The kind of work you do might be the same whether you’re a freelancer or a full-time employee, but the money and lifestyle can be drastically different. Which working arrangement is better? We asked you, and these are some of the best arguments you gave us.
Employees Get Steady Income and Benefits
Most of the arguments in favour of being a W2 employee centered around the regular paychecks and benefits, such as health insurance and paid time off. These are things freelancers have to pay for themselves and factor into their rates if they want to be at least on par with employees doing the same job. For employees, however, these details and expenses are all taken care of. Lifehacker reader noneOther says:
Freelance may work for certain individuals but I got back into the corporate world after a year-and-a-half.
Health care, taxes, self promotion, vacation pay, retirement benefits, etc. issues I just didn’t want to deal with the complexities any longer.
I’m working for the man again but life feels more enjoyable.
By far the best reason to work for a company is regular income. As a freelancer you might make $US8,000 ($11,147) one month, but the next month it might be $US500 ($697). If you’re not good with your finances, beware.
Freelancers need different — and trickier — budgeting strategies than those who get a regular paycheck. Freelancers can’t even count on unemployment insurance if they can’t find any work.
Freelancers Have the Most Income Potential
When you’re freelancing, you can work as much or as little as you want to. You set your own rates and don’t have any income limits. If you’re successful in finding good clients, the pay can be much better than what you’d earn as an employee in the same field. Myrna Minkoff shares:
Any successful freelancer is charging 2x or more the hourly rate an employee would get for the same job.
I just an invoiced a job at roughly $US250 ($348)/hr. I’m a writer. You’d be hard pressed to find a 9-to-5 writer making $US500k doing the kind of work I do. (Granted, I don’t have 40 hours a week of that kind of work, either. But at that rate, I don’t need to.)
I can confirm, as a fellow freelance writer, that the money opportunity is much higher working freelance jobs than what you’d be offered as a full-time employee at one company. It can also be a lot lower too, especially when you’re just starting out, so give yourself some time to break into the market — years, even. But if the opportunity to gain more money is what you’re most after, freelancing is the better bet, as long as you’re willing to work for it.
Taxes Are a Pain for Freelancers, But at Least We Get to Deduct Our Business Expenses
Good thing freelancers have the potential to earn more, because they have more expenses and the hassle of dealing with higher taxes too. You’ll not only owe income tax, but self-employment tax too, and estimating and paying your taxes over the year is a lot harder than having them deducted for you every paycheck. CPA EvanrudeJohnson says:
Freelancers on a 1099 almost always have to pay estimated taxes and it takes discipline to hold out one third or more of your pay and then pay it over months later to the government.
Although taxes are more complicated for freelancers, there’s more we could write off, which could offset the additional self-employment tax we have to pay. Business use of your home is a huge one: If you have a separate, dedicated home office for your freelance business, you can deduct a portion of your mortgage, utilities, and other home-related expenses. (By contrast, employees are only allowed to deduct their home offices if they’re working from home “at the employer’s convenience” — i.e., they forced you to work from home). All the little things add up, too, from inkjet cartridges to books you bought to boost your career or drinks you had with a client to discuss a potential project.
Employees Can Climb the Ladder
When companies give out promotions or invest in their teams’ professional development, they typically don’t consider the freelancers. Full-time employees have a clearer career path within their companies, as Snottrocket points out:
Full time offers consistency, usually standard benefits and some level of security provided you don’t screw up. If you’re wanting to climb the ladder, provided the situation allows for that, full time is the thing to do (you have to be careful with this…Glassdoor can be your bromance – great way to find out what a company is like from happy and unhappy employees, current and past). The only time one may have to be concerned is if there are major changes with a client (acquisition, management staff) which could affect how or if an agency does business with them.
Another benefit is professional development. yes, you can do that on your own but if you’re employer is going to pay for Lynda.com or Treehouse or pay for you to go to thousand dollar seminars….
On the other hand, I suppose if you’re a freelancer, you’re at the top of your own ladder already?
Freelancers Have More Work Opportunities
Part of the appeal of switching to freelance is the chance to decide on what to work on and also to have a wider variety of project possibilities compared to working for just one company. Regodamus says:
The steady work of an employee is nice, but I sure would be happy if I was fortunate enough to have the ability to hand-pick what I work on. I understand you have to line up the options to pick from yourself, but if you’ve got those then you have some freedom to work on what you enjoy most.
