Transferring the workplace from the office to people's homes is the reality nowadays. It provides benefits for both parties: the employers and the employees. These are increased flexibility, improved work efficiency, less traveling time, less stress, and distractions for the workers.
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When it comes to the individual itself, though, it is essential to consider several factors when deciding the type of job you will be striving for. More particularly the choice is between a full freelancing job and a job on a Labor contract.
What is the difference between an Individual contract and a Labor contract?
If you decided to work from home and you are considering an opportunity from an employer who offers you a Labor contract, this can provide some limitations to your time, routines, and salary.
On the other hand, Individual contracts are more flexible in nature in terms of schedules, holidays, and changing jobs/projects. Let's have a look at this table:
Labor Contract vs. Individual Contract
| Features | Labor contract | Individual contract |
|---|---|---|
| Tax and Insurance | The employer pays for taxes and insurance | The employee is responsible for tax-related fees |
| Working Time | Fixed schedule | Flexible working hours |
| Quitting the job | Requires 1-month notice* | Can quit any time |
| Time off and vacations | Fixed Paid leaves and sick leaves | Unpaid leaves anytime |
| Salary | Fixed payroll | Varies per project and skills |
| Security | A stable job with less risk | Less secure job based on results |
| Variety | Daily routine with the same tasks | A variety of projects and clients |
*Depending on your labor contract this period can be over a month.
Tax and Insurance
When working on a Labor contract, the payroll accountants of your company is taking care of all documentation related to your salary. They prepare the paycheck for you, including taxes you owe/your employer owes to the government, any insurance fees that are deducted from your payment, amounts added to retirement accounts, and depending on your country - a few other taxes. What needs to be deducted is decided by national laws, and the Labor contract that you signed represents your agreement with the company's policies.
On the other hand, an individual contractor is responsible for doing this on his/her own. If the projects you work on are relatively small, you can be your own accountant and prepare/pay those taxes yourself. In case you are involved in bigger projects and you don't have the time or will to deal with documentation yourself, hiring someone (a professional accountant) is always an option. An additional bonus here is that you can opt-in to pay only taxes and fees that are mandatory and leave the rest.
Working Time
An employee on a Labor contract can expect a fixed schedule (9 am to 5 pm, 4 pm - 12 am) depending on the time zone. A work-from-home opportunity on a fixed schedule doesn't differ much from an office job in terms of flexibility. On a full-time job, you will need to dedicate a certain amount of hours (usually 35 - 40 h per week), and complete them in the specified periods of time - 7 hours/5 days a week or 8 hours/5 days a week (excluding the weekends).
An Individual contract is more flexible. You can work full-time or part-time depending on your availability. You can commit to a different amount of work each week/month, and you can complete the job anytime as long as you are within the period before the deadline. For example, if you have a small project/task that you can complete for 20 hours, and you have two weeks time to finish it, you can choose to work 4 hours for 5 days, on any day during these two weeks. This allows more freedom in terms of deciding on your spare time, and breaks and choosing to work when you are most productive.
Quitting the Job
Signing a contract with a company and becoming their employee comes together with loyalty. You agree to stay with them for the term of the contract (it can be from 6 months to 5 years), and during this time you will not sign Labor contracts with other companies. In case you change your mind and you'd like to quit for any reason (issues in the workplace, finding a better opportunity) you will have to file an advanced notice which is usually 1 month. During this period you give your employer the chance to find a replacement for you. Your contract might also state that you owe compensation if you quit before the term expires if you made a deal with your company to support you for your education.
Individual contractors can start and leave projects anytime as long as they didn't commit to a certain deadline, and leave without causing any unfinished tasks to be left out. Once you finish your task/project you can choose not to accept any further opportunities. The same is valid if you decide to join again after leaving. You are allowed to do this anytime, no one is holding you responsible for your choice. This is psychologically much more liberating and can lead to boosted productivity.
Image by Gerd Altmann from Pixabay
Time off and Vacations
Regarding the time you will not work and have a break, both Labor and Individual contracts have their advantages. In a Labor contract, you will have a fixed paid leave and a sick leave. This means that you will have a certain amount of days that you will not work during the year (usually 20 - 25 days) and you can plan them ahead of the year or at the beginning of the year considering the company's needs for availability. In the scenario that you get sick, you are paid as well for the amount and time provided by the national laws of the country you reside.
On the other side of this story is the Individual contract which does not pay for your leaves. You can have a holiday or a vacation any time, but this time is not paid as you are not working. Giving an advance notice for having a break is recommended, but it is not necessary to provide it at the beginning of the year. Usually, 1 - 2 weeks ahead is enough. Payment is per project/per task/per hour. If you are sick, you can stop working until you are fully recovered, but again, payment is not offered.
Salary
Here comes one of the most important factors. The employees of a company have an agreement about a specific salary, which can be raised in time through the years, but in general, it doesn't provide much flexibility. Bonuses can be offered, and added to it, additional amounts due to inflation, however, the general rule is that the wage is limited.
Working as a freelancer would provide almost unlimited opportunities. As you can choose among different companies, customers, projects, and tasks with variable payments. Bonuses are also available for certain projects, but as you grow in freelancing you can take on work for a higher salary. It all comes down to the skills and professionalism you can offer in return.
Security
Having a contract that is protected by all labor laws provides a sense of stability and security. If the employer is not happy with your work, he/she has to follow procedures and document all of this information to take steps against you. You cannot be fired for no good reason, for example. You have protection for many real-life situations like pregnancy, maternity, and work accidents - these are all covered by labor laws.
An independent contractor is a person, business, or corporation that provides goods or services under a written contract or a verbal agreement.
It is not strictly and explicitly certain that you can stay on a project if you don't perform well. If you don't bring good results and you don't contribute to the success of the project, the company/client can every right to find a better replacement. You will not get financial support for any personal/health-related issues you might have unless you work with a company that provides it as a bonus. Your health can be improved if you participate in a well-being program provided by your company.
Variety
The tasks and daily routine you will encounter will be very similar and repetitive. You can master a certain job and then your professional growth is very limited. If you are good enough and there is an available spot, you can be promoted higher in the hierarchy for a better salary and increased responsibility. This is a combination of conditions that not every employee can have the luck to meet.
Since you will be working on many projects and tasks, the variety for a freelancer is large. It comes down to the type of person you are. If you embrace change and novelty, freelancing is definitely your way to go. On the contrary - if you find it difficult to adapt to new situations and solve new issues as they arise, you might feel challenged and even overwhelmed by the job.
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