One might think that there is not much difference between a freelancer and an employee because at the end of the day, both complete the tasks assigned to them and get paid for the work they do. However, there are some major differences if we look closely.
Full-Time Employee or Freelancer?
This happens to be a huge decision in outsourcing. Should you get a full-time employee or a freelancer? Now, before you can make this decision, you will have to know the difference between them first.
The IRS states that you have to consider three traits when it comes down to it: the type of relationship, the behavioral control and the financial control that you have. Basically, if you can still direct or control what has to be done and how it is done, then you are considered to have hired a full-time employee. However, if you can only control or direct the results of the work, but not the methods and means of getting the results, then you are considered to have hired a freelancer.
Presently, there is no single legal test to determine if you are an employee or a worker, but you are likely to be an Employee (whether on a Permanent (open-ended) contract or on a Fixed-Term contract) if -
Your Employer provides the work, any tools and equipment for it, and they decide how and when you do the work. (Know as the What, Where, When and How Tests)
You will usually have a written contract (although a verbal contract will count)
You are expected to do the work yourself that you are employed to do, and may be moved to a different tasks
You are paid a regular amount according to the hours you work (through the Pay as You Earn system – so Tax and National Insurance is deducted), and you have to work a set amount of hours. You may get extra pay for overtime and bonuses.
The legal definitions of these (from case law, not from statute) are personal service, mutuality of obligation and control.
Freelancers watch over their own taxes, health care advantages, and time off. This means you do not have to keep way of how much they made last year and you don’t pay them for sick days etc. Paying employee advantages can cost businesses thousands of dollars every year. Freelancing is a bloodthirsty industry. You can select from thousands of extremely expert workers, and pay them a portion of what you would pay an employee. You can hire a freelancer for almost any feature of your business. Effective assistants, website developers, database management and telemarketing are but a few of the things you can appoint for. Many freelancers concentrate in certain areas. You can hire a specialist in web design, or a specialized database manager. By contrast, many employees must experiment in a little bit of everything. This does not guarantee excellence. If you were to hire an employee that is qualified, you would likely have to pay them a much higher pay.