Freelancer or Employee? Know the Difference

Today's post is both for you freelancers out there and also for the companies that are doing the hiring...because if we're being totally honest, it seems like these days some folks don't know the difference between a freelancer and an employee.

And there is a HUGE distinction!

Think of a freelancer as a person that runs their own business...and that business is themselves! Also known as 'Independent Contractors' or a '1099 employee', a freelancer can offer their services to several companies or clients at a time for an agreed-upon amount of time. They're also responsible for paying their own taxes and aren't entitled to any benefits - I didn't say freelancing didn't come without its own risks and responsibilities!

Why is it important to know the difference? Well, for all you freelancers out there (because you know I've got your back) it's the difference between being taken advantage of versus getting treated with the respect and autonomy you deserve.

As a freelancer, YOU get to dictate your work schedule and even where you do your work. That job you applied for that 'requires' you to come into their office to work 35+ hours a week? What they're looking for is an employee, NOT a freelancer. Either the hiring company doesn't understand US employment law, or is trying to pull one over on you so that they can get away with not paying your federal taxes or offering you any benefits. Don't fall for the okey-doke.


In short, as a freelancer, it is you that sets the work rules whereas an employee has to follow the rules set forth by their boss. On a similar note, unless you've signed some sort of non-compete or contract stating otherwise, the company you're working for also can't tell you that you're not allowed to work for anyone else.

It's not always so cut and dry, so if you're not sure whether you or the person you're hiring is to be classified as a freelancer or employee, the IRS offers up a 20-part test on their site to help you nail it down.

And if you're an employer who's come across this article, just know that by not properly classifying your employees as such and passing them off as freelancers, you run a huge risk of being audited by the IRS and not only having to pay said employees' federal back taxes but a penalty on top of that. 

More often than not, I see companies claiming to be on the search for freelancers when what they really want is an employee. It's become an epidemic! Have you applied for a freelance gig only to be presented with something entirely different in the interview? This is your chance to call 'em out in comments!