Freelance Contractor or Payroll Employee? — Things to Consider Before You Decide How to Work

Pros and Cons of Both Alternatives

Photo by Ant Rozetsky on Unsplash

One question that comes up frequently is whether one should work as a freelance contractor or an employee on the payroll of a company.

It depends since both alternatives have their pros and cons.

Freelance Contractor

From a taxpayer’s point of view, a freelancer is one and the same thing in the United States as an “independent contractor.” Independent contractors get a 1099 Form from their clients to pay their taxes if they make at least $600 a year. Payroll employees, on the other hand, get a W-2 Form.

Freelancing will provide you the opportunity to write your own check. Your income will be limited only by your own efforts, how good you are, and the willingness of your client to pay what you are asking for.

The chances are you’ll be working on more interesting and time-sensitive critical projects and will have access to the kind of people and resources that you would probably not have when working for a corporation.

However, you need to market your services constantly. You need to advertise, grow your social media footprint, maintain a blog and a website, build up a mail list, and do all those endless things that online and brick-and-mortar marketers do.

There is also the financial and tax angle that you must keep an eagle’s eye on as a freelancer. You have to keep meticulous records of your income and expenditures so that you know how to file your taxes properly. You need to provide your own social security tax filings, plus, also pay for your medical and (perhaps) malpractice insurance.

Most writers can get away by remaining a sole proprietor but as your business and revenues expand, you may have to incorporate yourself to protect against any lawsuits.

Let’s summarize the positive and negative points of working on your own as a freelance writer.

FOR FREELANCE EMPLOYMENT:

  • You write your own check. No upper limit to how much you can earn (in theory).
  • You set your own working hours, workplace, and style of work.
  • You get to know interesting people and work on a variety of interesting projects.
  • You can repurpose your written work into learning and training modules, books, podcasts, webinars, etc. by creating content for your own use.

AGAINST FREELANCE EMPLOYMENT:

  • Need to market yourself constantly.
  • Need to keep meticulous tax records.
  • Need to pay your own taxes, medical insurance, and other professional fees.
  • The minute you stop writing, your income also stops. Like when you are sick, or when it’s an official holiday, you don’t get paid for such occasions.
  • You don’t own the content you create if you are working for a client.

Payroll Employment

Payroll employment also has its own pros and cons.

One major advantage is the security it provides. When you are on the payroll, you know you’ll be paid at the end of every pay period as long as you do your job well.

You do not need to go out and hunt for new clients at all. Nor do you have to market your services regularly. When you are on the payroll, you get paid even when you have nothing to do at the office since it’s not your responsibility to find enough projects to keep you occupied.

Another advantage is the “benefits package” that comes with most payroll employment positions which include medical insurance, dental and vision coverage, short- and long-term disability insurance, life insurance, paid vacations, paid training and business travel, etc.

On the downside, you do not control your time when you are on payroll. You have to show up in the office (which usually means commuting in traffic) at a certain time and put in your 40 hours a week (for full-time employment).

You also have no say in choosing which projects to work on. You have to follow company guidelines and use corporate templates and branding stylesheets, etc.

Another major difference is the necessity to work with others as a part of a team and the ability to survive the infamous “office politics.” You can’t escape that.

Thus, if you are not good at getting along with others, making small talk at the cooler and coffee machine, and have the ability to compromise and find peaceful solutions to everyday issues, then you’ll probably not survive too long on the payroll.

Working in an office environment is not for those who live by the motto “my way or the highway.” The kind of personality you are will at the end determine if working as a part of a team in an office is something you can continue to do in the long run or not.

So, let’s summarize the good and bad points of payroll employment:

FOR PAYROLL EMPLOYMENT:

  • Guarantee of income.
  • No need to market your services.
  • No need to find the next client.
  • Medical coverage.
  • Dental and vision coverage.
  • Paid vacations.
  • Paid training and travel.
  • Pension Plan (if any, since most companies are phasing out of pension plans).
  • 401K Plan.

AGAINST PAYROLL EMPLOYMENT:

  • Daily commute.
  • Need to put in 40 hours a week (for full-time positions).
  • Working under a manager in an office.
  • Need to play the “office politics” and get along well with others.
  • Inability to select projects.
  • Need to comply with HR rules.
  • Need to use corporate guidelines and templates.
  • “Glass ceiling” to income.
  • The work can become stale and uninteresting over time.
  • You don’t own the content you create if you are working for a company.

DISCLAIMER

This article is an information product written only for the purpose of sharing information. The author is not responsible for any consequences arising out of the use or misuse of the information contained here.

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Ugur Akinci

Ugur Akinci

Award-winning Fortune 100 writer. Father. Husband. Brother. Fabricator. Got nothing to sell but tips are humbly welcomed.