Freelance vs. Contract: Work Considerations and Differences

Whether you want to become an independent professional or are looking to hire one, make sure you know how freelancing is different from contracting. Freelancers work on their own terms, creating their schedules and finding clients. Contractors have fixed-term contracts through their employer or a third-party agency. Both freelancers and independent contractors are self-employed, which gives them more control over their work, but several key differences separate the two types of employment.

Many people find that freelancing or independent contracting offers more flexibility and better suits their lifestyle than being full-time employees. Companies can use independent professionals to broaden their talent pool, hire experts for projects, and save resources.

This article will help you understand the difference between freelance vs. contract work, from general overviews to pros and cons, so you can figure out what type of role fits your career path or hiring needs.

Freelance and contract work overview

Freelancers and independent contractors are both self-employed professionals who work contract-to-contract for clients. Clients hire freelancers on a shorter-term basis for specific projects and deliverables, which can be ongoing depending on their needs. A freelancer may work with multiple clients at once and offer one-off services.

Clients hire independent contractors to work on longer-term contracts, often to fill specific roles. These contracts could be part time or full time and anywhere from a few weeks to two years. The limit for how long contractors can work without being classified as employees is typically two years, depending on local legislation.  

When freelancing, independent professionals get to choose when, where, and how they work. They set their availability and hourly or per-project rate. Freelancers often have a niche or specialty and offer specific services to clients.

Clients hire independent contractors when they need a wider range of skills and longer engagement. Independent contractors typically have more structured contracts that outline work responsibilities, deliverables, and compensation, but they still have control over their work. The client can only direct the outcome by setting goals and expectations.

Example of freelance vs. contract work for a graphic designer:

A graphic designer can freelance on Upwork by offering their designer services to clients. While they can market a wide variety of services, many freelancers find more success by choosing a niche like logos, social media graphics, or brochures and building a skill-specific portfolio. Clients hire freelancers when they need expert talent. A freelancer graphic designer could work on recurring projects like monthly social media graphics for clients or one-time projects like designing a new logo.

If a company needs a full- or part-time graphic designer for six months, they can post the job or work with a third-party agency. They need to outline their budget, responsibilities, and role requirements, including how many hours per week the contract is for. As a contractor, the graphic designer may be responsible for all of the company’s graphic design needs from marketing collateral to website banners.

Freelance work: flexibility and independence

Freelancers are independent professionals who provide their services to individual clients through Upwork or an individual company directly. Unlike employees, freelancers typically work for more than one client and do specific jobs, like writing articles or creating brand logos. Freelancers charge hourly, by the project, or work on a retainer for set deliverables. They are not locked in to long-term contracts and have the ability to choose not to work for certain clients if they want.

Gen Z is the next generation of workers, who will make up 30% of the workforce by 2030. These professionals often choose to work independently because it gives them more control over their careers and work environment. In 2023, over 53% of Gen Z work full-time hours on freelance projects instead of a traditional nine-to-five.

Freelancers allow companies to scale up and down as needed, fitting their specific hiring needs. They can hire the expert talent they need for their projects without having to fill entire roles. According to the Upwork Labor Market and Insights Report, companies are relying more on remote freelancers than they did a year ago. Midsize companies will rely on remote freelancers the most, with 59% planning to use more remote freelancers.

A client may need only a single project, like a website or a certain number of social media posts, but if the client enjoys working with a freelancer, they may decide to offer more work. Depending on the types of services a freelancer offers, they may do a lot of one-off projects, such as crafting a resume, setting up a Shopify site, or providing ongoing work for a client, like doing data entry or creating social media ads.

Pros and cons

Pros:

Niching. Freelancers can choose a specialty and become experts at a skill or service, making it easier for clients to know what to hire them for.

Work opportunities. Clients need freelancers across many different industries, which allows freelancers to work with a variety of different clients and experience a mixture of subject matter projects.

Creativity. Clients determine the deliverables, but freelancers have control over their work processes, including how and when they work.
‍

Cons:

Stability. Freelancers may not always work 40 hours a week and have gaps between clients, which can make income less steady or predictable.

Finding work. Freelancers have to actively pitch their services to clients, either using a platform like Upwork or finding clients directly–these are unpaid hours.

