How Being an Independent Contractor Can Help Shape Your Career Path and Other Benefits
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Being an independent contractor gives you the power to create a career that works for you and your lifestyle. With the flexibility to choose what you want to work on, who to work with, and where to work from, it’s not a surprise that contracting as a side gig or a full-time career is part of our top work trends of 2023.
- Independent contractors are self-employed and have unparalleled control over how they want to work
- Being an independent contractor offers many advantages that traditional employees can't get
- Make sure you are correctly classified as a contractor, as you also lose out on employment protections that the law only gives to employees
What does it mean to be an independent contractor?
Being an independent contractor means that you are not considered an employee of a company, but rather you are self-employed and contracted to perform a specific task or service for a client.
Independent contractors may be more commonly known as freelancers, “1099 employees”, contributors, or consultants. Anyone can become an independent contractor—there is no special training required (though depending on where you live, you may need a business license).
Benefits of being an independent contractor
1. Independent contractors get to be their own boss
As an independent contractor, you are your own boss. That means you can choose how much of a workload you want to do at a time. You can manage your schedule and workload according to your habits and availability. Being your own boss can provide you with a sense of control and freedom that can be very fulfilling and empowering.
2. Independent contractors have flexibility over their working hours
Independent contractor have the ability to control their working hours. Unlike a regular employee, you don’t have to put in a full shift—you can work as long (or as little) as you like. Although you’ll still have deadlines, you choose how you want allocate your time to complete your work. Here are some examples of people who might value this flexibility and control over their career:
- Someone with young children or a baby can schedule their work around their family's needs. They could choose to work early in the morning or late at night when their kids are asleep, or they could take on shorter-term contracts that allow them to have more time with their family
- Students can work around their class schedule and exams. They can choose to take on more contract work during breaks or take on shorter-term contracts that allow them to focus on their studies
- Someone with a health condition can take time off work when they need to rest
- Someone with a passion for travel can use shorter-term contracts that allow them to take extended breaks between projects to explore
3. Independent contractors earn more (before tax)
Independent contractors tend to earn more than regular employees in the same business position. On average, an independent contractor will earn up to 40% more than an employee doing the same job. That’s because companies don’t need to pay social security tax, provide employee benefits, or provide equipment when they hire a contractor. This gives the freelancer the opportunity to request higher rates for their services and still be competitive.
Another reason for higher earnings is partially because taxes for an independent contractor are different than for an employee. Most independent contractors file as a sole proprietorship, meaning they’re the only person who owns and operates the business. As your own boss, that means you’ll be responsible for self-employment tax—in the US, these are Social Security and Medicare taxes. Since you pay a bit more in tax, it’s reasonable to charge a higher rate for your work.
4. Independent contractors can claim deductions
Independent contractors can make use of tax deductions that regular employees aren’t entitled to. These deductions let you claim business expenses such as equipment and business travel. Deductions offset your business income, allowing you to reduce the income tax you pay and keep more of your hard-earned money.
5. Independent contractors can experiment with business ideas
Working as an independent contractor is a great way to see whether you are ready to start and expand your own business. Nothing gives you a better idea of what it takes to manage a small business than actually giving it a go! As an independent contractor, you can test out new business ideas without needing to commit a lot of time or resources. You can identify which ideas are more likely to succeed, giving you the ability to build a sustainable business. Experimenting with different business ideas can help you discover what you are truly passionate about and find work that is fulfilling and meaningful to you.
6. Independent contractors gain more experience
Working as a freelancer can let you develop crucial skills that help you stand out in your field that you wouldn’t be able to develop as an employee. You’ll have the opportunity to work with a wider range of clients and on a wider range of projects than you would as an employee. Deep experience in various industries and job functions will make you a more well-rounded professional.
Because you work independently, you might also enjoy more responsibility and autonomy than you would as an employee. This allows you to hone skills such as decision-making, problem-solving, and other valuable leadership capabilities.
7. Independent contractors can stand out
As a contractor, you can choose to take on projects and clients that align with your goals and interests, allowing you to establish a niche or specialty. You’ll gain more targeted and relevant experience than you would as an employee who may be limited to the projects assigned to them by their employer. A niche expertise in a particular area or industry can make you more valuable to potential clients and help you stand out in your field.
As you complete projects, you’ll be able to build a portfolio of accomplishments that showcases your skills, expertise, and values. This can help you differentiate yourself from other professionals.
8. Independent contractors can work from anywhere
Your clients can’t decide where you work—you have the freedom to choose the setting that best suits your lifestyle. Many contractors work from a home office or in a coworking space, but you can even work abroad or as a digital nomad, working while traveling from country to country. Avoiding a daily commute gives you extra time to spend with family and friends, explore the city, or explore other interests and hobbies.
Control over your work environment can also help create a better balance between your work and personal life. This can help you avoid the stress and burnout that can come with a traditional 9-to-5 work schedule.
Before you go: Keep contractor misclassification in mind
Contractor misclassification occurs when an employer wrongly classifies an employee as an independent contractor in order to save costs. While being an independent contractor can offer many benefits, it’s important to make sure that you are correctly classified. Workers who are misclassified as independent contractors may be missing out on important employment benefits and protections such as minimum wage, overtime pay, unemployment insurance, and workers’ compensation. If you think you are being misclassified, seek legal advice or see if you can convert to a full-time employee.