Contractor vs. Freelancer vs. Full-Time Employee: Pros and Cons

Posted by Templeton on Thursday, 26 October 2023

When you're looking for a new opportunity, apart from deciding in which industry, role and company you want to work for, there are also other aspects you need to consider, such as the type of commitment you are willing to make to your job. And that level of commitment depends strongly on the type of employment you're planning to enter.

Contractor vs Freelancer vs Employee Pros and Cons

There are several different types of employment, like full-time employment, contract employment and freelancing, and each has its own set of advantages and disadvantages. So, whether you're contemplating your first move into contracting for its flexibility or tempted by the stability of full-time permanent employment, you might always wonder what's on the other side of the creek.



If that's the case, Templeton's tech recruitment experts can help you determine which type of employment best suits your personal needs and professional aspirations.

This article explores the pros and cons of being a contractor, a freelancer, or a full-time employee, as well as what makes each type of work unique.


Understanding the Different Types of Employment

If you're not fully aware of the distinction between an independent contractor, a freelancer and a full-time employee when looking for a new job, you may end up making the wrong career decision. Consequently, your choice will have a significant impact on your working hours and schedule, your income, the level of autonomy and security you feel, your career progression opportunities, and so on.

Therefore, it's important to understand the differences between being a contractor, a freelancer, and a full-time employee. Additionally, you should also know what benefits and disadvantages each type of employment brings.

  • Full-Time Employee: Full-time employees are long-term, permanent employees who are contracted to receive and perform work for their employer on a regular basis. Their working hours and days are determined by their employer, and their pay is usually based on an hourly or annual salary. In most cases, full-time employment comes with benefits such as health insurance, maternity and sick leave, paid holidays and pension schemes.

  • Freelancer: A freelancer is a non-permanent, self-employed worker who provides services to clients remotely. Freelancers generally work on multiple projects for more than one client at a time. Their involvement, scope of work, and contract length with clients are not limited in any way, while the amount they charge for their services often depends on their area and level of expertise.

  • Contractor: A contractor is an independent, skilled professional who carries out work for a company over a defined period of time. Employers often rely on their expertise to cover hard-to-fill roles or to bridge skills gaps within their organisation. Contractors work remotely, and they are not entitled to any employee benefits. However, this often means that they can negotiate lucrative daily rates.

Now that we've covered the basics, let's explore each type of employment and take a closer look at some of their advantages and disadvantages.


What is Full-Time Employment?

Whilst there is a growing trend towards freelancing and contractual work, the majority of the global workforce is still fully employed. In most cases, this comes with benefits such as job security, health and retirement insurance, sick pay and holiday allowance.

Full-time employees are hired to be an integral part of a team and grow within a company. Usually, they are compensated based on their experience and level of expertise. However, in most organisations, employees are entitled to ask for salary raises after working for the company for a year or more.

Full Time_Pros & Cons

Full-Time Employment in Tech

Although it seems less and less popular, full-time employment in tech still exists. And it's not a bad career choice, especially for newcomers that don't have the experience yet to handle larger workloads and plan their time, lack communication skills or feel more productive in an office environment. In fact, most IT professionals choose to have some office experience before diving into the world of freelancing or contracting.

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The Advantages of Being a Full-Time Employee

1.      Job Security and Stability

As a full-time permanent employee, you'll have the security of an employment contract. This means that you don't have to seek out a new job opportunity after your contract or a project comes to an end. Apart from guaranteed work, full-time jobs also offer the stability to support specific lifestyles, steadier income, and a predictable working schedule, allowing you to plan for the future.

2.      Employee Benefits

One of the most attractive advantages of choosing a full-time position is the benefits that come with the job. In most countries, companies are legally obliged to cover health and retirement insurance for their employees. And even if they aren't, they often offer this as a perk for being part of their team, along with other benefits, such as paid time off (sick days and vacation time), life insurance, childcare plans, healthy lifestyle incentives, and more.

