the real question: what’s the difference between a consultant/freelance contractor and an employee? There are many nuances in the definition of these different types of workers. With little adjustments and small tweaks to the laws made by government agencies, it can be quite hard to have a clear knowledge of what is and what’s not.
Even so, it is crucial to have a classification process that helps put policies in place for managing and hiring your workforce. Of course, classification can be a bit complicated, but here are five differences between being an employee ad a consultant/freelance contractor.
Who’s an employee?
An employee typically works for an employer. The employer in this context controls and dictates the work performed, coupled with the hours and location of the work. Simply put, an employee is a person employed for wages or salary, especially at the non-executive level.
Who’s a consultant or freelance contractor?
While a consultant is a person who provides expert advice professionally, a freelance contractor is someone who works for themselves. By themselves – in simple terms, they have no employees of their own and are paid contractually.
Five differences between an employee and a freelance contractor
While employees work for a specific salary, freelance contractors, on the other hand, submit invoices for their work (project). Therefore, the payment terms are often discussed during the initial contract negotiations. Speaking of bill rates, freelance contractors may have a fixed or standard billing rate for their full services.
Also, their rate may vary depending on the type of service they’re offering. So, be sure to discuss with them how you’d like the freelance contractor to invoice you for a project completed and how you’ll pay them after receiving the invoice.
- Office hours
Because independent contractors own their business entity, clients can’t determine their work hours. Instead, they determine the work agreement process – when they (freelance contractor) work. The hours they keep are completely up to them. Meanwhile, employees typically work for an indefinite period. The employers determine the employee’s work hours.
- Project Completion
While employees’ jobs may include a wide variety of duties and tasks, freelance contractors are only responsible for performing the services outlined in the presented contract.
Their works revolve around the spheres of the words inked on the contract’s dotted lines for freelance contractors. Asides from a contract, a clear Scope of Work will help you (either as a freelance contractor or as a client) lay the foundation for a good working relationship. SOWs are aimed at outlining the expectations of both parties (freelance contractors and clients). Typically, it has to include details about the work to be done, the estimated time frame, and the process for managing modifications and payments.
While a client can’t determine how a freelance contractor works, employees receive instructional oversight from their employer. If a task requires specialized equipment that’s only available on site, this has to be stipulated in a contract. If a freelance contractor has to work on-site, the client or relevant company employees and managers know processes and protocols, so they don’t treat the contractors like an employee.
Last on our list of differences is a partnership. Freelance contractors may have subcontractors, partner consultants, or employees who help them to complete work tasks. During initial discussions, the freelance contractor needs to tell you if they’ll utilize additional work resources. If they do, it has to be outlined in the contract. Remember, if they engage extra resources, they alone are responsible for the tax filing, responsibilities, and reporting the requirements for the added workers.
The Pros and Cons of employees and freelance contractors
- As an employee, you’ll not worry about not getting paid next month. So, you can keep doing what you do.
- Employee benefits include paid vacations, workers’ compensation, social security, a retirement plan, and more.
- Relatively easy to separate life and work
- Building someone else’s wealth
- Not fulfilling your potential
- Freelance Contractors
- Freelance contractors are their bosses