Pros and cons of being an independent contractor:
An Independent contractor/subcontractor is also known as a self-employed person or you can also state it as a freelancer. The industry of freelancing/independent contractors is emerging these days as they provide on-demand expertise. Independent talent can be a great way to fill business needs. Independently employed specialists are generally recruited by an organization to complete specific assistance. They work for themselves in an assortment of occupations or exchanges as opposed to working for a specific boss. Models can incorporate legal advisors, financial backers, protection specialists, sales reps, or doctors,the best part of becoming an independent contractor is you can keep your main job while turning a side hustle into a big brand business.
How does it work?
The independently employed specialist may qualify as an Independent contractor or they may be a vendor, which means they don't work as per an agreement but instead sells labor and products. Being an independent contractor you're free from boundaries that are set by the company such as specific work hours or limited wages that employees get by performing assigned tasks. They can work for more than one company or can work on different projects at the same time and can set their schedules accordingly. That enables them to earn more than a normal employee of any company depending on how many projects they are doing or how many clients they are working with. Self-employed people bring in more cash than normal employees do. It's that straightforward. That is because self-employed people charge more and can bring home significantly more of their compensation than normal employees can.
Independent contractors enjoy three significant benefits:
1. They normally charge more, they cover less in duties, and they can deduct their costs.
2. Their billing rates are standard for their services, variation of rate occurs depending on which service they are providing.
3. They provide no other services than those which are outlined in the contract.
As independent contractors are their business entity, it means the client can not determine their work hours, it's completely the choice of the contractor when to work. Usually, the contractor uses their equipment, material, and tools, If any project required any equipment that is only available on-site, it should be included in the contract. Independent contractors will get full protocol, managers and employees have to make sure that the contractor is not treated as an ordinary company employee, because the independent contractor is a sole business. It means business- the business relationships should be maintained properly. Independent contractors ought to know about their expense liabilities.
Independent contractor taxes
They pay what's known as self-employed (SE) tax, which incorporates both the business and representative parts of Social Security and Medicare. Self-employed entities are answerable for the conveyance of an item or administration, by a predefined cutoff time, regardless of how long is spent functioning. As being self-employed, you need to foster a recording framework to follow all receipts for hardware and supplies, and administrations need to manage your job. On the off chance that your work requires voyaging, monitor your mileage and vehicle costs, just as lodging and supper costs.
Being an independent contractor gives you more noteworthy autonomy, it can give you more unsurprising control of your work, and for some individuals, more prominent professional stability than customary everyday work. In any case, you are answerable for your expenses, agreements, advantages, and get-aways.
Pros and Cons of being an independent contractor:
Here we will look at the pros and cons of being an independent contractor let's start with the pros
Pros of being an independent contractor:
Let's take a wider look at the benefits of working as an independent contractor and briefly discuss the reason why people chose to be an independent contractors.
Be your boss!
To all of those who love to be the leader of the group and imagine themselves as alphas when they stand in front of the mirror, an independent contractor is the best role for them. You have the sole responsibility of building the reputation of your business and deciding who to work with.
Work whenever, wherever!
While working as an independent contractor, you enjoy the freedom of setting your tules, hours, place of work and pay. You can make your work schedule. Let's say you are more comfortable waking up at 6 am and getting to work, you can do so! At the same time, if you’re a late riser and like working while watching the sunset, you have the freedom to do that. You don’t have to get up every morning and get to work like some robot, rather you can enjoy your time as a free man!
There’s a lot of tax advantage. You can deduct a lot of expenses. For example your gas mileage. If you are an employee, you cannot deduct the price of gas on your way to work. But it is possible when you’re an independent contractor. It is very beneficial but at the same time, you should consult with a tax professional to avoid getting audited or termed as someone who misreported. This factor is very beneficial for independent contractors in the US as a lot of incentives are given. Whereas, if you work for someone else, the tax just comes out of your W2 paycheck and there is nothing that you can do about it.
Happier work-life guaranteed
Many people in this world are financially driven but some people want to reach their goals, they want to do what makes them happy. Some people might want to be an artist, digital creators, or anything else. Regardless of what that business is, being self-employed allows you to do the work your way. You don’t have to be someone you’re not. You don’t have to follow everything that your boss says. All you gotta do is listen to what you want and there is real-life evidence of those people who chose their path and got successful in it rather than walking on others’ lead.
independence to work
Do you like working in your personal space with no one to hop into your affairs? Many people enjoy working alone. They like the idea of having the independence to work where they can grow at their own pace. They typically don’t like being in a team or maybe they’re not that good at coordinating work. For them, being an independent contractor is the best option
Grow at your own pace!
Another pro of being an independent contractor is that you can always come up with new plans and put them to work without any hustle. In contrast, if you're an employee you would have to go through a lot of paperwork if you want to make even slight changes to the work form. For the most primitive of things, you have to go through a lot of work as an employee.
