Contract vs Full-Time Employment: Understanding the Key Differences

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DateMay 20, 2021

Contract workers have the option to work for multiple companies simultaneously. Due to the flexibility of their employment, they can work multiple jobs at once more easily than full-time employees. A contractor is a person who finishes a job for a predetermined amount of time. The term “contract” refers to the arrangement between a business and a contractor who works on a project-by-project basis rather than an offer of ongoing employment. One of the global industries with the fastest rate of growth is the life sciences sector.

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While both of these employment types indeed promise significant advantages, the fact of the matter is that they do differ quite a bit. That’s why some people find it rather challenging to choose between the two and identify the employment type that will serve them best. What’s more, even if they identify that the company lacks the necessary tools or equipment, full-time employees can rest assured that they will most likely provide them sooner rather than later. To many people, particularly those either planning or already having a family, this is one of the most vital advantages of being hired full-time. Thanks to this commodity, contractors can easily plan and organize time off or vacations and holidays by accepting more work prior to ensure that they’ll be able to handle them financially.

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More employers across an increasing number of industries are embracing the flexibility and potential savings of hiring contract labor over full-time labor. And job seekers are loving the flexibility and options to grow their careers. Companies opt for contract work for various reasons, particularly in the current job market, where candidates hold more influence. Though having a stable team of full-time employees is ideal, it may not always be feasible or cost-efficient.

They are not beholden to a full-time employer’s rules, work hours, or demands. Not everyone will want to commit to your organization over the long-term – but many will. Providing a contract-to-hire path to your favorite freelancers gives these contractors an added incentive to remain loyal. Simply follow the money – if you’re paying a person directly for their expertise and their work, they’re a contractor.

Contract vs. Full-Time Employment: Understanding the Key Differences

This post sets out to explain what a few of those differences are, in order to help both job seekers and employers determine which path to take. One of the biggest differences between independent contractors and full-time W2 employees is who pays for all the supplies. For the W2 employee, the business either directly pays for or reimburses the employee for all supplies needed to complete the job efficiently. Employers looking to hire a workforce need to know the differences in compensation, expectation and employer responsibility for hiring contract, part-time and full-time employees. Each of these types of workers has different tax implications, varied responsibilities and separate legal requirements on the part of the employer. Nevertheless, there are still a variety of options for contract work in many different industries.

By law, contractors can’t be required to perform their work in a specific place or time, allowing them to choose when and how they get their work done. If these rules are broken by the employer, e.g. by requiring a contractor to work in the office from 9-5, the contractor could sue for employee benefits. In addition to paying for their own benefits, contractors are responsible for managing and paying their own taxes, which are not handled by the employer. Specifically, contractors pay the full amount of a self-employment income tax and sometimes will pay at the end of the tax year in one lump sum, though they can also choose to make payments throughout the year. Employees pay an income tax out of every paycheck, and employers are responsible for a matching tax payment for every non-contract employee.

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So, while contractors are required to obtain all of these – out of their pocket – company employees will either have them at their disposal or will need to file a request to obtain them. This type of employment and job stability is something many people strive towards, as it enables them to plan and supports contract vs full time employment specific lifestyles. One of the most common mistakes contractors that are new in that line of business make is taking on more projects than they can realistically handle. Needless to say, this can result in delays and failure to meet projects, which will make you come off as rather unprofessional.

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