In this post: There are several differences between a work-at-home employee and an independent contractor. Do you know which one is right for you?
Working at home is a dream that many of us hold (and many of us achieve!). Going from dreaming about it to actually doing it is a process, and there are a few factors you’ll need to consider and decisions you’ll need to make along the way.
There are a few broad-category ways to classify work-at-home jobs, and they mirror what you’ll find in the traditional employment scene. These three categories are:
- Independent contractor
Each job category has its own pros and cons, and it’s possible that you’ll only want to do one type of work. This is an important distinction to make early on in your search, especially if this is your first foray into working from home. The nature of each type of role is different, and you should know going into any job application whether it’s even a role you want.
I’ve written a lot about entrepreneurship, but I’ve noticed that there’s not much information that covers the differences between working from home as an employee and as an independent contractor. Do you know which one is right for you? Let’s take a closer look.
Employee vs. Independent Contractor: What’s the Difference?
The distinction between employees and contractors isn’t always clear, and there’s no one rule, law, or guideline that cuts a clear distinction between the two. To make it extremely general (and not very clear), an employee works for a company whereas an independent contractor works for herself (or himself).
That said, when you’re a contractor working in a corporate-type setting, it can feel a little fuzzy. There are some key distinctions between being an employee for a company and being an independent contractor with the same company, though, and knowing them should help you clear up what, exactly, your role is.
Employees draw a regular salary, are eligible for company benefits, presumably could have their job until the end of time (in a sense), and have direct oversight from a boss, a job description, a work plan, and more. Additionally, an employer will pay a portion of each salaried employee’s taxes and also offer the ability to withhold a portion of the employee’s income taxes from each paycheck.
Independent contractors are different. They may be paid on a regular basis, but they aren’t a part of the company’s payroll. (For an example, many contractors send an invoice to the company when it’s time to get paid.) Contractors aren’t eligible for the benefits plan, and they don’t have any income withheld for taxes either. Contractors are subject to different tax rules, and frequently will pay taxes the same way freelancers and entrepreneurs will.
There are other guidelines about who pays for what equipment the worker uses, how much autonomy the worker has over his or her schedule and work, and more. But these are the basics: employees have less autonomy, qualify for benefits, and are on payroll; contactors have more autonomy, get paid independently, and don’t access benefits or the employer-paid share of taxes.
Working from Home as an Employee: Pros and Cons
A lot of the great benefits of being an employee extend to the work-at-home environment. You have a stable paycheck, your income taxes are straightforward, your company may provide the equipment you need (or reimburse you for equipment-related expenses), and you can access the benefits plan. Many companies offer paid training, and there’s almost always a guaranteed hourly minimum.
There are some drawbacks to employment, though. As an employee, you’re under direct oversight. Even when you work from home, you’ll likely be required to work specific hours, deal with a boss who might micromanage you even when you’re off-site, and possibly be “stuck” in your current position until you decide to find a new job. That’s fine (or even great!) when you like what you do.
Some work-at-home employees also deal with isolation and feeling disconnected from their colleagues, and many (especially those who work remotely when most of the business works on-site) feel that they have to “prove themselves” in a way because there’s a sense that they aren’t as serious about their jobs. (Note that this isn’t something that affects all work-at-home employees, but it definitely is something that many folks deal with.)
Working from Home as an Independent Contractor: Pros and Cons
As an independent contractor, your environment might not necessarily look much different from the work-at-home employee’s, but the structure is very different. You’ll be able to set your own hours and come and go as you please (as long as you’re hitting your milestones). There’s no “glass ceiling” on the amount of money you can make because each new contract, service, or skill can bring you to new income levels. You have a significant amount of autonomy, with no one standing over your shoulder telling you how to do your job.
It’s not all sunshine and roses, though. Your tax burden as a contractor is higher. You’re responsible for all your own equipment and software. (The plus side: you’re also able to make a lot more work-related tax deductions than an employee could.) And there may be no one telling you what to do or how to do it, which means you need to know it already or figure it out for yourself.
You’re also responsible for finding new work, because every contract is likely to end at some point. You may be able to land long-term contracts (I know one woman who was an independent contractor for a program “until the program was completed,” which ended up taking four years!), but ultimately your contract will close and it’ll be time to find the next gig. It’s not always as stark-looking as that — you’ll have plenty of lead time in most cases — but it’s still a reality that you’ll need to find new work on a regular, if predictable, basis.
Which one is right for you?
Most of us have experience as an employee and can understand what that looks like, even remotely. Being an independent contractor isn’t necessarily as cut-and-dry, depending on the type of work you want to do. Contractors typically work for other businesses, sometimes doing employee-type jobs (but not always). And entrepreneurs can look like a contractor, or a freelancer, or something totally different.
Being an independent contractor sometimes looks a lot like being an entrepreneur, but not always. Direct sellers are considered independent contractors, for example, but a pet-sitter, a letterpress stationer, or other freelance service provider typically wouldn’t be called a contractor (unless the service is provided to businesses, in which case that could venture into contractor territory).
Ultimately, going from dreaming about working from home to actually doing it isn’t the same process as getting a traditional job, not by a long shot. It’s a good idea to know what you’re looking for before sending out your applications, so you don’t end up somewhere that isn’t right for you.
Companies That Hire At-Home Employees
If you think being a work-at-home employee is right for you — and it’s a good fit for many of us! — take a look at this list of companies that hire remote employees. These are proven companies offering legit work-at-home jobs that come with all the perks of being an employee.
- ABC Financial
- ACTIVE Network
- Alpine Access
- American Airlines
- American Express
- Apple at Home
- GE Retail Finance
- Neiman Marcus
- NEW Corp
- Sedgewick CMS
- Sitel Work@Home
- Starwood @Home
Have you had a work-at-home employee position? How about worked as an Independent Contractor? Which did you prefer?