Working from home has become a hot topic recently and a lot has been written about the pros and cons. However, one important area that is perhaps lacking in information is the subject of being home based as an independent contractor.
How do you find out if this job category is the right fit for you? Below you’ll find the ins and outs.
What is an Independent Contractor?
It’s not always easy to define what an independent contractor is so perhaps a good way to do it is to compare it to an employee and a freelancer.
Contractor vs. Employee: Both a contractor and an employee can work for a company, however there are some areas where this work is done differently. This distinction is sometimes very blurry and depends on many factors.
According to the IRS “A worker is an employee when the business has the right to direct and control the work performed by the worker, even if that right is not exercised.” Therefore the extent to which an employer controls how and when a worker does the tasks that are expected from him or her, can make the difference between an employee or a contractor.
Another area where the two diverge is the way they get paid. An employee is on the payroll and receives a regular salary, benefits and other perks associated with a permanent employment.
Their taxes are paid by their employer.
An independent contractor on the other hand is not on the payroll, they have to pay their own taxes and are not eligible for the same perks and benefits as a regular employee.
So what are the benefits and drawbacks of being an independent contractor working from home?
- On the plus side you have quite a lot of freedom and flexibility to set your own hours, there’s no cap on what you can earn based on your skills and you don’t have the boss looking over your shoulder all the time and you don’t get drawn into unnecessary office place politics which take away precious energy and time from you.
- On the downside though, you don’t have the job security of permanent employees and need to be always planning your next gig. You need to take care of your own taxes and in most cases provide your own equipment. When you work from home as an independent contractor you also don’t get much of a chance to develop working relationships and you can start missing the social side of working.
Contractor vs. Freelancer: One of the main differences is that some companies might ask you to sign a non-compete agreement when you work as an independent contractor.
It’s important to have that non-compete reviewed by an employment attorney.
This means that you will not be able to provide the same or similar service to other companies in the same industry.
As a freelancer you have more control usually, and most freelancers do similar work for a number of companies in the same industry.
What’s Best for You?
When starting out as a home-based worker, it could be hard to decide which option is best for you.
It all depends on how much you prefer freedom and flexibility versus structure and security.
If working from home is what you want to do, then there are quite a few different ways that you can set it up, explore the pros and cons we’ve set above, take a close look at what your preferences are and you will be on your way to make a decision soon enough