By and large, freelancers and contractors are pretty much alike. They are both external resources that a company uses temporarily instead of using them internally. However, freelancers and contractors work in different ways.

Instead of working on an ad hoc basis whenever they are needed (as freelancers do), the contractor works on a set contract – either for a set period of time (fixed term contract) or as part of an ongoing contract or proviso.

What counts as a contract?

A contractor is someone who provides work or services to a company but is not employed by it as an employee.

They may be self-employed or work for an agency or umbrella company that they rent to clients individually or as part of a team. Contractors who go through an agency are usually paid through them rather than being billed directly to clients.

Contracting is common in areas like IT, SEO, security, and construction (to name a few). During this time, a contract worker will typically report to a manager within the customer’s organization. You can also work from the client’s office or location.

What does freelance work include?

Freelancers are independent workers who are usually hired directly by the client to complete a one-off or short-term project. The freelancer then bills the customer directly.

The same freelancer can be hired on a regular basis if necessary. This means that freelancers usually work on multiple projects at the same time or even work with multiple clients at the same time. (Who said freelance life was a breeze again?)

Freelance specialists are most commonly found in creative industries such as copywriting, graphic design, video editing, or photography, but can be spread far and wide across different industries.

A freelancer is expected to provide all of their own tools and equipment and is usually not asked to work from the client. They are also usually not asked to work within a client’s working hours. Freelancers work on their own time, from wherever they want.

It is interesting to note that “freelance” is actually not a legal term. The official title is “Self-employed”, which is reflected in how they must pay taxes to HMRC (through a self-assessment tax return).

The growing trend towards outsourced workers

As the world of work is in a transitional state caused by a pandemic, more eyes are on the flexibility and cost savings that outsourcing to external specialists such as freelancers and contractors enables.

A recent study by Ernst & Young by the Professional Services Network found that over 60% of companies currently use flexible workforce to complement their full-time teams.

The same report predicted that by the end of 2020, one in four companies would have flexible workers making up 30% of their workforce. If expanding teams to include outsourced workers is to become even more popular, as companies continue to adapt and recalibrate, understanding where freelancers and contractors differ is more important than ever.

To understand this, expectations and results can be managed effectively and harmoniously by both parties.

Find more advice for the self-employed, whether you’re a freelancer or a contractor!