Also, if you have a hard time finding full-time employment, freelancing could be the solution. Sage calls himself unemployable (doesn’t always show up on time, doesn’t like socialising during work, and so on) but does great work, and thus he freelances. Villaine is “old and white” and therefore has turned to freelancing because of the slimmer odds of getting hired for a full-time job.
Employees Have More Social Support and Interaction
One thing in-office employees have that telecommuters and freelancers don’t: A regular group of people you see (in-person!) and could potentially become friends with. Covarr notes:
For me, being a traditional employee means going into the same place of work every day, seeing the same people every day, and becoming good friends with them. Maybe this is atypical, but time with my coworkers in the break room, around the water cooler, and even next to each other at our desks is a fairly important part of my social life. I’d be afraid of losing that as a freelancer.
Freelancers Have More Lifestyle Flexibility and Don’t Have to Deal with Office Politics
Most freelancers get to choose where and when they work. That’s a big boon if you have children or medical issues. Yorkshiretealover says:
I’m having the immense pleasure of being with my son 24/7 (except when he’s at school). If I were working a regular job, I’ll be leaving home while he would be still sleeping and would get home way after he would have arrived.
While many employers offer flexible work arrangements, not all do, and that’s a make or break benefit for many people.
Also, when you’re a freelancer, you don’t have to deal with office politics and needless drama.
Employees Have Less Job Security
While being a salaried employee offers stability and consistency, job security isn’t assured. One could argue that employees have less job security, because they only have one “client” — their employer — compared to freelancers who have multiple clients. SergioAM shares:
Reason I love freelancing is because you’re constantly on your toes, you fight harder, you appreciate the little things and you learn more. Due to downsizing at my last full-time job, I got hit with the realisation that a full-time job gives you a false sense of security. Or at least for me it did. You get stuck in this mindset that you’re guaranteed that amount of money biweekly, you have workplace accident cover, [paid] holidays, coworkers begin to turn into friends, you get along very well with the higher ups etc.
You start to feel safe in that bubble.
Then when it pops, everything comes crashing down and you feel completely and utterly helpless.
This is why we recommend frequently looking for a new job even if you have one you like, whether you’re an employee or freelancing.
Freelancers Have to Be Self-Starters and Always Looking for the Next Job
You’ll always be in work mode when you’re freelancing, and most freelancers will need to consistently market themselves and look for the next job. Not only that, you might have to chase clients just to get paid. Taco Fortress points out this downside:
You have to be a self-starter, drum up your own business, and engage in the unenviable task of getting paid. There are unscrupulous clients out there who will pay late or try to get out of paying you at all. With a regular paycheck, it’s much less likely that you’re going to get stiffed.
Many readers said the uncertainty of finding clients, along with having to bug clients to get paid, make being a full-time salaried employee the better option for them.
Working from Home as an Employee Might Be the Best of Both Worlds
Former freelancers, such as colormist, and those who were tempted but put off by the marketing prospect of freelancing, such as Fairboxie, say the best solution is to telecommute. You get the ability to work from home with the stability and benefits of being a salaried employee. As a former telecommuter and current freelancer, I tend to agree, but you should be careful about getting stagnant in your career or work — something more likely to happen when you telecommute than if you’re freelancing.
Also, some people just don’t like working from home. It’s not all rainbows and unicorns.
Know Your Personality and Goals to Choose the Best Path
Corey Edwards argues that the answer is simple:
The only *tough* part of this question is that people tend to have a hard time deciding what they actually want. They tend to try to answer the question one way or the other instead of simply deciding what they want out of their work life. Figure that part out first, then decide which path gives you the most of what you want.
Perhaps Code-Archeolologist said it best:
If you like money, and can be extremely organised and disciplined… then 1099 is for you.
If you like stability and don’t want to have to think too hard about the details… then W2 is for you.
Or you could try freelancing part-time while you’re employed to see which option is the best for you. Perhaps it’s both?
The Cheapest NBN 50 Plans
Here are the cheapest plans available for Australia’s most popular NBN speed tier.