After working for a quite big company in the automotive business, in an environment that I really didn’t like, I decided to spread my wings a little bit. I wanted to no longer be tied to a certain company and to have more freedom with whom I worked with.
So I chose the contractor way. I knew there was a need for contractors in the market and after setting up the self-employment papers I also got my first client. After some time I met up with some friends and one of them asked what’s cooking professionally speaking. After I let him know about self-employment and stuff, he said: “So you are a freelancer now!”. Then I started pondering as why he thinks I’m a freelancer and not a contractor. For me these 2 things are different and I’d like to explain some differences between these two.
The first step you’ll need to do in order to become a contractor is to set up your own self-employment firm. Depending on where you are located, this can be as easy as registering online. In Romania, it’s a little bit more complicated, you require to do some paperwork, go to the authority submit them, wait for a judge’s approval etc. I won’t go into much detail about this. So, the key difference between contractor and freelancer is that as a contractor you sign a collaboration contract with your client company. Then, each month you send them invoices according to contract. Forget about paid holiday, you are paid exactly for how much you work. The same goes for freelancing, but as a freelancer you are not required to setup an individual firm or have a legal entity. It’s as easy as signing up on Freelancer or Upwork and start working. No contract required! After you start earning a stable income, you might want to declare your income and pay taxes. As a contractor, you need to declare your income because you have a legal entity.
Another difference is the work schedule. Although there are companies out there willing to be flexible, they still require you to work 8 hrs a day, like an employee. Moreover, you are required to work at a client’s location. As a freelancer you have no restriction, you can work anywhere/anytime provided that you meet deadlines and client’s expectations. As a freelancer you can truly say you can work near a beach with a cocktail under an umbrella, whereas employees don’t have this treatment.
In theory, after creating a freelancer profile on any renowned website, you can work on projects. However, mind the fact that the competition is much higher than in a contractor job. You must really be good and advertise yourself properly. It’s very tedious to find work at the beginning even if you have previous work experience as employee or contractor. Your dream of working beside the pool with a cocktail in your hand can very soon drift away so persistence and a will of steel will get your first assignment. You’ll feel a great sense of accomplishment once you nail it.
In my case it took me almost 1 month to get the first freelance contract. I only applied to jobs I felt I could accomplish. The thing is that I couldn’t keep doing freelancing for long as I already had a full-time job. Gosh, this Universe has very odd ways of rewarding you 😄
When you are a contractor, you usually sign the contract with an agency and the agency itself signs a contract with the final client. When the project is over, they’ll find another project for you. For me there was never a long bench period considering that I’ve worked with 3-4 different agencies which all had positions to fill in.
Getting the “dough”
As I said in the first section, as a contractor you are required to send invoices to each of your clients. As freelancer, it’s not necessary, you are paid by the portal no matter what client you have. There are two ways of monetizing your work: by project/milestones and by working hours. Usually the contractors are paid hourly because of the 8 hrs/day requirement, but freelancers can be monetized in both ways depending on the project.
If a client has a small project and his budget is low, he’ll most likely prefer to pay by project/milestone completion. On the other hand, clients with lots of requirements and well established practices and clients may prefer to pay hourly. For freelancers, I know that it’s not as simple as writing the hours in a timesheet because you need to install an app that counts how many hours you work. I don’t know if these apps are trustworthy, maybe you guys can add comments if you tried one.
So there you go, I touched the key points in understanding the difference between a freelancer and a contractor. I think they are not the same deal and they shouldn’t be confused. Both of them have similarities, they are quite risky and you don’t have the stability of a normal job and the rights and employee has. What you choose depends on your style, motivation, personality but also on constraints like market demand, available project types or company’s acceptance of contractor/freelance roles.