Pros and Cons of Being an Independent Contractor

Pros and Cons of Being an Independent Contractor

By: Daniel Steingold | June 05, 2016

The term “independent contractor” conjures different emotions in different people. Many relish the freedom and flexibility that being an independent contractor provides, while others feel the pain of not being able to be considered an actual employee— many, particularly in the gig economy, have no choice when it comes to this facet of employment status.

While being an independent contractor clearly isn’t right for everyone, it certainly has its benefits, particularly for those who have specialized skills, or value accommodation over pay.

This article will discuss a few pros and cons for being an independent contractor.


You’re Your Own Boss

One of the biggest pros of being an independent contractor is that— in theory— you’re your own boss. This means that you’re not tied to a 40-hour work week— you have the ability to work more or less.

Furthermore, you can often set your own hours, which is enticing for anyone, whether you end up deciding to work 9 a.m. to 5 p.m., or 9 p.m. to 5 a.m. Again, you have an impressive amount of freedom and flexibility that many would die for.

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As a final point of emphasis, being your own boss often means that you’re paid a proper amount for your work. You aren’t simply offered a wage and go through the motions of accepting it; your pay is predicated upon your quality and quantity of work, along with your negotiating skills and a bit of luck.

For this reason, many independent contractors choose to be so because they’ve taken a bet upon themselves. They are often able to avoid workplace politics by taking matters into their own hands.

Higher Pay

Being an independent contractor often allows one to make higher wages, as they can cut out any middlemen. In a role as an employee at a company that has direct clients— such as PR or marketing— it is often a better deal for one to communicate with and bill clients on their own, if at all possible.

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A study by the Wall Street Journal found that independent contractors typically make 20-40 percent higher pay than employees in the same role.


Lowered Job Security

With independent contractor work, there is typically less job security than there would be otherwise. If you can’t find work, too bad.

And typically, safety nets, such as unemployment benefits, are much less prominent in scope should you be an independent contractor. One is usually only eligible for benefits should they pay into their state’s unemployment fund.

Fewer Benefits

As an independent contractor, you not only miss out on vital benefits that a job provides— such as healthcare— but you have to pay more in taxes.

Typically, in an employee-employer relationship, an employer pays one half of Social Security taxes, which amount to 6.2 percent. An additional 1.45 percent is paid for Medicare. When an independent contractor pays these taxes on what would be the employer’s behalf, it is tantamount to double taxation.

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Needless, to say, all the other smaller benefits— company lunches, gym memberships, etc.— are usually not applicable.

Used to Avoid Actually Employing You

A more recent phenomenon is the act of hiring someone as an independent contractor, but having them work in what most would consider a standard employee capacity, in order to avoid offering certain employee rights and benefits.

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While the avoidance of paying payroll taxes, such as Medicare and Social Security, has already been mentioned, there are additional benefits that come with not outright hiring an individual.

An independent contractor does not have to be paid overtime, often lacks working protections, and usually does not get vacation or sick days. Worker’s comp is also not provided in a vast majority of these circumstances.

While this is a loophole that can be used by employers at present, it is hard to know if it’ll be capable of being exploited in the future. Lawsuits by workers in the gig economy— think Uber and Lyft— may change the current legal precedent.

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