Join Tom Geller for an in-depth discussion in this video How freelancing and employment differ, part of Freelancing Fundamentals.
If you've always had salaried positions in the past, you might wonder how freelancing is different. I'd like to look at that from three angles; legal, practical, and personal. I'll start with legal definitions, but keep in mind that I'm not a lawyer, and new information might appear after I record this video. So, don't depend on what I say here if a serious legal question arises. The I.R.S., that's the U.S. government's tax authority, says that a freelancer is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done or how it will be done.
In other words, the client could say, design my website and deliver the results as a Layered Photoshop File, and you'd still be considered a freelancer. But if the client says, "You must use Dreamweaver and do the work in our office between 9 AM and noon," then the I.R.S. is likely to consider you an employee rather than an independent contractor which would lead to differences in such things as tax withholding, benefits and so on. Such distinctions vary from country to country. In the U.S., the I.R.S. released some specifics that set forth 20 factors to separate employees from independent contractors.
I won't go into them, but if you're interested, do a search online for the 20-factor test. So that's the legal view. But on a day-to-day level, you'll be more affected by the practical differences. The big one is, if something needs doing, you're the one to do it, and there's nobody else to blame if it doesn't get done. You're now in charge of among other things, marketing, sales, accounting, project management, IT, and legal matters. You also have to keep yourself busy, and motivated.
And if you expand by hiring other people, you have to become your own human resources department. If you think that's all daunting, well, you're right. But don't worry, I go into all these aspects during the course. Finally, we come to the personal differences between freelancing and employment. That is, how your mentality and lifestyle will change. For example, you're likely to find your work life creeping into your personal life and vice-versa. So it becomes much harder to judge whether you're being productive.
And that can lead to some unexpected anxieties. It's a big subject. So rather than gloss over it here, we'll go into more detail later. In short, there's a lot to think about as you transition to freelancing. But don't worry, it's something you can do successfully as long as you prepare, plan, and of course, take action.
A bonus chapter covers common questions freelancers have when entering the field.
- What is freelancing?
- Defining your career goals
- Funding your startup
- Getting licenses, permits, and insurance
- Setting prices
- Finding work through agencies
- Getting referrals
- Working with time and project management tools
- Increasing your rates