How Is Being a Freelancer Different From Being an Employee?
Explore the key differences between being a freelancer and an employee. Understand how work flexibility, independence, and responsibilities vary in these roles.
When deciding whether to become an independent professional, many wonder: How is being a freelancer different from being an employee? Freelancers work for themselves, giving them a great deal of control over when, where, and how they work. They have to actively find clients, pitch their services, and accept contracts. Employees on the other hand work for a single company that outlines their employment terms which can include everything from location and hours to their specific processes for completing tasks.
Deciding whether working freelance or as a full-time employee is better for you depends on your personal work style and what you want your workweek to look like. This article will outline the two different types of careers, along with pros and cons, and questions to help you decide what path suits your goals and lifestyle best.
Freelancer vs. employee: Key differences
Freelancers are self-employed and offer their services to their clients, working on contracts that can be hourly, fixed-price, or retainer. They largely get to choose when and where they work. Employees work for a single company full- or part-time under a formal agreement that outlines work responsibilities, hours, and specific employment terms.
Freelancers have more control over their schedule and work processes, while employees have stability and benefits (if working full-time). Here are more key differences between freelancers vs. employees to consider:
Freelancers:
- Skills. Many freelancers are specialists rather than generalists. The most successful freelancers find a niche and then work to become an expert at that skill or skill set.
- Compensation. Clients can pay freelancers hourly, per project, or on a monthly retainer.
- Hours. Most freelancers, depending on the field, get to set their own schedules and work when they want.
- Benefits. Freelancers are self-employed and responsible for their own benefits.
- Taxes. Freelancers have to pay self-employment taxes. Taxes are not withheld from earnings.
- Environment. Freelancers can work remotely unless they need to travel for the project and provide in-person services (like photography).
- Job security. Freelancers work contract-to-contract with their clients and may have slower times or gaps in between clients.
- Control. Clients determine the deliverables and outcome expectations, but freelancers get to decide when, where, and how they work, using their own tools like a computer or specific software.
- Work assignments. Freelancers choose what projects to submit proposals to and contracts they accept.
- Responsibility. Freelancers are self-employed and responsible for every aspect of their business from finding work and communicating with clients to marketing their services and invoicing.
- Career development. Freelancers work independently and can grow their careers by starting an agency, upskilling, or hiring other freelancers.
- Wages. Freelancers negotiate each contract with their clients and can increase their hourly or per-project rate based on the demand for their skills.
Employees:
- Skills. Companies hire employees to fill a role, while they may have a primary focus compared to a freelancer the scope of work and skills needed will be broader.
- Compensation. Employers can pay employees hourly or salary and have to pay overtime depending on local laws.
- Hours. Can work full-time or part-time depending on the position and company. In the U.S. full-time employment is over 30 hours per week.
- Benefits. Companies have to pay full-time employees benefits like healthcare, retirement savings plans, paid time off, and more depending on local laws.
- Taxes. Employers withhold income tax, social security, medicare, and other taxes from paychecks depending on where you live and work.
- Environment. Companies can require employees to work in the office and set specific work hours.
- Job security. Employees work for a company until they resign, are fired, or the job ends.
- Control. Companies outline employment contracts with specific terms like work hours and location, and determine processes for tasks that employees agree to.
- Work assignments. Employees are typically assigned work by their manager and don’t have the option to decline.
- Responsibility. While employees have job responsibilities, they often report to a manager and are provided the tools and training they need. Employees may not have a client-facing role.
- Career development. Companies often offer career development tools and opportunities for growth within a company like promotions or additional training.
- Wages. Hourly rate or salary is set and outlined in the employment contract but employees can get annual raises, commissions, or performance bonuses with manager or leadership approval.
Pros and cons of freelancing
Working as a freelancer has pros and cons; what may be a drawback to some may be a perk to others. Whether or not freelancing is for you depends on your career goals and personality. Freelancers are small business owners and have a high level of control over their careers, from setting their rates to choosing what projects and clients to work with. However, the freelancing lifestyle can have less stability (especially in the beginning), and income can go up and down weekly depending on the projects you have lined up.
