Contractor vs Employee: Which is Right For You?

Female office worker writing and signing check or cheque, while sitting at her desk and looking at computer screen

One of the biggest divides in the current US labor market is between employees and contractors. Around one in ten workers in the US are classed as independent contractors, while more than half are classed as full-time employees.

When choosing your career path, it is important to be able to identify the differences between different categories of workers, especially if you are working in sectors that are heavily weighted towards a specific category.

One of the most important things to understand here is the difference between contractor vs employee. Let’s break it down and explain the pros and cons of each. 

Contractor vs Employee: What’s the Difference?

So, what is the actual difference between a contractor and an employee? An employee belongs to a specific company and is contracted to work exclusively for them and remain loyal to them.

In exchange, the employee will receive a salary from the company, and usually extras such as health benefits and overtime. Meanwhile, a contractor owns their own business and sells their services or skills to clients or companies.

They are independent, and autonomous, and can always choose who they work for and when they work for them. These are the key differences to keep in mind. 

Contractor Pros

So, what are the benefits of the contractor lifestyle? For one, a contractor is independent. They set their own hours, choose exactly who they work for, and when they work. They have the freedom to choose clients and set their own compensation rates. Nobody else can dictate these terms to them.

A contractor can also build lasting relationships with high-paying clients by becoming a bonded contractor. You should always learn the answer to the question “what is a bonded contractor?” if you are considering this career path. 

Contractor Cons

While schedule autonomy is great, there are some downsides to being a contractor. Most important is the lack of job security. You will work on a project-based basis and will not be entitled to any long-term salary or job protections.

You are independent and only get paid for the work that you complete. This means no sick pay, no health benefits, and no overtime. If you value safety and security, the contractor path might not be right for you.

Employee Pros

Most of the pros of being an employee have already been covered, such as job guarantees and health benefits.

On top of these, you can also expect extras such as discounted commutes, company pensions, and other payroll-tax-related extras.

You can also enjoy being part of the company culture and having a consistent circle of coworkers to socialize with if you value that sort of thing.

Employee Cons

That being said, being an employee is not for everyone. As an employee, you are tied to the company you work for in several ways. You might be prohibited from conducting any work outside of your “day job”.

Once you leave your employer, you might be banned from working with a competitor company, as part of a “non-compete” clause.

You will have to adhere to a very strict schedule and you cannot choose who you work for or the type of work you are told to do. If you value your autonomy, being an employee might not be for you. 

Choose the Right Role for You

The contractor vs employee debate matters to everyone, whether you are just starting your career or you have been working for decades.

If you need more resources to help you make the right career decisions, we have got you covered. In our dedicated Business section, you can find real business insights and tips to empower you to make your ideal career decisions.