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Independent Contractor Vs. Self-Employed

Nov 23, 2019

Independent contractors and self-employed individuals earn incomes outside the bounds of a traditional employee-employer relationship. Learn the difference between these two alternative employment types and find salary and job outlook information.

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Comparing an Independent Contractor to Self-Employed

Self-employed individuals can work in almost any trade or occupation, while independent contractors are self-employed workers who provide goods or services to clients on a contractual basis. The distinction between an independent contractor and a strictly self-employed individual lies in the contractual agreement for work. While this difference may seem small, it has large implications for the day-to-day responsibilities of these two employment types, as seen in the following information.

Job Title Typical Education Average Annual Income (2019)* Job Growth (2016-2026)**
Self-employed Education not required but useful $58,000 7.9% (all self-employed workers)
Independent contractor Relevant education and licenses $64,409 7.9% (all self-employed workers)

Sources: *Payscale.com, ** U.S. Bureau of Labor Statistics

Responsibilities of Independent Contractor vs. Self-Employed

Self-employed individuals work for themselves by operating their own business. Those who are self-employed typically take on a variety of tasks associated with operating their business. In comparison, the role of an independent contractor is more specialized. Independent contractors offer a specific expertise for hire on a contractual basis. The scope of responsibility is typically more business-oriented for a self-employed individual. This is especially true in the first few years when they may be overseeing all aspects of running the business. Independent contractors only work to fulfill the specified needs of their clients. Overall, those who are self-employed earn income by operating a business, while independent contractors solicit their goods and services on a case-by-case basis.

Independent Contractor

The responsibility of an independent contractor is to provide the specified good or service to their client within the designated timeframe. Specific duties of the independent contractor will be outlined in a written or verbal agreement. Independent contractors often have to market themselves to potential clients by advertising their information and expertise online, in print, or by word-of-mouth. Strong interpersonal skills are a must for success in this role. The ability to approach projects creatively and work flexible hours are useful for contract work. Each new project often differs from the last, and managing multiple projects is common.

Responsibilities of an independent contractor include:

  • Maintaining open communication with clients
  • Documenting hours worked or project progress
  • Keeping up-to-date on current industry trends
  • Refining quality of expertise to land higher-paying jobs

Self-employed

Self-employed individuals generate income by owning their own business. When self-employed, an individual must set their own work schedule, find their own customers, and acquire the knowledge and skills needed to operate the business. Those who are self-employed sometimes need to work weekends, holidays, or long hours to turn a profit. Self-motivation is a must to succeed in operating a business. Self-employment usually requires a great deal of independent learning, trial and error, and creative problem solving. Education or experience in entrepreneurship or business administration is helpful. An understanding of the laws and taxes associated with running a business is necessary.

Responsibilities of someone who is self-employed include:

  • Developing a business plan
  • Calculating startup and operating costs
  • Acquiring any necessary licenses or permits
  • Improving business model over time

Related Careers

If you want to pursue independent contract work, you may find a career as a real estate broker rewarding. If self-employment sounds appealing, a career as a restaurant owner may interest you.

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