Pros
Freelancers made up 38% of the workforce, contributing $1.27 trillion to the U.S. economy in 2023. Over 78% of companies have used remote freelancers. Many people enter the gig economy as freelancers because of the flexibility of working from home and the freedom to choose what projects they work on.
Freelance jobs are often outcome-based, so you can work whenever and wherever is the most convenient as long as you meet your deadlines. Being able to have control over their career paths and work environment is what draws Gen Z in particular to freelancing. This generation sees freelancing as a fulfilling alternative career path, with over 58% of Gen Z working full-time hours on freelance projects.
If you're interested in freelancing, here are some of the major pros:
- Set your own flexible schedule. Decide what hours work best for you, from when you'll be available to how much you want to work per week. Flexible schedules appeal especially to caregivers, digital nomads, and college students.
- Have unlimited earning potential. As a freelancer, you set your own rate. As you gain more experience and skills and become an expert, you can decide to charge more. Compared to an employee with a set salary who has to ask for raises, freelancers can determine what to charge based on the demand for their services, market rate, and personal availability.
- Take full advantage of remote work. Freelancers are self-employed and truly get to embrace the benefits of remote working by doing their jobs from anywhere in the world. While remote work is becoming increasingly popular with employers, many employees still have to be in the office at least part-time.
- Choose the clients you want to work for. A major perk of freelancing is deciding what you work on; if you don't want to work on a project, you can easily say no (and refer another freelancer on Upwork). Only work with the clients and on projects you want. Your completed projects will help build your portfolio and expertise, so you're excited to get started on work each day.
- Avoid office politics. The one work stressor you don't need is interpersonal conflict or a manager who makes you dread going to work. If you have a particularly stressful and unreasonable client, you can decide not to work with them again once the project ends or even cancel it after you've started working.
- Take advantage of truly unlimited time off. You don't have to worry about how many vacation days you have left to take a trip as a freelancer because you create your schedule. You decide when you're working and when you want to take time off, as long as it works with your deadlines and personal budget.
- Be considered an expert in your line of work. Successful freelancers have a niche and work on becoming experts, doing exactly what they enjoy and are best at. As an expert, you build a reputation, earning Talent Badges and positive client reviews, and can charge more as the demand for your skills rises and your schedule fills with your dream clients.
Cons
Being your own boss and working as an independent professional has its cons, too. As a freelancer, you have to find the balance between finding enough work to meet your needs and taking on too much at once. Meeting deadlines and staying on top of your work is your responsibility. You have to seek new clients and projects actively. Initiative and patience are important when starting your own business, especially a freelance operation where your skills are the services you're marketing. When considering working as a freelancer, here are some of the biggest cons:
- It takes time to build contacts and clients. Often your first project is not your dream project; you must build your career, market yourself, make contacts, and reach out to clients. On Upwork, as a freelancer, you can browse the Talent Marketplace™ and see what jobs are available for your skillset. New freelancers sometimes take lower-paying jobs at first to build their reputation.
- Taxes can be challenging. Independent contractor taxation is a primary reason some are skeptical about freelancing. Taxes are not withheld from your earnings as a freelancer, so you must save and pay them back with quarterly estimated taxes or reconciliation during tax season. Independent professionals can get help from a freelance accountant to make filing easier.
- There's no paid time off. While you can take as much time off as you want as a freelancer, the time off isn’t paid as it would be for a full-time employee. You can take time off during the week to run errands and plan trips whenever you want as long as you can still meet your deadlines and account for upcoming vacation expenses in your financial planning.
- You're responsible for your own benefits. As a freelancer, you’re in charge of your own benefits, like health insurance and retirement savings, which is one factor why freelancers might charge more per hour than employees. U.S.-based freelancers on Upwork can use Hooray Health for supplemental healthcare.
