Freelancing or Contracting – what’s the difference?

In January 2017 I took the leap of faith and set upon my new career Freelancing in Digital Learning. If you too are contemplating going freelance into the world of eLearning, you may be confused about the difference between freelancing and contracting.
Let me explain…

Contracting

As a contractor, the most common type of contract is the day rate contract. You would normally pick up these for a set duration varying from 1 month to 6 or 12 months, or sometimes even longer. These are usually advertised through specialist recruitment agencies like Woodrow Mercer, Instinct, Blue Eskimo etc.
Don’t get the day rate contract mixed up with fixed term contracts. These type of contracts are more common for longer periods like 12-18 months for filling a vacancy like maternity leave or similar. They are usually advertised with an annual salary, rather than a day rate, but keep in mind this is the full-time 12 month equivalent salary, so any contract shorter than 12 months will be pro-rata.

Unless it specifically states the position is 100% remote based, contract work normally requires you to be onsite at the clients premises for each professional day (09:00-17:30), although some contracts do offer a mix of onsite and remote work.
Whilst on a contract, you usually work with one client at a time for the fixed contract duration.

NB: Due to legal requirements in the UK, you are not allowed to undertake contract work through an agency if you are Sole Trader status. You must either be a limited company or work through an Umbrella company. Keep in mind that working through an Umbrella company can reduce the day rate by around 33%-39% in my experience, depending on individual tax circumstances, after they take off your tax, national insurance, employers NI and their fee’s.

Freelancing

This differs from contracting in that you pick up projects or ‘gigs’ as they are called. These are normally done on a fixed fee basis and you often raise a quote for a client to complete the project within a certain time period. Some jobs might require you to work on an hourly basis or even a day rate basis, where you might estimate a project would take so many days and agree to do the work for a fixed number of days at a fixed day rate. Freelancing offers the most flexibility as you usually work 100% remotely and truly operate as your own boss, working on multiple projects with multiple clients at a time, unlike contracting where you work with the one client for a fixed period.

For freelancing you CAN be Sole Trader status (or Ltd if required) and you decide when and where you work, how long for and even if you wish to work in the evenings and weekends, it’s up to you, so long as you deliver the project to the client by the agreed deadline.
Once the project is completed you raise an official invoice for the work and the client pays you on agreed terms. In the world of business 30 days seem to be the standard although I have worked with firms that demanded 60 or even 90 day payment terms from date of invoice, I try to avoid these for cash flow purposes – get this agreed before you start the work.

These sort of jobs (or gigs) can be found on sites like People Per Hour, Guru and Jam-Pan. Be aware though that there is a lot of competition from all over the globe, with people prepared to work for peanuts and there are also clients that want the world but don’t have the budget. My advice is to steer clear of the low hanging fruit jobs as you can spend days completing these, sometimes for a small return, and when you work it out over the time taken the hourly rate can be very low.

It’s important to have your own website with contact details and portfolio work demonstrating your skills as I get numerous enquiries through my own website from clients.

Of course, there is nothing to say you cannot do a bit of both, freelancing and contract work but you need to keep in mind that whilst on contract you won’t be able to take on much freelance work and if you have built up some freelance clients who keep coming back, to then go and take a 6 month contract Mon-Fri with one client will not please your freelance clients as you will be unavailable for this 6 month period and you’ll find they won’t come back if you bat work away.

In summary

If you prefer the security of a regular income for a fixed period with ‘normal’ fixed hours (professional day 09:00-17.30) and don’t mind working onsite with one client at a time, then contracting is for you. This is very similar to a fulltime permanent role, commuting to work and being at a desk etc, albeit for a fixed period on a day rate basis, but without the benefits of holiday and sick pay etc. Keep in mind you must be Limited or go through an Umbrella company. Also keep in mind the forth coming changes around HMRC IR35 rules when taking on contracts.
Look for your next contract BEFORE your current one ends so they can dovetail.

If you prefer to be truly self-employed, work your own hours and like working for multiple clients on multiple projects, usually 100% remotely, then freelancing is for you. Keep in mind that there can be quiet times as well, often referred to as ‘feast and famine’ where work is high then low and you have to constantly look for work and new clients as you build your business up.

Lee Webber is a fulltime Freelance Digital Learning Developer available for freelance work for short and longer term assignments, specialising in Articulate Storyline 360, Rise 360, Gomo, Vyond and Camtasia.

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