Benefits. Clients don’t provide benefits to freelancers outside of optional performance bonuses; freelancers are responsible for their own healthcare, retirement planning, and other typical employer-provided benefits.

Contract work: stability and commitment

Contractors are independent professionals who provide their services to a client for a fixed-length contract that can be full or part time. Companies hire independent contractors to do a specific job over a set period. Like freelancers, contractors have a particular set of skills, but their skills are often broader and more position-based.

The main difference between freelance and contract roles is that contractors typically work for a single company for the duration of their contract. Independent contracting is a great way to gain experience and get your foot in the door at a company where you might like to be a full-time employee eventually.

Some independent professionals prefer working on contracts for stability, and if the contract isn't full time, they can freelance on the side. U.S. workers are becoming more diversified; 17% have a mix of full-time and freelance work.

Compared to freelancing, which is remote unless presence in a specific location is necessary, companies can require independent contractors to work on-site and set specific working hours if relevant to the job.

Many companies open contract roles to test-drive positions that may become full time down the road. A big tech company may open a new role, start it as a six-month contract, and give a full-time offer after the contract ends.

Tip: Contract-to-hire is an option on Upwork if a company enjoys working with a freelancer and would like to offer them a full-time role.

Contracting is also popular when departments haven’t finalized budgets yet but need to fill a role urgently. Independent contractors can work full time but do not legally require benefits in most cases as an employee does. Some companies give certain benefits to full-time contractors to attract top talent.

Let's say the marketing department needs a new graphic designer but doesn't have the budget secured or the approval for a full-time hire. They could agree to a three- or six-month contract and then offer a full-time position at the end of the contract once they have the budget secured.

Pros and cons

Pros:

Longer contracts. Independent contractors typically work on longer contracts that could be anywhere from a month to two years, offering more income stability.

Benefits. Depending on state and local laws, independent contractors who work full-time hours may be able to receive benefits like health care and paid time off.

Full-time opportunities. After the contract ends, companies may choose to hire their independent contractors as full-time employees. You can find freelance jobs that have the potential for full-time on Upwork.
‍

Cons:

Commitment. Unlike freelancing, which allows you to work with multiple clients at once and on one-off projects, contractors commit to their clients for the duration of the contract.

Work gaps. Contractors may have longer gaps between contracts since they typically work for a longer term with one client at a time.

Scope of work. Rather than being specialists, contractors may fill broad roles and need to have a wide skill set to match the comprehensive scope of work.

Key similarities between freelancers and contractors

Comparing freelancers and independent contractors may initially seem confusing, especially since they’re classified the same by the Internal Revenue Service (IRS). In the United States, the IRS has two worker classifications: employee and independent contractor. When comparing freelance and contract positions, these two types of independent professionals overlap and have key similarities.

Taxing

The IRS sees both freelancers and independent contractors as self-employed contractors; anyone who hires them must report payments above a minimum annual threshold to these workers and the government using a 1099-NEC (nonemployee compensation) form. A full-time employee has a W-2 that automatically withholds payroll taxes (e.g., social security, income tax, and Medicare). Independent contractors have to file their own taxes and pay their self-employment and income taxes based on what they make each year. Freelancers can get help from independent tax preparers on Upwork.

Ownership of tools

You decide when and where you do your work as a freelancer or a contractor. Some types of contract work could have set hours, like customer service, but often, the work can be remote, allowing you to contribute from where you choose during the hours that work best for you. You provide your services to a client or employer that you're under a contract with but use your own equipment, such as your computer. Contractors and freelancers are generally responsible for providing the tools they need to be successful, whether it's hardware, software, or training.

Managing expenses

Both freelancers and contractors are responsible for work-related expenses. If you need a computer, phone, office equipment, or software to do your work, it's up to you to purchase it. Clients are also not responsible for reimbursing any travel.

As a freelancer and independent contractor, these business expenses may be deductible in your taxes, but you must account for these additional costs as you’re crafting proposals and negotiating contracts. Some clients may give temporary access to their internal tools and software necessary for the project, especially items that are accessible only with a company license.

Benefits

Companies in the U.S. don’t legally have to offer benefits to freelancers and independent contractors, even if they work 30 hours or more per week, which is considered "full time," according to the IRS. As more companies want to bring on the best independent talent, many choose to offer some elements of health care, dental, and vision coverage, retirement savings plans, educational resources, corporate discounts, voluntary worker-paid benefits, or holiday pay, even though they’re not legally required to do so.

