Celarity Blog • Updated Aug 30, 2022
Demystifying the Independent Workforce
The number of full-time and part-time independent workers in the US is expected to grow to 37.9 million in 2020, according to Staffing Industry Analysts and MBO Partners State of Independence study. Independent workers are people 21 years old and older who work on a regular basis as freelancers, contractors, consultants, temporary and on-call workers. They also say people working on fixed-term employment contracts of less than a year are also considered independent workers. The terms “temporary” and “on-call workers” are self-explanatory, but what is the difference between “freelancers,” “contractors” and “consultants”?
Freelancers are Independent Contractors
An individual described as a “freelancer” is a person who is “self-employed and is not necessarily committed to a particular employer long-term,” according to Wikipedia. The IRS says an “independent contractor” is someone who offers his/her services to the general public. They go on to say “the general rule is that an individual is an independent contractor if the payor (the client) has the right to control or direct only the result of the work and not what will be done and how it will be done.”
For all purposes, the “freelancer” and the “independent contractor” are the same. Their earnings are subject to Self-Employment Tax. In some professional fields, such as marketing, creative and IT, a freelancer is an independent contractor who works on a project basis and has multiple clients. They may work for one client at a time or juggle multiple projects for several different clients. Freelancers set their hourly rate or project price when bidding on a project for a client. They are self-employed independent contractors and have a vendor’s relationship with the client. Freelancers handle paying their taxes and other business responsibilities such as being accountable for the outcome of the work they produce. If the client is not happy with the work performed by the freelancer, they may ask him/her to revise the work to meet the client’s satisfaction or make adjustments to the invoice. Freelancing is more for the seasoned professional who thrives on working independently and is also skilled at managing the business side of being a freelancer.
What is a Consultant?
Where does the “consultant” fit into all of this? The Apple Dictionary (2.2.1) states that a “consultant” is a “professional or expert in a particular area or speciality field.” The consultant can be someone who operates within an organization but is available to be consulted on areas of their speciality by other departments. A consultant can also be employed externally, with a firm or self-employed as an independent contractor. A consultant can be an independent contractor, freelancer or an employee of a company whose expertise is provided on a temporary basis, usually for a fee.
Successful “contract workers” or “contractors” in professional fields, may be seasoned professionals or quite new to an industry. Like freelancers, they may work on a project basis or work for a defined amount of time for a client company. Contractors are on the payroll of a staffing firm to fulfill the contract that the staffing firm has with the client company. Many staffing companies offer their employee contractors a host of benefits such as PTO (paid time off), health insurance, 401K, competitive pay and other perks that full-time employees enjoy. Additionally, the staffing firm must meet all other employer obligations including payroll taxes. When the contract assignment ends, the staffing firm will seek other contract opportunities for that contractor or consultant.
With today’s independent workforce, some individuals work a mix of freelance, contract work and consulting. Freelancing, contracting, consulting, temporary and on-call are all viable career options for those seeking independence and flexibility in their work.
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