What You Need to Know About Contractors vs Employees

benefits of being an independent contractor vs employee

Learn how to manage the financial aspects of your small business. MBO helps companies in many industries engage successfully and compliantly with independent talent. Being a contractor means you get paid for every hour of work you do, at the market rate. If you’re lucky enough to land on a team that desperately needs you to work overtime, you may be able to take advantage of it at higher rates. Hiring an employee entails additional expenses in terms of taxes, pensions and employee benefits, such as medical coverage.

benefits of being an independent contractor vs employee

They can pick clients that offer lucrative job opportunities and better compensation than the market average. Also, independent contractors can negotiate their service charges to match their monetary targets. As mentioned earlier, independent contractors do not have a fixed working schedule – they can work at their convenience. So, unlike employees, independent contractors do not have to slog for a single organization from 9-5. They usually plan and organize their projects according to deadlines and determine their working hours accordingly.

Human Resources

You provide employees with the tools required to complete a job, whereas independent contractors are typically responsible for their own tools. Employers have to use a different tax framework in most countries when working with independent contractors. For example, in the US, a company has to file forms 1099-MISC and W-9 when hiring independent contractors instead of form W-2 for employees.

While employees enjoy numerous company benefits and perks, independent contractors, too, have unique perks that a traditional employee cannot avail of. ” By definition, a contractor can be a person or an organization that agrees and undertakes to conduct work for another independent contractor vs employee organization as specified under the terms and regulations of the contract. A contractor worker is an independent entity that does not work exclusively for one person or business. They are subject to different employment laws and tax dynamics compared to employees.


An employee may be able to obtain better benefits than an independent contractor. Employer subsidized health, life, disability and retirement benefits represent part of the “hidden paycheck” for employees that independent contractors don’t always enjoy. As a freelancer, you’ll have to pay for your own dental and health insurance and social security. There’s also no such thing as a “paid vacation” — you’ll have to say no to certain projects and forego income if you want time off.