Setting your salary
Work more, make more. When you work for yourself, the sky's the limit. This means that you’re not limited by a third party. There’s no manager that you have to impress so that you demand an increase in your payroll. All you gotta do is work faster and efficiently and this would directly lead to more income. Unlike an employee, you don't have to impress your boss all the time and be under him to ask for a raise. Not only that, because your work is not limited to a single company, a few highs and lows don’t impact your work that much. There's always a difference between a supervisor and a client, no?
You can also choose your team depending on the work that you do. It can be a small bunch of people who work with you only when you need it or a group of people that always assist you with bigger projects. And the best part is, you can choose their payroll yourself.
According to some sources, independent contractors earn around 35 percent more than a typical employee. That’s because when companies hire an independent contractor, they don't have to pay for social security tax and health insurance, etc. This in turn allows the contractor to demand an increase in their pay.
Every coin has 2 sides. As we have already discussed the good side, let's talk about the cons of being an independent contractor.
You miss a lot of things
You don’t get the privileges that a typical employee gets. That means you can’t apply for health and liability insurance at a lower cost. You might have to fund your retirement accounts and this can be a big headache and an out-of-pocket expense. According to onebiteblog.com, ‘The average cost of employee benefits such as healthcare, dental care, life insurance, retirement savings contributions, disability insurance, etc. equates to roughly $11.00 an hour. This is everything that an independent contractor has to sacrifice.
When you’re working with a company as an independent contractor you have to take care of the tools yourself. You have to arrange all of it yourself. And this factor directly affects your pocket. And if you try to demand the tool from the company you can be held accountable for posing as an employee.
Many of the people around the world who chose to be an independent contractors over an employee had socializing issues. They felt more comfortable working at home alone with no one to interfere with their affairs. But at the same time, this can lead to uncompetitive behavior. Many would agree that working with a team yields greater benefits. It increases the efficiency of work and the load is divided justifiably. You have to manage your accounts and your expenses yourself because no one else would take care of it. And if you try to hire an accountant that would heavily affect your pocket.
Risk of getting demotivated
Since you're working your way and without any supervision, many people tend to slack off. This means that it gets hard to motivate themselves to get up and work when they are in charge of themselves. While an employee has tasks to get done under his boss, he knows that if he didn't get his job done at the right time he might risk his job. But being an independent contractor, you have to keep pushing yourself and try to set a routine.
Being an independent contractor, you have to have a sniper-like focus. Without it, many people fail to get the success that a more focused contractor achieves.
No job security
Okay, you wanted to be your boss, you wanted to do things your way. You achieved it. But do you know that a 1099 work doesn’t have job security?
If you’re working on a short-term project, you have to keep looking for the next project too so you don’t see days of looking for work while doing nothing. Remember when we said the more you work, the more you earn. This time, when you don’t work, you don't earn. And that no working phase can also include the times when you’re sick. Imagine you're working day and night for this project and putting your all efforts into it without even being sure that the work you’re doing would have the same demand tomorrow. This leads to our next con:
The life of a basic employee is, well, basic. The pay is set. The work is set. An employee knows what his earnings would be next month or maybe next year. But an independent contractor cannot forecast it. He experiences months of high earnings and great profits but there also come the months where his expenses are hard to get paid. This makes saving and planning a budget a little difficult.
Earlier in the pros section, we talked about how a 1099 worker gets benefits from the tax laws. But there is one tax-related point that they should be concerned about. A W2 (employee) pays 7.65% of their income in taxes. But an independent contractor has to pay double it. 7.65% of his income has to go to basic taxes just like an employee. In addition to this, he also has to pay another 7.65% of his earnings because he’s termed self-employed according to the law.
You have to take the risks to go up
Being an independent contractor means taking risks. Even when you're starting your new business, your early days of being an independent contractor are filled with risks. We already talked about the lack of job security and it is pretty much the type of risk we are talking about here. It seems easy when you're planning to start it but as soon as you step your foot into the contractor ship you get to taste the reality.
You have to fall to get up
You should always be ready to face failures. Every risk that you has two conclusions, success and failure. If your luck chooses the former, then good for you. But there's also a chance that you might face failure. That failure might not be huge or small. It all depends on your levels of risk tolerance and how you handle the situation.
Extra skills required
You need to have many skills to be self-employed. You don't necessarily have to be the best at everything but when you're self-employed or have a business, you have to do a little bit of accounting, and marketing especially when you're starting. You need to have the necessary skills of a sales guy too. Your communication skills should be top-notch. So this makes up for too much for most people thus counting as a disadvantage of being an independent contractor.
In conclusion, after reading these pros and cons of being an independent contractor, you would be able to understand that it is not everyone’s piece of cake. a true definition of investing in yourself It is suited to only those people who meet the requirements of it and who are ready to tackle the upcoming hardships. But those people who are more scheduled, keen to work at set times, and believe that working as a team yields greater results should not choose to be an independent contractors.
But whatever the reasons, whatever the person does, whether he’s an independent contractor or an employee, everything ultimately depends on the hard work, the consistency, the passion, and being true to your work. All these attributes lead to your success in whatever business you’re doing.