Advantages of Working as an Independent Contractor
Benefits of Working as an Independent Contractor
Contractors are their boss
People who want to run their own businesses will love working as a contractor. Contractors have greater freedom to manage their business and choose how they want to do the work without a supervisor or boss. Contractors are able to work at home or while on the road. You can conduct business on the beach with a laptop instead of in a cubicle.
Independence can be a drawback. People who like to work in large groups or get feedback from supervisors may not enjoy contracting. Independent contracting is rewarding for self-starters who are disciplined.
Enjoy More Time Off
In general, employees are bound by their employment contract to work for a particular company and follow its policies. This includes attendance policies that dictate when and where the employee is required to be present and how to request permission to take a break. Other companies may have a limit on the amount of time that can be taken off per year. Some companies have a policy of “use it or lose it”, which means that unused vacation time is not paid at the end of each fiscal year.
Employees are not guaranteed to be able to take time off. In certain countries, like the United States, there is no legally mandated time off that employers are required to provide their employees. In the United States, employees may not have paid leave for annual leave, maternity, sick, or bereavement leaves, as well as other types of leave provided by countries around the globe. Contractors are not bound by any rules that limit how long they can stop working or at what time.
Improved Work-Life Balance
As an employee, you have to get up early in the morning and drive a long distance to your office. Independent contractors who work from home using their computers do not have to worry about the commute, which gives them more time with their families. A parent can supervise their children and spend the entire day with them by working at home. Contractors can plan their schedules around weddings and other life events, such as unexpected emergencies or weddings.
The contract can be temporary or for a limited time. Contractors can choose not to renew their contract or to take a break between contracts. Contractors such as handyman, carpenters, landscapers can still take time off and vacations without fear of losing their livelihood, even though this time is unpaid. This can help to achieve a better work-life balance.
Obtaining general liability insurance as a consultant is a prudent approach to safeguarding yourself against unforeseen risks.
Increased Financial Control
The wages of employees are usually lower than the rates that contractors can charge for similar services. Payments and deductions from employee paychecks cause this. The employee also has no control over how much they earn each year and is limited to what the employer decides after performance reviews.
Contractors can raise their rates without having to undergo an annual performance review. This is especially useful in high inflation periods. Employees have limited control over their income. The employer does not increase the wage after negotiating. Contractors are in full control of the prices they charge.
Increased Income Potential
There are fewer or no deductions made from their income. Contractors’ payments are not deducted for benefits, which results in higher invoice payments.
Independent contractors also enjoy certain tax advantages. Contractors are exempt from income tax and contributions to tax-funded programs like unemployment insurance and workers’ compensation. Employers may provide health insurance to their employees, but they are responsible for paying a portion of their salary. Some employees’ pay goes towards insurance, like unemployment insurance. Contractors do not have any obligation to pay these payments.
Independent contractors are not free of risks or drawbacks. It is possible that there will be no job security or a steady income as with a regular employee. If their rates increase too much, it may result in a decrease in active clients. They also cannot receive bonuses or promotions. There is no unemployment insurance and no compensation for a lack of work.
In addition, health insurance, dental coverage, vision coverage, and other insurance will need to be purchased out-of-pocket, which is more expensive than insurance plans provided by an employer. Independent contractors are not required to pay income taxes, so they have to do it themselves and make quarterly estimates.