3.      Career Progression Opportunities

An employer that hires full-time employees usually wants to see them grow within the company. This means that they care about your professional development and will invest in it. So, if you stick around long enough, and as you gradually develop a deeper understanding of your role and the organisation, you will most likely move up the career ladder.

4.      Sense of Belonging and Company Culture

Being a full-time employee of a company, big or small, means that you are part of a team – and being a part of a team is fun! Working with others on a daily basis towards common goals allows you to build friendships, bounce ideas and feel that someone has your back at all times.

5.      Paid Training

As a full-time permanent employee, you can utilise the tools and take advantage of your company's advanced training and professional development opportunities. They might as well pay for you to attend conferences and seminars that will add to your knowledge and skills to advance your career. Especially if you are in an industry like tech, where software and digital developments appear all the time, expect in-person training sessions and online courses to be part of your job description.

 What is Full-Time Employment

The Disadvantages of Being a Full-Time Employee

1.      Fixed Salary

This is a tricky one. Having a regular income is a luring benefit for most people, but when your needs or lifestyle take a shift, you might need a more flexible budget. There are options in full-time employment to earn more, like working extra hours or asking for a raise. However, in most cases, you don't get paid more for working more hours, and you may get an annual bonus or a raise eventually, but only if you hit your targets and the company performs well.

2.      Increased Work-Related Stress

Committing to working full-time for one employer can, in some regards, lead to an increase in work-related stress. When you spend so much time and energy providing for your employer, it is inevitable that you become emotionally invested in your work. As a result, stress levels will rise along with increased workloads, responsibilities, and pressure, eventually leading to burnout.

3.      Less Flexibility

Companies that offer full-time permanent employment opportunities usually have set structures, hierarchies and rules. This means that, compared to contractors or freelancers, you may not get to choose where and when you work, how you do your job or in which projects you apply your abilities and skills. This can limit your creativity and may affect your work performance.

4.      Difficulty Maintaining Work-Life Balance

Having a good work-life balance might be more challenging if you are a full-time employee. In most cases, you'll have to spend at least eight hours at work and – because most full-time positions are on-site – probably another couple of hours commuting. Hence, with so little free time left, finding the balance between a productive and effective working life and time away from the grind can be difficult.

5.      Getting Too Comfortable

The ingrained security of full-time employment can lead you to take your foot off the gas and get too comfortable in your routine. Indeed, working for the same organisation, repeating the same tasks and interacting with the same people every day may cause boredom and stagnation, which consequently can lead to a lack of drive or desire to progress, as well as to an uninspired career.


What is Freelancing?

"I am a freelancer" is a phrase that we hear increasingly often lately, as more and more employees are leaving their 9-to-5 jobs and shifting to freelancing. But why?

In simple terms, freelancers are independent workers who use their skills and experience to work with multiple clients and take on various projects without committing to one employer or company. This enables them to work as much as they want for the rates that they deem fair for their abilities. However, it also means that they are responsible for figuring out their own tax obligations and for finding their next jobs (or gigs), usually using a freelancing platform.

Freelancer_Pros & Cons

Freelancing in Tech

The high demand for IT professionals and the nature of their jobs make the tech sector extremely fruitful for freelancers. Indeed, companies today are hiring more freelancers and paying them lucrative wages as the demand for tech talent - especially in some sub-industries like security, cloud computing, and software development - is booming.


The Advantages of Being a Freelancer

1.      Remote Work

Freelancing enables people to work remotely, and the benefits of remote working are much more than just being able to work from the comfort of your own house and having control over your environment and working hours. Being able to do your job from everywhere can open up other countries, markets and opportunities to you. With the required skill set, freelancers from countries with a lower average income, for example, can make a much better income by working remotely for foreign clients.

