Contract vs Full-Time Employees: How to Make the Right Decision


Each of these types of workers has different tax implications, varied responsibilities and separate legal requirements on the part of the employer. While independent contractors and freelancers both work on projects and for different organizations and not for a single employer, there are a few differences between these two types of employment. Regardless of which option you choose, it’s important to remember that both contract jobs and full-time employment can offer valuable opportunities for professional growth and development.

contract employee vs full time

Use our employment calculator to get an estimate about your overall costs for employees in different countries. One important thing to bear in mind is the employee misclassification issue. We’ve covered the topic in detail in this article so you can read more about it and possibly run the test to determine if your employer may have misclassified you as a contractor. Note that full-time employees can be both salaried and paid by the number of hours they spend working for the employer.

Contract vs. Full Time: Everything You Need to Know

Contract workers work on a short-term basis with one or more companies at a given time to perform a specific task at a specific rate of pay. This rate is generally higher than industry rates for full-time employees. As contract workers aren’t a part of an organization’s staff, an employer doesn’t cover their taxes, provide benefits, or invest in marketing them. They give up job security and full-time benefits for greater flexibility in managing their schedule and pace, higher paychecks, and a chance to work with multiple companies through their careers.

What one tech professional might view as a disadvantage, another might see as a benefit. The good news is that, whether you choose contract or full-time employment, there are plenty of opportunities in the IT industry waiting for you. Unlike other professions, contract work in the technology industry is extremely prevalent. Yet for those who prefer more stability or predictability from their job, full-time employment might be a better option. While there’s no right or wrong answer when it comes to contract versus full-time employment, there are pros and cons to both.

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For instance, a year-long gig with a high-growth startup can tremendously accelerate your career and provide you with equivalent experience working at a larger enterprise. If your career choices are not determined by the stability and predictability of a job prospect, contract work could be an ideal choice for you. Therefore, before accepting your next IT role, you must explore the advantages and disadvantages of full-time employment vs. contract employment to extract full potential out of your IT career. If you have enough employees for a group health insurance plan and want to offer the best healthcare coverage to your employees and contractors, you should take your time and shop around. On the other hand, you may enjoy a few benefits if you offer your contract workers health insurance. Contract workers are becoming an increasingly attractive option for businesses.

Contract vs. Full-time Employment Comparison

Since you’re working for a single company, you may not have the opportunity to work on a wide range of projects or gain experience in different industries. However, full-time work can give you more financial security and stability. So, freelancing isn’t necessarily better than full-time work, but this will depend on what you value more. If you value flexibility and freedom, freelancing will be better for you. Needless to say, while both of these options do offer some unique benefits, deciding between the two will greatly depend on various factors. So, to make the best decision, you will need to determine your financial needs, think about the career and lifestyle path you wish to take, and carefully assess the pros and cons of both of these options.

Contract vs. Full-Time Employees: How to Make the Right Decision

Analyze your team’s work hours (and how frequently you hire contractors) with Toggl’s powerful (and free) software. You can typically expect to pay more upfront; however, keep in mind that contract workers are fully responsible for their own expenses, including all taxes. This means you have no obligation for federal, state or local taxes, Social Security or Medicare benefits, workers’ compensation insurance or unemployment taxes. Because, in reality, the hourly or flat-fee rate that you pay for an independent contractor will most likely be higher than you’d pay an employee to perform the same services. However, that’s mostly due to the additional costs you’d normally incur with an employee that aren’t required when you hire an independent contractor. Another factor contributing to the higher rates of contract workers is that competitors of a company may be willing to offer higher wages and greater stability with respect to work.