Key differences between freelancers and contractors

Freelancers and contractors are both independent professionals but work on different types of projects and contracts. Compared to independent contractors, freelancers are often more highly specialized, often experts in their field. Instead of offering a wide variety of services, they choose just a few and work hard to be the best. Companies hire freelancers to fill skills gaps on their teams and to help with projects. Contractors, on the other hand, may work full time for a single client on a long-term contract, filling a specific role.

Schedule

One of the main reasons workers turn to freelancing or contracting is control over their schedules. Freelancers submit proposals and accept or decline client projects based on their workload. They decide what projects to take on and when they're working.

Freelancers can get paid hourly and track and submit their hours, but while a client could propose a job that requires set hours, it's up to the freelancer to accept. Depending on the contract, an independent contractor may only work for a single client and need to be available during business hours to attend meetings or interact live on project activities.

Hiring process

Clients can book a freelancer's services in various ways. A freelancer could submit a proposal for a job and have it accepted without an interview, just a few messages back and forth, or it may be a more formal process with multiple video interviews. Companies looking to hire freelancers can use a platform like Upwork to post jobs and find the perfect candidate.

Independent contractors often fill specific roles, and the engagement is typically longer term and more hours. Hiring a contractor can feel more like conducting an employee interview and take longer to onboard and create a formal contract. Businesses may need to work through an agency to handle the logistics of hiring independent contractors, which can add extra steps and costs.

Tip: If you want to hire an independent contractor, Upwork’s Any Hire solution takes care of all of the compliance required to bring an independent contractor to your team.

Kind of work

Freelancers are highly specialized experts in their fields. Businesses work with freelancers to fill specific skills gaps. Independent contractors are more likely to engage in a role than to be hired for a one-off or short-term project. A company might hire an independent contractor to be a full-time social media manager for three months or a freelancer to create three months' worth of social media content. Depending on the work a freelancer does, they may work only once with clients who don’t have repeated needs for the service.

Way of working

Both freelancers and independent contractors control how they get their work done. Compared to freelancers, who work remotely unless they must go on-site or travel for the project, some independent contractors are on-site part time or even full time. Because freelancers typically work for multiple clients at once, having a schedule full of on-site meetings would be difficult. Independent contractors, unless they have a part-time contract, typically work for only one client at a time and can dedicate all of their workweek to that client.

A company may need someone in-office, at the front desk, during the company's working hours from nine to five Monday through Friday to answer customer calls or provide tech support – this would be an independent contractor. While independent contracting can be remote, some contracts require being on-site to use company tools. The same company could want a new website and look into hiring an outside developer. If the job is remote and the talent can determine how and where they work on it as long as they meet their deadlines – this would be a freelancer.

Rates

The rates and how payment works for an independent contractor vs. freelance depend on whether a platform or agency is involved. Many independent contractors choose to work with an agency. The company will first talk with the agency to determine the contract's budget. The rate is established before the agency or company posts the job.

Freelancers set their rates and often submit proposals to clients through Upwork or directly pitch their services to prospective companies. When companies post a job on Upwork, they can put a target range for the hourly or project rate. Then, freelancers can submit their proposals with what they think is fair to charge based on their experience, expertise, and understanding of competitive pricing for these types of services.

A freelancer's rate may change from project to project depending on what's needed, but freelancers often have an average rate they use as a baseline. Many freelancers prefer to work on a platform like Upwork, where everything from proposals to client communication and payment is in one place.

Length of project

Compared to an independent contract with a set start and end date (which can be extended or transitioned to contract-to-hire), freelancers generally have more flexibility and variance in the project length. Short-term and single projects are often preferable to freelancers who work with multiple clients.

Contractors give all of their time (or a significant portion of their working hours) to a single client and may prefer the security of a longer contract so they don't have to seek out new projects and actively queue clients. Typically, companies turn to independent contractors when they know they need longer-term engagement, anywhere from three to six months or up to two years.

Which is right for you?

One question comes up frequently: Is freelance or contract better? As an independent professional, choosing freelancing vs. contracting depends on the type of work you do, your work style, and the client. On the client side, it depends on how much time you want the talent to spend on your project and the level of autonomy they will have.

