What’s The Difference Between A Freelancer And An Employee?

Freelancer vs. Employee

The debate over whether to be an employee or a freelancer seems to be endless! It can feel daunting to think about either becoming or hiring one versus the other, but it’s not always that complicated.

Let’s break down what we see as the top 10 differences between the two—and how those differences impact your business and career goals.

We hope this helps you make the decision of whether to become a freelancer or employee!

Takeaways
Understanding the legal and contractual distinctions between freelancers and employees is crucial for making informed career choices.
Freelancers enjoy greater flexibility in their work arrangements, while employees typically have set working hours and locations.
Tax implications differ significantly for freelancers and employees, and understanding these differences can help with financial planning.
Freelancers have the potential to earn more based on their skills and productivity, while employees often receive a stable salary with benefits.
Both freelancing and traditional employment have their benefits and drawbacks, and the right choice depends on individual preferences and career goals.

Top 16 Differences Between Freelancer And Employee

1. Freedom

As an employee you have a boss who tells you when to work, where to work, what to work on, how long to work…you get the idea. As a freelancer, YOU decide all these things for yourself. You get to set your own hours and take on projects that interest you. It can make all the difference in the world in terms of your happiness and productivity at work.

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2. Workload

An employee works on whatever project they are assigned by their employer. Freelancers, on the other hand, can choose which projects they want to take on. This means you get a say in what type of work you do and how much time you spend doing it. It also means that you might need to do some marketing in order to attract clients who will want to work with you!

3. Equipment

A freelancer can use their own equipment, whereas an employee has to use the company’s equipment.

Employees are assigned a computer and have to stick with it. They don’t get much choice over what they use, how it functions, or whether it’s fast and efficient enough for them to do their jobs.

Freelancers, on the other hand, get to choose everything from their desktops to their laptops and even what kind of chair they sit on. If you want to work from a chair that supports your lower back, you’re free to do so as a freelancer. If you need a new laptop that can multitask in ways your old one can’t, there’s nothing stopping you from getting one as a freelancer.

4. Relationship With Clients

Freelancers are self-employed, independent contractors. They’re hired to perform a specific task for a client. Freelancers don’t have a formal employer-employee relationship with the clients they work for.

Employees work for one company full-time. They have a formal employer-employee relationship with that organization and receive compensation from that source.

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5. Payment

Freelancers don’t receive a paycheck every week. Instead, they are paid for each project that they complete. This means that there is no guarantee of a steady income or paychecks that are consistent from one to the next. An employee will always have some form of income coming in (even if it’s just minimum wage) whereas freelancers might not.

6. Taxes

Employees don’t have to pay their own taxes; employers do that for them automatically. If you’re a freelancer, you have to pay your own taxes. You can deduct a portion of your internet bill from your income tax, but you’ll need to budget for taxes on the rest.

7. Job Security

When you work for an employer, there’s always a risk that they can fire you at any moment. That’s because they have control over your job and they get to decide when you keep it and when you lose it. If your manager doesn’t like what you’re doing or if you get on their bad side, you could be out of a job very quickly.

But when you work as a freelancer, you’re in control of your own job security. You decide who to take on as a client, and when to stop working with them. You make sure that each client is paying well and treating you fairly, and you never have to worry about getting fired from a job that doesn’t pay enough or make you happy.

7. Sick leaves?

It’s simple. Freelancers don’t have sick leaves. If you are not feeling well, you need to cancel your projects, lose money, or carry on with the project, and keep losing money in the long term because if you are not careful enough with your health, it will cost you in the future.

As an employee, if you are sick for a week or two, your employer will just contact the HR department and let them know about your situation. You might have some concerns about staying at home but taking sick leave means that you are good enough to be back at work tomorrow.

8. Income

Freelancers generally earn more than employees per hour of work. Freelancers can earn more by working fewer hours than employees because they control their own hourly rate and take on clients that pay them well. Freelancers also don’t waste time commuting to an office or attending meetings. They set their own schedules and work from home. Some freelancers work in their pajamas when they are feeling lazier and in nice clothes when they are feeling productive.

Employees who have worked at a company for a long time may have higher salaries and better benefits, but they still have to go through the hassle of all that extra paperwork, which takes up valuable time.

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9. Time Management

A freelancer suffers from time management. The reason for this is because they have to manage their own time. They have to make sure they work enough to cover bills and not work too much or burn out. An employee just has to work what they’ve agreed to with their employer in their contract. That’s it!