- Work isn't guaranteed. Freelancers own their own businesses and spend part of their time submitting proposals and reaching out to new clients. You have less predictability in your income from week to week as a project ends, and you may have dry periods between high-paying jobs. If you have a marketable skill and build your reputation you can create a steadier income stream, but it is often less secure than an employee’s.
- Potential payment issues from clients. Freelancers are responsible for billing and invoicing clients, and if you work directly with a client, you could have to deal with late or missing payments, which can negatively affect your earnings and budget. Working on a platform like Upwork makes payment easier and more secure, as you can wait until client payments are in escrow before starting. If you have any client disputes, work with the Resolution Center to address them.
Pros and cons of being a full-time employee
Just like freelancing, being an employee has its benefits and drawbacks. When you opt for the dependability of a set paycheck and dedicate your entire workweek to a single employer, you give up an aspect of control and faster career growth that freelancing can have. Some people are comforted by the dependability of salaried pay, knowing exactly how much they’ll make each week and what hours they need to work, while others feel restricted. What one person sees as security, another might see as limiting.
Pros
Being an employee offers a set schedule and steadier pay than being a freelancer. Some workers prefer to be in the office, enjoying the social aspect or making their jobs easier because they can use company tools on-site. A popular hybrid policy allows employees to work from home part of the time, with set in-office days to give the best of both worlds.
Workers may be drawn to the routine and assurance of being an employee with benefits, a set work schedule and salary, and paid time off. If you're interested in working as a full-time employee, here are some of the major pros:
- Fixed salary and benefits. One of the main reasons people stay as an employee is the financial security of having a fixed salary and benefits. Depending on where you live, you may get health insurance, retirement planning, vacation time, paid leave, and wellness benefits like commuter and meal credits.
- More structured professional growth and development paths. When you start a position as an employee, you may have an idea of how you want to move up and progress. Many companies offer professional growth opportunities to employees, whether offering free classes or internal programs. Employees also have a more clear-cut path to advancement with promotional opportunities.
- Ability to collaborate with a team. When you work as an employee, you have the camaraderie and support of being on a team. Employees can ask coworkers for advice and collaborate.
- Retirement options. Many people choose to stay as employees because of retirement benefits. Depending on your country, employers typically provide some retirement planning support, like matching the amount you contribute to savings funds from each paycheck.
Cons
While being a full-time employee has some stability and financial security, it also has drawbacks. Employees have less flexibility over their schedule and may not be able to work remotely; only 32% of non-freelance professionals work remotely. Some former full-time employees are turning toward the gig economy to reprioritize their well-being, whether needing more flexibility in their schedule or working from home.
When considering working as a full-time employee, here are some of the major cons:
- Difficulties maintaining work-life balance. Many employees feel they don't have enough time to balance work, friends, family, and well-being. When you work 40 hours a week and commute 30+ minutes each way to an office, along with getting ready, prepping meals, and taking care of your family and pets, you barely have time to exercise and have a personal life. Fully remote workers can cut out the commute and much of the time for getting ready.
- Lack of versatility on your resume. As an employee, your position may limit you, as it often takes a lot of work to move within a company, even laterally, and build new skills. If you want to work at a new job in your current company or find a position in a different company, you're often defined by the past positions on your resume. Even if you've learned new skills, employers want experience.
- Routines can become stale. Many full-time employees don't have the luxury of deciding where they want to work, whether at home one day or in a coffee shop or coworking space the next. You can get stuck in a routine that can be uninspiring, creatively blocking, and boring.
- Hours are defined by the employer. Even if you work remotely, employers often have typical working hours, around 9 to 5, Monday through Friday, during whatever time zone your manager, headquarters, or company’s customers are in. The standard 9 to 5 may not work with your schedule or not fit the times you’re most productive and creative.
10 questions to help you decide
When deciding between freelance vs. employee, consider all the pros and cons and see which are in closest alignment with your goals and work style. If you’re still unsure, ask yourself the following questions to see what your preferences are.