2.      Flexible Working Hours and Volume of Work

One of the greatest perks of freelancing is that you have a better chance of creating a better work-life balance. Freelancers can choose which projects they want to accept and control the amount of time they spend working. Moreover, instead of having a fixed working schedule, as a freelancer, you can choose to work at the time you are the most productive or when your clients are most responsive to ensure good and timely communication. However, being the boss of your working schedule doesn't mean that you can work whenever you feel like it, as you might have to meet deadlines.

3.      Freedom in Choosing Clients

Freelancers have the unique advantage of choosing who they work with and how many clients they take on. This allows you to pick projects that you find personally rewarding and align yourself with employers that share your values, views and creative style. Or, simply, choose who pays you enough.

4.      Independence

Freelance jobs offer independence. It doesn't only free you from the cubicle and the 9-to-5 work life; freelancing also gives you the opportunity to work alone whenever you feel most comfortable doing your job. In addition, without having a strict company plan to stick to and managers over your head, you feel free to put more passion and creativity into your projects.

5.      Variety of Clients and Projects

Freelancing is a way to broaden your horizons, as it allows you to gain experience in different industries and career areas. As a freelancer, you get the opportunity to work with diverse types of clients, from small tech startups to well-established pharmaceutical companies, on various projects and topics. And this variety is what keeps things interesting by creating a working environment that is less redundant and boring.

What is Freelancing

The Disadvantages of Being a Freelancer

1.      Large Competition

Currently, there are approximately 1.1 billion freelancers worldwide – around 31.4% of the global workforce. This is roughly how big the competition in the freelance market is. Today, freelance platforms like UpWork and Fiverr are overflowing with thousands of professionals in many different fields. And if you are a new joiner, trying to get a reputable resume and a noticeable profile is not an easy task, especially without any reviews from previous clients.

2.      Sole Responsibility

Being a boss can be challenging, even if the only person you have to manage is yourself. As a freelancer, you're in charge of finding clients, managing your time and workload, and paying your taxes. Also, you will have to make all the hard decisions by yourself, track payments and promote your brand – all in all, run your freelancing career as a business, and not everyone is prepared or able to handle a responsibility like that on their own.

3.      Irregular Work

In freelancing, there's no guarantee of tomorrow's work or next month's income. Projects may remain unfinished, clients may end a contract early, and sometimes you may struggle to find your next gig. In other words, long-term security doesn't exist in this type of employment. For this reason, it pays to know what to do in between slow and busy periods to fulfil your financial goals, like taking the time to market yourself better and brush up on your skills.

4.      Work Isolation

Working alone is often considered a common downfall of being a freelancer, but for some, it is a blessing. Regardless of your perception, though, you will ultimately feel isolated if you only work alone and remotely. And even if you had the option to work on-site for a company, you would only be there temporarily, so making friends and establishing stronger bonds with people would still be challenging.

5.      No Paid Time Off

Of all the cons of freelancing, this probably hurts the most. Especially when planning your vacation budget, having an employer who provides you with 20-something days of paid leave might seem like a great idea. As a freelancer, you have to build vacation into your annual income, calculating if and when you can afford to take some days off.


What is Contract Employment?

Businesses around the world are moving to more flexible employment methods in order to cut costs. Technology is a driving force behind this change, and it's benefiting a particular type of worker – the contractor.

Essentially, contractors work as freelancers, but only with one constant client. They work on pre-defined working hours, projects and companies but do not enjoy any of the perks of full-time permanent employment, such as health and retirement benefits. So why would someone choose to work as a contractor? Well, because of flexibility, remote work and better pay!

Contractor_Pros & Cons

Contract Employment in Tech

It is most likely to come across contractors in the IT industry, and that's because this type of employment benefits both tech professionals and organisations: IT contractors have the opportunity to earn higher wages than a regular full-time tech employee, and employers can use their skills and expertise for as long as they need them without having to provide them benefits, unemployment insurance, or holiday leave.

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The Advantages of Being a Contractor

1.      Paycheck Outweighs Benefits

Contractors make nearly 50% more than full-time employees, as they have three significant advantages:

  • They typically charge more.
  • They pay less in taxes.
  • They can deduct their expenses.

