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Freelancers vs. Contractors: What Is The Difference?

by YOSS Community Writer, on November 20, 2019 at 1:45 PM

There are a lot of different kinds of contingent workers, and two of them are often confused: freelancer and contractor. In everyday speech, these terms are sometimes used interchangeably, but if you are involved with staffing, you need to be clear about the differences between the two.

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Difference Between Freelancers and Contractors

Generally, the following rules can apply to differentiating between these two kinds of workers:

  • Freelancer definition: they run their own businesses and work on projects with clear deliverables.
  • Independent contractor definition: they normally work over an extended time for a single client. Additionally, they may work via an agency.

Note, however, that these distinctions are not universal, and they may not matter that much to the workers themselves. In fact, there is an oft-repeated joke among contingent workers, "I'm a contractor when I'm getting paid and a freelancer when I'm not."

Where the distinction between freelancer and contractor matters is in making staffing decisions.

Examples: Data Science Freelancer and Contractor

Let's look at some examples. Suppose your firm needs a data scientist to create a machine learning program to analyze an existing set of business data. The data scientist is to deliver the program with testing results and documentation within a month.

After this is done, your firm needs another data scientist to use the aforementioned tool to analyze parts of your database as needed for the foreseeable future.

Which Is Which?

In the first case, the data scientist is working as a freelancer. In the second case, they are working as a contractor. The first project is limited in time and requires a clear deliverable. The second project requires constant work over a longer time period.

It's almost certain that in this case the freelancer would be paid a set amount agreed upon for the entire project. It's likely (but less certain) that the contractor would be paid by the hour.

In both cases, they would be self-employed. The contractor could be working through an agency or through their own company. It's even possible that both jobs would be filled by the same person. Freelancers often take contractor work.

Independent Contractors, Consultants, Gig Workers

Depending upon who you talk to, an independent contractor is the same thing as a freelancer. When making staffing decisions, you can pick from freelancers and contractors based upon your needs. What you call them doesn't matter.

Consultants are a particular kind of specialist, and they typically work as freelancers. However, there are times when you may want to hire a consultant as a contractor when they need to work closely with your team for an extended period of time.

Gig workers are generally a type of contractor that does a lot of little jobs, mostly through a third party like ride-sharing or task marketplace apps.

Why Use Freelancers and Contractors

Generally, contingent workers add flexibility to your human resource management. You can scale production up and down as needs dictate. Freelancers and contractors offer special advantages.

It's often useful to add particular kinds of expertise to your team for a limited time. Going back to our example, most companies don't have data scientists to analyze their data. Data science is a complex field. Almost half of all data scientists have an advanced degree, so you can’t exactly expect one of your employees to quickly teach themselves the subject.

There are other reasons to make freelancers and contractors part of your team. Their independence can lead to increases in productivity, and there's no reason they can't be fully integrated with your workforce.

Managing Freelancers and Contractors

Managing freelancers is not more difficult than managing regular employees, but there are some differences. Managing contractors is usually like a combination of managing freelancers and employees.

Hiring

The most critical element is hiring. It's necessary to know exactly what you need before you start the process. In particular, think about what you need done and how the freelancer or contractor will fit into your existing workforce.

It’s at this point when you will determine whether you need a freelancer, who will generally work on a project with clear deliverables over a set time period, or a contractor, who will work on an ad hoc basis over an uncertain period.

Team Building

Freelancers and contractors are much more independent than regular employees, and they usually don't work on-site. Many freelance jobs don’t even involve the worker showing up to your office at the start and end of the project.

To get the most out of freelancers and contractors, make them part of your team. That doesn't necessarily mean having physical contact. There are plenty of tools to create team cohesion for people who are located in different places. The key is to maintain a high level of communication between the contingent workers, management, and the rest of the team.

Other Things to Keep in Mind

There are more general considerations to remember when employing freelancers and contractors. One is to invest resources in analytics. If you are to use your workforce effectively, you need to be able to monitor how well things are going.

For example, if your freelancers are under-performing, you may need to take a different management approach to them. There are lots of software applications that can help you with this, or you could hire an HR analyst as a freelancer or contractor to oversee this part of the management process.

You also need to manage risk. There are regulatory issues depending upon the work being done, for example. Most important: make sure that any freelancer or contractor is properly classified, because it can be easy to classify employees as contractors. Work with your HR department to sort this out.

Summary

Contingent workers are more important to business than ever. Freelancers and contractors are the core of this workforce. They offer businesses distinct advantages to supplement or even replace regular employees.

As long as you fit freelancers and contractors to the right kinds of projects, they can greatly add to your company’s flexibility and productivity.

If you are looking to increase your contingent workforce or better manage your talent, YOSS can help by providing access to the very best tech flexible talent. At YOSS, we represent the very best pre-vetted freelancers in the world. We only engage with the top 1 percent of talent. So whether you are looking to fill a particular position or to shore up your talent pool, we can help.

Our mission is to make agile staffing easy for companies like yours so see how YOSS can help you manage or add to your workforce below with YOSS Talent Pools. 

Learn More About YOSS Talent Pools

Topics:Freelancer EconomyBusiness StrategyRemote WorkforceHire FreelancersIndependent Contractors

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