Back in 2022, 58% of talents were already engaged to join companies without traditional employment. “Borderless recruitment is no longer an exception”, as the Gartner survey has concluded. If you ever wondered how to minimize the cost of hiring an employee, you might’ve heard that agile engagement models, freelancing and contracting, can be cost-effective.
Both short-term and long-term projects in tech can benefit from remote freelancers or contractors. In both cases, companies can adjust their tech teams to their current needs and manage workloads without extra bureaucracy.
If you pick the right option when considering freelancer vs. independent contractor, your spendings decrease and the time to complete the project increases by about 25%.
If you go wrong comparing independent contract vs. freelance IT specialists, you can get into financial losses.
It will be easy for you to pick the right option, as, right now, I am deciphering the difference between contract and freelance hiring and answering when to hire whom ⬇️
The Key Difference Between Contract and Freelance IT Specialists
Independent contractors operate under fixed-term contracts that outline the scope of work, duration, and payment terms. Independent contractors often bring specialized skills to the table and may work as part of the client's team or project.
Freelancers are highly flexible, offering their services on an as-needed basis.
What to Consider Comparing Independent Contract Vs. Freelance Engagement Model
To choose between an independent contractor vs. freelancer, first run through this checklist:
Is the project long-term?
Do you need specialized skills?
Is budget flexibility important?
Do you want a specialist to work exclusively for you?
Do you need a specialist to collaborate with your team?
How much control do you want over the work process?
Then, match your answers with the freelancer vs. contractor comparison below.
Putting a Freelancer vs. a Contractor Face to Face
Independent Contractors
Freelancers
Engagement Duration
Long-term
Short-term
Client Relationship
Typically, one client at a time
Multiple clients simultaneously
Work Scope
Broad, project-based
Specific tasks or projects
Flexibility
Less flexible due to longer commitments
Highly flexible with varied commitments
Payment Structure
Often fixed price or retainer-based
Hourly or per-project basis
Specialization
Specialized skills for comprehensive projects
Specialized skills for specific tasks
Integration
May work closely with the client’s team
Operates more independently
Engagement Duration
Independent Contractors
Freelancers
Long-term
Short-term
Engagement Duration
Independent Contractors
Freelancers
Typically, one client at a time
Multiple clients simultaneously
Work Scope
Independent Contractors
Freelancers
Broad, project-based
Specific tasks or projects
Flexibility
Independent Contractors
Freelancers
Less flexible due to longer commitments
Highly flexible with varied commitments
Payment Structure
Independent Contractors
Freelancers
Often fixed price or retainer-based
Hourly or per-project basis
Specialization
Independent Contractors
Freelancers
Specialized skills for comprehensive projects
Specialized skills for specific tasks
Integration
Independent Contractors
Freelancers
May work closely with the client’s team
Operates more independently
Need skilled contractors for Tech projects? We cover talent search, contract management and payroll.
Hire with usWhen to Hire a Freelancer
Short-Term Needs
For tasks that are short-lived or require a quick turnaround, freelancers are perfect. Their ability to start immediately and work on tight deadlines can be a significant advantage.
Short-Term Cost-Efficiency
The difference between contracting and freelancing payment models makes freelancers a good fit for short-term projects, as they bill for the exact time spent on a task, avoiding the overhead costs associated with long-term engagements.
Diverse Skill Sets
When you need a variety of skills for different small projects, freelancers offer the flexibility to bring in the right talent for each specific need without long-term commitments.
Generally, it’s more typical to hire freelancers for non-tech roles. For instance, some marketing departments in tech companies often face varying demands for content creation, graphic design, and social media management. So, they hire freelancers for such tasks.
Practically, every tech specialist can work as a freelancer or a contractor. Even if it’s normally considered to be a position only for a contractor or an in-house hire. A freelance Data Scientist can prepare just one report visualization. A freelance DevOps can provide a one-time consultation. And, ta-da… a CTO can become a fractional CTO by partnering with several businesses.
If you are hesitating between a freelancer vs. an independent contractor but planning to engage a specialist for up to 3 months or delegate tasks to a specialist episodically, go for a freelancer.
When to Hire an Independent Contractor
Mid- & Long-Term Projects
If your business requires ongoing support for a project or a specific function over an extended period, an independent contractor is ideal. Being integrated into your team, a contractor is more likely to invest time in understanding your company's goals and working towards them. Altogether, their deeper involvement in projects makes them more accountable for the outcomes.
Long-Term Cost-Efficiency
Going for freelance vs. an independent contractor, what really helps decrease, say, the cost to hire an app developer? Mobile app development is one of the smallest yet comprehensive projects in today’s tech. If you are a tech startup or an established business and need to develop a new app, you might understand that this project requires input from your team, as well as ongoing support for maintenance and updates. If you hire an independent contractor with expertise in the chosen tech stack, you can set more effective communication, code documenting and bug fixing. This eliminates the need for rework and reduces the cost of your app’s maintenance in the future.