10. Freelancers Are Autonomous

Freelancers are independent workers who don’t report directly to anyone else. They work for themselves and set their own schedules, which means they don’t have supervisors dictating their work-life balance or workloads. Employees, on the other hand, are paid employees who must report daily (or weekly) progress reports directly back to their manager(s). This can mean that they need more guidance from others in order to accomplish their tasks efficiently and effectively!

11. Benefits & Insurance

There are a few benefits that freelancers don’t get as a result of not being employees, including health insurance and paid time off. Many freelancers purchase independent health insurance or are covered by a spouse’s plan. Freelancers will also have to take care of their own retirement plans.

12. Time Off

Freelancers don’t get paid time off, so they’ll have to figure out how much vacation time they can afford. The upside is that they can work when it’s convenient for them instead of having to work within set business hours.

13. Expenses

Expenses such as cell phone bills and travel expenses will likely be paid by the freelancer instead of the employer if they were an employee. For example, if you’re on a business trip and need to stay at a hotel, you’ll be paying for that yourself, whereas employees can often submit these expenses for reimbursement.

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14. Location

Freelancers don’t have a fixed place to work. Some have an office they can go to and focus, while others prefer working in cafes, or from the comfort of their own home. Employees, however, are required to go to a particular location every day and work from there.

15. Retirement / 401k Savings

Freelancers don’t have access to retirement savings plans because they don’t work for one company for long enough periods of time–and many will leave before that happens anyway! So it’s important that we plan accordingly and make sure our finances are in order before jumping into a career as an independent contractor. You can set up your own savings plan by opening a Roth IRA or contributing to a traditional IRA.

16. Motivation To Work

Freelancers are self-motivated and have a higher level of accountability for their own work. They do not have a supervisor or manager looking over their shoulder, so there is no one to tell them what needs to be done or when it needs to be done. If a freelancer does not complete a task within the timeframe provided by his or her client, then he or she will not receive any payment for that particular job.

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Final Thoughts

The differences between an employee and a freelancer are pretty wide. Some of them are small, and some of them are big. Some of them are obvious, and some of them are slightly less obvious.

Having said that, one thing is almost always true in all cases: someone who’s employed by a company is going to have a much different experience than someone who isn’t employed by anyone.

Which one you choose has everything to do with your own preferences and needs. It doesn’t make sense for everyone to be on their own, but there’s no denying that freelancing has many perks for those who know how to handle it.

Further Reading

Work Categories: How to Effectively Manage Your Team’s Workload: Discover effective strategies for managing your team’s workload by utilizing work categories.

Understanding the Difference Between an Employee and a Freelancer: Gain insights into the distinctions between an employee and a freelancer, helping you make informed decisions about your work arrangements.

A Comprehensive Guide: Freelancer vs. Employee for Millennials: Millennials can explore this comprehensive guide comparing freelancing and traditional employment, enabling them to make career choices aligned with their goals.

What’s The Difference Between A Freelancer and an Employee – FAQs

Can You Work Full Time?

You can work full-time, part-time, or even just a couple of hours here and there. It’s up to you how much you want to work when you want to work, and how much money you want to make.

Can I Work From Anywhere?

Yes! You choose where you want to work. You could be lying on the beach or sitting in your favorite coffee shop.

What Kind Of Payments Does Freelancer Offer?

Freelancer offers a variety of payment methods including PayPal, Skrill (Moneybookers), Payoneer, and Wire Transfer.

How Much Can I Make As A Freelancer?

Your income is entirely dependent on how many hours you work and how much you charge per hour. Generally, freelancers earn more than employees because they are free to set their own rates and they don’t have to pay taxes out of their earnings.

How Do I Get Started?

It’s really easy to get started by signing up with online platforms that connect freelancers with clients. Once you complete your profile, job offers will start coming in instantly. You can decide which jobs to accept based on budget, deadline, expertise, and other factors.

How Are They Taxed?

Payments to freelancers are subject to self-employment tax and income tax. The client is responsible for withholding taxes (estimated tax payments). Freelancers receive 1099-MISC forms at the end of the year of earnings over $600 (in most cases).

What Is A Freelancer?

A freelancer is an individual who works on a contract basis for an employer, rather than being employed directly by the company.

What Is An Employee?

An employee is someone who is hired by a company to work for that company on a full-time or part-time basis.

How Do You Hire A Freelancer?

Freelancers can be found through online job marketplaces like Upwork or Guru, or through industry associations.

How Do You Hire An Employee?

You hire an employee by posting a job opening with your company and then interviewing candidates who apply for the position until you find the right fit for your team.