Independent Contractor vs. Employee: How to Decide Which One You Are

Do you like danger? OK, OK. Neither full-time nor contract-based IT work is dangerous, at least not usually, but the question is relevant if you’re trying to figure out what work environment is most suitable for you.

If you have a yen for the unknown or are an adventurer at heart, you might be better suited for the independent IT contractor lifestyle. You’ll have more freedom of movement, more choice, more responsibility for all the different aspects of your work environment and more risk. An independent contractor must wear many hats and effectively juggle many details, lest project pieces fall through the cracks or IT assignments not be completed on time and delivered per client specifications.

As an independent contractor, you’ll have to pay for your own insurance and benefits, market your own services and count your own books, though it might be advisable to call in some outside help for that last one. You’ll also have to scout out your own jobs and clients.

Unless you have a directly client-facing position, as an IT employee, you probably won’t have to placate touchy customers or decipher the technical dos and don’ts of their often changeable needs. As an independent, however, client woes become your woes. In addition to soliciting your own customers, you’ll have to manage all aspects of the client experience, from that initial meeting through to product delivery, customer service and follow-up. And, as a contractor working solo, your backup resources will be minimal.

Resources bring another point to mind. As an independent, you can command higher fees than your full-time employee counterparts, but you have more expenses, too. You’ll have to pay for all of the things you used for free as an employee. They include: printers, printer ink, phone service, fax machines, Internet access, paper, pens, staples and lights. There are tax write-offs and credits to offset these business necessities, but you’ll have to pay for your own accountant to find out what they are.

Employees have the security of knowing where they will be working day to day, and usually employees have a pretty good idea what they’ll be working on. They also have to take some orders and follow the company rules regarding lunch hours, start times and other protocol. On the other hand, their health care is usually cheaper and tax deductions occur automatically.

In order to decide whether you’re best suited to be an independent contractor or an employee, consider what the most important work factor is to you: security or control?

As an employee, you may only get a 3 percent raise once a year. As an independent, your earning potentially is virtually unlimited. In the event something goes wrong, and a customer becomes angry enough to sue, do you want the sole responsibility for handling the situation, or would you prefer to let the company legal department do its thing?

What’s more important to you, freedom or freedom from liability? As an independent, you make your own hours, but you have to be extremely motivated, and there is likely no sympathetic ear down the hall to relieve some of the weight of that responsibility from your shoulders. Where are you most comfortable, competing with peers for plum clients and projects or reporting in to the 9 to 5 and chatting with co-workers over the water cooler?

What means more to you? Knowing where your next paycheck is coming from and having the company match your 401(k) contributions? Or, do you value the thrill of the client chase and the challenge of taking on new, exciting work on your own terms? It’s up to you.

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Kellye Whitney

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