Specialized Expertise
For projects that demand a high level of expertise and cannot be easily segmented into smaller tasks, independent contractors bring the necessary skills and stability.
Regulatory Compliance
When a project involves stringent regulatory requirements, it’s easier to adhere to standards by hiring a contractor. Taking into account long-term commitment, a company can train contractors to follow, for example, the GDPR. These training sessions can cover the legal principles, roles, and policies related to GDPR compliance, and include practical exercises to help contractors understand their responsibilities and how to implement the compliance measures.
Moreover, contractors can be required to sign Non-Disclosure Agreements (NDAs) before starting work. This helps protect sensitive company information and ensures compliance with data protection regulations.
Project Management
An ability to cope with high-level and strategic roles is another core difference between freelance and contract IT specialists. Independent contractors can take on a project management role, overseeing various aspects of a project and ensuring that all components come together seamlessly.
Pre-Vetted Skills
It may be tricky to spot reputable freelancers on freelance platforms. And you may need some patience to filter matching self-employed contractors within LinkedIn or Glassdoor. If with freelancers, you and only you take the risk of mis-hire, opting for contractors gives you an opportunity to mitigate such a risk. You can contact an IT recruitment services provider and task them with filling the skill gap in your tech team. Then, your talent providers take care about the talent match.
I often hear the concern: “How much do recruitment agencies charge? Is it worthy to work with them?”. Well, it’s worthy when you want to get the most of their hot talent bases and years of hunting for tech talent. An average tech recruiter from an agency closes 100x more vacancies than an average in-house recruiter. Besides their experience, recruiting firms utilize innovative AI tools for candidate profiles analysis. All this increases the chances of finding a better fit quickly. In case you need to replace a specialist during a guarantee period, they do it free of charge.
Wrapping up, I believe that if you don’t know whom to prefer, independent contractor vs. freelancer, but you need a task owner and dedicated team player, hiring an independent contractor is the right solution.
Want Contractors but Don’t Want to Manage Contracts?
When comparing independent contract vs. freelance engagement models, many business owners and team leaders point out that it’d be great to find a happy medium. Actually, this happy medium exists, and it is called IT staff augmentation which gives you an opportunity to sign contracts of different lengths, fully control the working processes, but delegate paperwork associated with contracts to pros.
We maintain the active talent base of independent professionals who know for sure what’s better for them, freelance vs. contract work. They prefer a contract format, as it’s more about meaningful tasks. So, our hires mind their results and the well-being of your projects in general.
Why else should you partner with us?
If you seek offshore and nearshore tech talent, you may lack expertise in foreign talent markets and laws. We are experts in local hiring norms and traditions and can make global hiring risk-free for you.
If you foresee converting a contractor to a full-time role later, starting with an independent contractor can make this transition more smoothly than with a freelancer. We allow buying contractors out.
Although providing benefits to freelancers and independent contractors is not required formally, it can increase your offer acceptance rate (even if you do not offer a lucrative compensation) and make your team loyal. We can help with talent trends analysis and define which perks attract your target specialists.
Why not consider these and other benefits of using staffing services today? You could save your time and costs on recruiting while getting a stronger tech team. Share your hiring targets, and we will suggest the best staffing solution tailored to your case. And if we see that you need a freelancer rather than a contractor, we'll let you know that. The first consultation with us is free, yet it may become a valuable insight into how you can optimize your business ops.
FAQ
Is there a difference in how freelancers and contractors are classified for taxes?
Freelancers and contractors are both responsible for the self-assessment of taxes. That means a hiring company is not required to withhold income tax, Social Security, and medical insurance from paychecks. One of the differences between freelancing and contracting is that contractors typically include their expenses in their rates. If a company wants to pay net compensations, it’s possible to hire contractors through staffing agencies like Outstaff Your Team.
Who works with more clients simultaneously: freelancers or contractors?
Freelancers work with more clients. They handle multiple clients at once, taking on short-term projects lasting from a few hours to several weeks. Whereas, independent contractors typically work with one client for countless months or years, under a contract detailing the services they provide, duration, and payment terms. Contractors bring specialized skills and may integrate into the client's team.
Which specialists, freelancers or contractors, offer more cost savings and flexibility for specific projects?
Although freelancers are more flexible, the differences between freelancing and contracting make them cost-effective for contrary cases. Freelancers can be an optimal solution for small tasks, as you pay only for the work done. Yet, managing freelancers can take more time than contractors, who offer specialized skills and project management for a set price. Contractors are more cost-effective in the long term if you need specialists who can dive deep into your project needs and if you want to avoid unexpected expenses and rework in the long run.
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