Contractor and full-time employee: What are the differences?

Many professionals consider the idea of becoming an independent contractor. The perks of being your own boss while potentially earning more speak for themselves. But what are the real differences between freelancing and full-time employment? Anyone who may be considering becoming a contractor should consider these factors before making the decision.

More responsibility

As an independent contractor you have a greater responsibility in terms of your work. You will no longer be representing your company, you will be representing yourself. As your own boss you have to ensure that your standards are exceptionally high.

Where as a full-time employee will generally work for the foreseeable future on their current contract – yours will end and your next job may be determined on how well you have performed for your last client.


A particularly big difference between full-time employees and contractors is the salary. Contractors will generally earn much more as freelancers than they will as an employee.

The main reason for this is due to tax regulations. Contractors actually get more of their salary than full time employees do. Contractors can also claim expenses on their work related items such as laptops etc. This also works for travel and accommodation expenses.

You can work out what you would potentially earn as a contractor by using a contractor salary calculator.


As a contractor, nobody will pay you if you take a holiday or if you are ill. The client you work for only pays for the work you do for them. This is not necessarily a bad thing however as a contractor enjoys certain tax advantages (as discussed earlier) so in the event you have to take a day off your extra earnings will cover you.

Generally your hours will be much more flexible as a contractor. As long as the work you are being paid to do is finished on time of course!

You will be responsible for arranging your own pension arrangements. A full time employee will have the option to take on their companies pension scheme but as a freelancer you will have to set your own up. This gives you more control over how you save and what you contribute to your pension.

More choice for contractors

Contractors have the ability to pick and choose where and when they work. Working for yourself means you can select the best job available to you at the time. It also means if you want an extended break, you can take one with very little hassle.

The nature of contracting also means that there is constant change. You will be working in multiple different sites or offices throughout the year. This generally means a new challenge is always around the corner for a contractor.

Paperwork and taxes

Contractors run their own business and with any business there are forms to fill out and regulations to follow. It is down to you to make sure extra time is dedicated to administration tasks and paperwork.

You are also responsible for your own taxes, however services such as umbrella companies can help you with this. An employee has all their tax deductions and National Insurance Contributions calculated for them. As the head of your business you will now have to work out your own. This may even mean hiring a licensed accountant to make sure they are done correctly.

For those contractors who do not like the idea of excess paperwork and complicated tax forms there is also the option of an umbrella company who will take care of it for you.