Taking the leap from full-time employment to contract work is a big decision. In addition to the excitement you may be feeling about trying something new, you’re probably also filled with questions like ‘Is contract work right for me?’ and ‘How do I know if I’ll be successful at it?’
There are several factors you should consider carefully in order to make an informed decision about becoming an independent contractor. We’ll cover those factors and outline the pros and cons of contract work here.
What is contract work?
Contract work is performed under terms dictated by a written agreement, a.k.a. a contract. It’s different from traditional employment, where the worker is an employee of the company.
In contract work, a company may dictate expectations for the work that will be delivered, but how that work is accomplished (like the hours worked and tools used) are typically up to the contractor. Contract work can be short- or long-term and can be ongoing or assignment-based.
Pros of contract work
It’s hard to beat the flexibility of contract work. The ability to control your own schedule and workload is one of the top factors that drives people to leave their full-time jobs for self-employment.
As a contract worker, you can choose your work hours and the tools you use to get the job done. You’ll also have the freedom to dictate the projects you work on and how many assignments you take on at a given time.
This flexibility is ideal for those looking for more work-life balance or who want to earn income on a nontraditional schedule. The flexibility also makes contract work conducive to doing a trial run, meaning you can test it on the side with small projects before committing to more (or all) of your working hours.
For those who are passionate about traveling, two weeks of PTO per year just isn’t enough. Contract work allows you to work from anywhere, be it in an airplane or on a lounge chair on the beach on a remote island.
But you don’t have to be a jet-setter to enjoy the location flexibility of contract work. The ability to work remotely is a plus if you’re simply sick of commuting or hate being cooped up in an office for eight or nine hours a day.
While contract work is not a path to get rich quickly, it puts your income entirely in your control. Contract work enables you to set your own prices, which means there’s no ceiling on how much you can make if you can land the proper contracts.
The more experience you have and the more specialized your skill set, the more you can earn.
If the rigid processes and outdated technology at your full-time job have you feeling stifled, you may find the technological freedom of contract work to be a breath of fresh air. Because contract jobs leave the ‘how’ of the work up to the contractor, you can experiment with new technology and systems as you see fit.
If you’re tech-savvy, this could mean you find new ways of working that allow you to get more accomplished faster, with less effort, all of which make your job easier and increase your earning potential.
Being a contractor empowers you to work on projects that interest you or are close to your heart, which you don’t always get to do in a 9-to-5. It also allows you to explore new skill sets at your leisure.
For example, if you’re a graphic designer but decide you’d like to dabble in social media marketing, no one is stopping you from bidding on those types of contracts. Traditional full-time roles tend to be much more strictly defined, limiting you to the duties you were hired to perform.
Unless you’re the company’s CEO, there will always be someone above you to answer to. When you’re a contractor, you’re the CEO of your own business, which means you get to call the shots. Not only can this be liberating, but can lead to a greater sense of satisfaction with your work.
There’s an intrinsic value that comes with finding and successfully executing your work all on your own. It can be personally and professionally rewarding in ways you might not be able to match as an employee of a company.
Cons of contract work
Lack of stability
Having a full-time job comes with a certain level of job security that you won’t have in contract work, at least when you’re first starting out. As a contractor, you’ll be susceptible to greater fluctuations in your workload and, subsequently, your income. This can require you to plan ahead more than you would when you receive a steady paycheck for a consistent amount.
You get paid the same amount as an employee, whether you’re grinding hard on a challenging project or coasting by on an easy week. The same can’t be said of contract work. If you’re not actively working, money isn’t coming in. This creates a sense of pressure that can feel overwhelming and, if not managed well, can lead to burnout.
When you’re an independent contractor, it’s all on you. Your success or failure rests entirely on your shoulders. This is a stark contrast to working on a team, where the final product is the result of many people’s efforts. Being a contractor requires more accountability for your work and its outcomes.
Lack of benefits
Contractors are not eligible for the benefits available to company employees, like healthcare and retirement savings. They’re also responsible for their full tax burden, including income and self-employment taxes.
Loss of community
You’re part of an office community when you work in an office. You build relationships with your coworkers and can commiserate with one another when things are tough.
When you work on your own, you don’t have such a community. This lack of camaraderie can be challenging. Many contractors report struggling with feelings of loneliness and isolation.
As a contractor, you’re not just performing the duties a company hires you for but also running a full-fledged business. You’ll be responsible for things you don’t have to do as an employee, like bringing in new business, closing deals, and handling the business’ finances. This creates an added learning curve and requires additional hours each month to manage on top of your regular workload.
How to decide if contract work is right for you
Deciding whether contract work is right for you depends on numerous factors that will be unique to each individual. Here are a few of them to consider:
- Risk tolerance. How comfortable are you with not knowing for sure how much you’ll make each month?
- Confidence level. Do you feel comfortable representing yourself in business conversations and negotiations?
- Income needs. How much do you need to make to cover your bills? What does that number look like after accounting for taxes, insurance, and savings?
- Availability. How much time do you have to commit to contract work, and when will you perform it?
- Professional network. Do you have connections you can leverage to find new sources of work?
- Experience level. Do you have the level of skill necessary to deliver high-quality work? Do you have a portfolio of work examples to show prospective clients?
The great thing about contract work is that it’s not permanent. If you try it out and decide it’s not a fit for you, you only have to stick it out until the end of the contract.
If you’re currently employed, our best advice is to give it a shot as a side hustle using a platform like Toptal, Upwork, or Fiverr. This will allow you to get a feel for how contracts work and whether you actually like working for yourself before you decide to give it a go full-time.
And you don’t have to go it alone–we have many more resources to help you take the plunge into freelancing and contract work. Check out the helpful posts below.