What motivates you?
Freelancer example: I’m motivated by creating a great work-life balance where I can work fully remote and travel whenever I want. I enjoy working independently and choosing the projects I say yes to, so I think I would enjoy freelancing.
Employee example: I'm motivated by financial security and having the stability of a job. I don't enjoy going into the office every day and wish I had more flexibility, but I like knowing I have steady pay coming in each week.
What appeals to you most about freelancing?
Freelancer example: I get bored easily and like the idea of being able to switch up what I do from day to day and week to week. Freelancers get to balance multiple clients at once, so I could spread my working week among different projects instead of just one task.
Employee example: I think I could make more as a freelancer than I do right now at my job. I know some people that had the same job title as me, and now they’re making more as freelancers.
What appeals to you most about being an employee?
Freelancer example: I know how to be an employee, so it seems like the safer bet. I am interested in freelance, but I don’t know how to get started and don’t have any friends who do it.
Employee example: The idea of having a salary that I can count on with benefits is the most appealing part of being an employee. I would know exactly how much my monthly salary would be and get paid vacation time and sick days.
Do you have a marketable skill?
Freelancer example: Yes! I checked Upwork's list of the most in-demand freelancer skills for 2024. Clients on Upwork are looking for freelancers in my field.
Employee example: I enjoy doing a little bit of everything. My experience is varied, and I wear many hats in my current role. I'm very good at what I do but don't know how to narrow it down to specific skills.
Do you like working with a group?
Freelancer example: I enjoy collaborating in a group setting and having work friends, but it's not a dealbreaker for me. I would prefer to work from home and can fill my social needs outside of my career.
Employee example: My favorite part of my job is working with others. I am a very social person and like having friends at work. I have a collaborative work style and prefer to be part of a team.
Do you enjoy working with clients?
Freelancer example: Working directly with clients is rewarding, and I appreciate their feedback. I am not afraid to ask questions and explain why I’m the best person for the job.
Employee example: Client-facing roles are not my favorite. I don’t like customer service or being direct and promoting myself. I prefer to work behind the scenes.
What does your savings look like?
Freelancer example: I have enough savings to pay my bills for the next six months and be comfortable. By the end of six months, I need to have a somewhat steady income source.
Employee example: I don’t have the current financial security to have a gap in income. If I started freelancing, I’d need to make close to what I make now to cover my expenses.
Do you have a large network?
Freelancer example: I have worked in my field for a few years and have made great connections. I could reach out to colleagues and probably find potential clients.
Employee example: I've worked with the same company for a while and know people in my industry, but I do not enjoy networking. If I were to freelance, I would not want to reach out to any of my contacts.
Can you test out freelancing first?
Freelancer example: I could do a couple of freelance projects first to see if I like it. I can dedicate 30 minutes per day to applying for jobs on Upwork.
Employee example: I have a busy schedule at the moment and don’t think I could find time to freelance outside of my current job.
Are you disciplined about work?
Freelancer example: I am very self-motivated and always meet my deadlines even if my manager isn't checking in. I am great at time management and don't have an issue with procrastination.
Employee example: I am disciplined when I have specific goals to work toward. My manager knows how to motivate me, and I’m competitive with my team.
Summary
Choosing between being a freelancer vs. an employee depends on your lifestyle and how you work best. What's ideal for one person may be suboptimal for another. Freelancers are self-employed and have to take on a lot of responsibility, which translates into more freedom. When working as an employee, you tend to have more stability and financial security, but you will often have less flexibility in your day-to-day activities.
If you enjoy working independently and have the self-motivation and time management skills to meet deadlines and create a balanced schedule, you may excel at freelancing. However, if you prefer collaborating, being part of a team, and experiencing company culture, working as an employee may be a better fit.
The best way to understand whether you should become a freelancer or work as an employee is to be honest with yourself about your motivation and what conditions you’re most successful and productive in. Write your own pros and cons list and think about what you want out of your career.
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