For employers: deciding between freelancers and contractors

Independent professionals have the unique skills that you need to complete a project. As a business, you can fill critical skills gaps with remote freelancers or contractors from anywhere in the world. The future of work is changing, and companies are rethinking how they build their businesses. Flexible talent are available when you need them and let you accomplish things you never thought were possible.

Benefits of working with freelancers

• Work with the best talent from anywhere in the world
• Hire by project and skill as needed
• Achieve fast onboarding and availability
• Easily post jobs and find freelancers on Upwork
• Reduce risk, as you can scale your workforce down as needed
• Require less supervision, as freelancers know how to work independently
• Sustain high quality because freelancers are self-employed, with their businesses built on positive reviews and repeat clients

Benefits of working with contractors

• Test-drive new roles and potential hires as contractors before going full time
• Hire workers seasonally
• Available full-time and in-office depending on the contract
• Option to hire as a full-time employee once the contract ends
• Expand your team to include the best remote talent globally
• Set contracts for fixed longer-term durations based on company needs

Should I hire a freelancer or an independent contractor?

As a client, if you’re looking for a long-term engagement that has a broader scope of work, more similar to a full-time position you likely want to hire an independent contractor. The contract could be part time, but if the independent professional needs to have a wide variety of skills to complete the project, a contractor may be the better fit.

A freelancer is the better option if you need specialized skills to work on a specific project. You can have a recurring need for the freelancer and work with them long term, but the skill set should be more focused. When working with a freelancer, you outline the deliverables you need and the deadline, and other than progress updates, the process is typically hands-off.

For independent professionals: choosing your path

Those looking to become independent professionals can work as freelancers or contractors. Freelancers have the most freedom by working remotely and setting their own schedules. They work directly with clients and choose which projects to accept. Independent contractors have more stability by signing a contract to work primarily with one client for a fixed amount of time. They may need to work on-site and have set working hours but know they're employed for the length of their contract.

Benefits of working as a freelancer

• Get to be highly specialized and do exactly what you love
• Can work in a variety of industries
• Able to travel and work remotely
• Create your own schedule
• You’re self-employed and in control of what projects you say yes to
• Can specialize and become an expert in your field

Benefits of working as an independent contractor

• Can see what it's like to work for companies in different industries
• Secure employment for the contract length
• May have the option to become an employee after the contract ends
• Work as part of a team within a company
• Some companies offer certain benefits to full-time contractors

Whether you want to be a freelancer or contractor depends on your skill set and schedule. Freelancers typically work with multiple clients at once, balancing short- and longer-term contracts based on the project and client’s needs. They have the most autonomy in their work, but this can also mean less stability.

Contractors work fixed-term contracts with a set number of hours needed each week or month. The engagement may feel more like filling a role where you have outlined responsibilities and need to check in more frequently with the client. You may have the option to work as a full-time employee after the contract ends.

Making an informed decision

Knowing the similarities and differences between freelancing and contracting can help you figure out what's best for your situation, whether you're an independent professional who wants to take your career in a different direction or an employer looking to level up your workforce. Becoming a freelancer or an independent contractor can help you take control over your career, choosing what clients to work with and what projects to work on. Companies can hire the best talent that is highly specialized in exactly what they need for each project.

Freelancers and contractors are independent professionals who control when, where, and how they work. They are considered self-employed. Both can work remotely unless the job requires the independent contractor to be on-site to perform their services. While they’re classified the same for tax purposes, the types of projects and contracts freelancers and contractors work on are different.

Freelancers work project-to-project for clients, often balancing multiple contracts and clients at once. The engagement can be a longer-term hourly contract or a one-off project. Freelancing may offer less stability but gives talent more flexibility and control of their work. Freelancers are experts who fill skills gaps on a team, working on specific projects rather than a wide scope of work.

Independent contractors are more position-based. They work with clients on fixed-term contracts that could be full or part time and last anywhere from a few months to two years. Contract roles offer reliable pay for the duration of the contract and could even become full time once the contract ends. Independent contractors typically have a broader skill set than freelancers.

Upwork is the world’s human and AI-powered work marketplace, where independent talent and clients meet and build meaningful relationships. Freelancers can browse projects that meet their skill sets and submit proposals to the ones that excite them the most. Companies can post a project or shop Project Catalog™ and find the expert talent they need to fill the skills gaps on their teams.