Although some may argue that this percentage barely makes up for the lack of benefits, that's not true. Today, more and more contractors receive benefits, and, if not, they can always use all that extra cash for insurance, savings, retirement plans, time off, and financial security.

2.      Test the Waters Before Committing

As a contractor, you have the flexibility to move from one role to another quickly and easily. So, if you're not sure if there's a market for your skills, you can always dip a toe into a new industry without committing yourself to a full-time job. Moreover, if you're not convinced that a new company is offering the right employment opportunity for you, you can suggest first working for them as an independent contractor.

3.      More Upskilling Opportunities

Working on a 3- to 12-month contract is preferable for many professionals, as it allows them to gain valuable experience on various projects, sectors and working environments throughout their career. Indeed, working on contract projects, you're most likely to use different technologies, platforms, and processes, allowing you to learn and apply new skills and continuously add new experiences to your resume.

4.      Freedom to Work from Anywhere, Anytime

As long as you have a good internet connection and the discipline to work on a project, even when you just want to lay in your bed or explore the new city that you're visiting, you can work from anywhere you want. Unless you are hired for a specific hourly role within an office setting, you are free to set your own schedule and place of work as a contractor. So, if your lifelong dream is to travel the world and have the money to afford that, contracting is the right type of employment for you.

5.      Contract Employment Is on the Rise

The pandemic forced a shift in the way we work, and it is not changing any time soon. Employers have found a way to leverage diverse skills for as long as they need them, and workers have discovered alternative employment opportunities – more flexible and profitable for them. Today, the demand for contract workers is on the rise (especially for IT contractors), signifying the death of the 9 to 5 workday.

What is Contract Employment

The Disadvantages of Being a Contractor

1.      Handling your Own Taxes

As a contractor, you are in charge of handling your own taxes and accounting after every job you complete. This means that if you don't put money aside for your year-end tax bills, you may find yourself in big trouble. Luckily, are many affordable tools and accounting software available to help you keep track of your tax liabilities and savings balances, like ZipBooks and Wave.

2.      Lack of Benefits

In most cases, as a contractor, you don't have benefits like health insurance, paid sick leave and vacation time, maternity or disability leave. As we already covered, however, a larger paycheck outweighs the benefits – but it's still something worth mentioning.

3.      Lack of Support

In a full-time position, you will often be expected to attend training courses and seminars to keep up some continuing education. It is your employer's responsibility to guide you and make sure everyone is up-to-date on all software advancements and changes. However, if you are an independent contractor, you are on your own. There will be no one to guide you through the latest industry trends or to support you on your lifelong learning journey.

4.      Lack of Connection with Colleagues

As a contractor, you may feel disconnected from teammates and the company. Similarly, with freelancers, it's common for contractors to feel separated from the rest of the organisation. It can be hard to get to know co-workers if you're only planning to be with the company for a short time. While regular employees build friendships and networks of support, contract workers can be left feeling alone.

5.      Being Always on the Search

Contract workers must always be searching and preparing for their next position. But if you get overwhelmed by the job search process, this requirement can feel quite daunting and may lead you to choose roles that don't match your skills or long-term career goals. Luckily, working with a specialist recruitment company can help you identify better opportunities and assist you with the application and interview process.


Which Type of Employment Is Best for You?

Each type of employment has its advantages and disadvantages, but it's in human nature to think that the grass is always greener on the other side of the creek. So, when it comes to deciding what is best for you, the answer lies in what you value the most: Security or freedom? Big wages or stability? Work on-site or remotely?

Which Type of Employment Is Best for You

Kick Start Your Career with Templeton

Templeton & Partners has more than 26 years of experience providing contract tech jobs in 40 countries across the world, and our diverse, international team is on a mission to find the right one for you. Get in touch with us today!

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Topics: Careers Advice