The modern workforce is changing and it’s changing fast. Post pandemic, we’ve seen record turnover as more professionals reevaluate work life balance, flexibility, remote work and financial freedom. Side hustles, freelance work, and independent contracting are booming, giving individuals new ways to earn income beyond the traditional 9-5.

So, what does it really mean to be an independent contractor, and could it benefit you more than being an employee? Here are some things to consider before quitting your corporate job!

Momentum in the Independent Contractor Space

An independent contractor is hired to perform specific work under a contract but is not considered an employee and will not have the same benefits as an employee, nor will they have the same expectations as an employee.

Over the last five years, we’ve seen an incredible rise in independent contracting, fueled by the “gig economy” and digital opportunities.

Some common independent contractor roles include:

• Delivery Drivers: Uber Eats, Amazon, DoorDash, Grubhub
  
• Freelancers: Web designers, app developers, social media managers, virtual assistants, writers, and more
  
• Affiliate Marketing & Partnerships: Promoting brands on Instagram, TikTok, or YouTube for commissions

The possibilities are endless and continuing to grow every day. 

Employee vs Independent Contractor: Key Differences

The main distinction between being an employee and an independent contractor comes down to benefits, taxes, and autonomy.

Employees often receive:

• Benefits:
  • Health insurance, paid time off and retirement match contributions
    
• Payroll Taxes Handled By Employer:
  • Employers will withhold and file required payroll taxes
  • Employer also pays half of the employees self-employment tax (as discussed below)
  • The employee will receive a W-2 to report income
    
• Professional Training and Support:
  • Training, education and support to enhance individuals professional expertise will be provided by the employer
    
• Reimbursed Business Expenses:
  • The employer will often reimburse the employee for business related expenses paid for personally
    

An independent contractor typically would not receive any of the above benefits from the company they are hired by.

Independent Contractor Benefits

Although an independent contractor may not receive any benefits or perks from the company as listed above, they will benefit from the following:

• Increased Pay:
  • You have the opportunity to be paid more as an independent contractor than as an employee considering the employer will not be providing you with any additional benefits or paying taxes on your behalf.

• Tax Benefits:
  • They will receive a 1099 at the end of the year to be reported on their Schedule C of their tax return.

• The benefit to the individual is that they will be able to deduct business related expenses like transportation costs, phone expenses, business supplies, healthcare premiums, etc. that they would not have been able to deduct had they been an employee.

• Home Office Deductions:
  • Many independent contractors’ primary place of work is in their own home, meaning that they may be eligible for home office deductions. This allows you to deduct a portion of utilities, rent, insurance, real estate taxes, etc. based on the square footage of your home office. Important to consult a CPA on this!

• Increased Flexibility & Autonomy:
  • They have more freedom to perform their work and have greater control over their schedule, projects and clients. 

Employees Are Expensive…And That’s Your Advantage

Employers often underestimate the total cost of a full time employee. On average, an employee costs 1.25–1.4x their salary once benefits, payroll taxes, and perks are included. For a $100,000 salary, that’s $125,000–$140,000 in total costs.

Independent contractors, however, don’t come with these extra expenses. That gives you negotiating power, often 15–20% higher than a W-2 employee because companies save money by hiring you instead.

As an Example:

If a W-2 employee earns $75,000, the employer may spend $94,000–$105,000 in total because of all the benefits provided to them. As an independent contractor, you could charge $90,000, giving the employer savings while increasing your own pay.

Things to Consider Before Becoming an Independent Contractor

While the perks are appealing, there are some trade offs that you need to be aware of:

Taxes

As a 1099 contractor, taxes aren’t automatically withheld. So you’ll need to work with a CPA to manage your cash flow, keep track of deductions and finances and consider paying estimated quarterly taxes.

Benefits & Job Security

Contract work can also be inconsistent and is not guaranteed, so plan accordingly. Be sure to keep a substantial amount of savings on the side to prepare for a change in employment circumstances. Contract work cannot always be relied upon for long term work.

Loans & Credit

It is typically more challenging to get approved for a loan – a mortgage, car loan, etc. if you are an independent contractor vs. a full time employee. Keep that in mind before leaving your full time job if you are in the process of purchasing a home or looking for a loan of some sort.

Bottom Line: Who Should Consider Independent Contracting?

The independent contractor life isn’t for everyone. It works best for those who:

• Value flexibility and autonomy
  
• Are disciplined with taxes and savings
  
• Want to maximize earning potential and have the self-motivation to create that reality
  
• Can navigate periods of uncertainty

It’s a lifestyle that blends opportunity with responsibility. Done right, independent contracting can provide financial freedom, lifestyle flexibility, tax advantages, and the ability to shape your career on your own terms. 

As an entrepreneur, it’s definitely not easy, but honestly, I wouldn’t have it any other way.