Being a Freelancer vs. an Employee

A growing number of Americans are working for companies that employ them on a freelance or independent contractor basis. According to one 2023 study, over a third (38%) of respondents worked as a freelancer in the past year.

Sites like Upwork empower gig workers to write copy, design websites and more. Airbnb enables people to rent out their home as an additional income stream. And Uber and Lyft empower anyone with a car to turn their vehicle into a metered cab. 

With the exploding gig economy (aka the freelance economy) comes a decision: to freelance or not to freelance. To many, it might sound attractive. But before shrugging off salaried employment altogether, it’s time for a reality check.

Key Takeaways

• Today’s workers can undertake freelance gigs for a wide range of industries, from just about anywhere on earth.
• However, freelancers may lack access to many benefits that full-time employees have, such as health insurance and 401(k) matching.
• Though freelancers may have more flexibility in their work life, they also may have less security.
• Freelancing can also be lonely.

Full-Time Benefits

There’s much more to freelancing than flexible hours and being your own boss. One of the biggest pluses of full-time employment is employer-provided benefits, such as health insurance, 401(k) plans, sick days and paid vacation time. A staff job often comes with all of these perks, while freelancers must fend for themselves on all counts.

You’ll also have to manage your taxes yourself, including the self-employment tax . And if you’d like to start saving for retirement, or for a major purchase like a home, you’ll have to figure out how to on your own.

Flexibility vs. Security

For many, the financial security of having full-time employment is pretty much mandatory. Freelancing offers no such security. It’s also not necessarily something you can rely on for regular income. For instance, Airbnb income is dependent upon bookings, and revenue from Etsy is dependent upon making sales. If you don’t sell anything, you don’t make anything. Gigging can be a risky business.

Per-Gig Pay vs. Paycheck

One of the major advantages to full-time employment is knowing that you have a regular paycheck coming in without fail, every pay cycle—which can be crucial for budgeting and saving. This isn’t the case in the world of freelancing. As a freelancer, you’re paid as the gigs are completed or products are sold, however frequently (or infrequently) that is.

Important

One of the biggest challenge freelancers face is ensuring there are enough jobs/gigs lined up to generate the cash flow to survive.

Special Considerations

How old you are bears considerable influence over which direction you might take. For instance, if you’re fresh out of college, chances are you don’t have the financial safety net to risk relying on gigs, nor enough on-the-job expertise to embark on a freelance career. If that’s the case, you might be better off exploring gigs and freelance opportunities on the side, in addition to a day job. Becoming a freelancer is like starting a business, so you need to be up for the responsibility that comes with it.

If, on the other hand, you’ve been in the working world for several years; acquired solid skills; identified a services niche; and established contacts with potential clients, then you could have the foundation to establish a solid gig workflow and a successful freelance career.

How Many People Work as Freelancers?

According to a 2023 Upwork study, over a third of the U.S. workforce (38%) performed freelance work in the previous year.

Is Freelancing Lonely?

Yes, freelancing can be lonely. The freelance life generally lacks the social interaction and bustle of an office job. Then, of course, there’s missing out on gatherings like holiday office parties. On the flip side, as a freelancer, you won’t be forced to spend hours with others in meetings—at least in person.

How Can You Make Freelancing Less Lonely?

You could consider sharing an office with someone else, or renting a space in a co-working site. One other solution can be to become active in professional organizations where you can meet others in your field, both consultants and full-time employees.

The Bottom Line

If the entrepreneurial call is too loud to ignore, it is possible to forge a great work/life balance, and even carve a lucrative career with a lot of commitment and the right mindset. However, unless you’re established enough (or have a big enough safety net) to throw caution to the work winds, it could pay to play it safe with a day job, and experiment with a few gigs on the side. If they take off, great. And if not, at least you’ll still be able to pay the bills.