the difference between contract jobs and gig work.

We’ve seen the rise of the gig economy in the past few years, with people dropping out of permanent positions to become contactors or gig workers.

According to CNN, if you've ever been a freelancer, a temporary worker or an independent contractor, you are part of the gig economy.

Workers in the gig economy come from a wide variety of backgrounds. A number of them are part-timers looking to make some money outside of their day job, while others provide for themselves financially solely from taking on different contract jobs and projects. 

A study by Deloitte projects that the number of self-employed workers in the USA will triple to 42 million people 2020, while over in Europe, freelancers are the fastest-growing labour group there with their number doubling between 2000 and 2014.

two main types of gig workers

1. contract workers

Contract workers are hired by their company for a temporary period (typically between 3 months and 2 years) or on a project basis. When employed by an organisation, they are not allowed to work for other companies.

Contractors also get a fixed monthly salary plus bonus, while freelancers get paid according to each project or gig they get.

2. freelancers

Freelancers are considered to be self-employed and can accept work from anyone, including having multiple employers at any one time. Freelance jobs are particularly popular for workers in the technology industry, such as web developers, and for those in the creative industry, such as writers, video producers and designers. In fact, “gig” is the slang for a live musical event performed by a musician.

On-demand service workers make up a large percentage of the gig economy.

Some self-employed workers are also known as solo entrepreneurs. They are professionals who choose to go into business for themselves, collaborating with others to grow their business without boundaries, often without hiring other employees.

why is it important to know the difference?

independent contractor vs gig worker

1. difference in the entitlement to employee benefits

Contract workers are entitled to employee benefits, though they may not have as many benefits as permanent staff. For example, they can have their medical bills reimbursed, but they may not be entitled to corporate health insurance.

If you want to go for training, you will have to pay that out of your own pocket. For many freelancers, it could be challenging to find additional funds to invest in training or to improve skills that may help them make a better living. 

2. difference in the stability of getting work and pay

Contract employees receive a monthly salary during the term of their contract, which means they know they will get paid a fixed amount every month, which gives them a sense of financial stability. Having a monthly income also makes it easier to plan your budget and investments as you know how much money you’ll be getting every month.

The income of self-employed workers and freelancers is dependent on a number of unpredictable factors, such as the state of the economy and their ability to get a steady stream of projects, making their sales and business development skills vital to their survival.

While most contractors earn between $3,000 and $15,000 a month, freelancers can either earn more or less than that, depending on their skills, professional reputation and availability to take on multiple projects.

The good thing about being a freelancer is the flexibility you have when it comes to accepting projects. If you want more work-life balance, you can forgo income by taking on less work so you have more free time to spend with your loved ones. On the other hand, if you want to make a lot of money, potentially making more than if you had a permanent position, you can take on as many projects as you can handle and rake in the cash. According to American Writer and Artists’ Institute (AWAI), top US freelance copywriters can make more than six figures a year.

3. difference in ability to get a permanent position

If you’re looking for a permanent job, a contract role may lead you there. 

Companies are always looking for competent and highly-skilled professionals. We have seen many contract-to-permanent conversions in Singapore as well. 

It is much easier for companies to convert contract employees to a permanent position, compared to a freelancer. This is because the headcount budget of a contractor is more similar to a permanent role. When hiring a contractor, the employer would need to expense costs such as MPF contributions, corporate healthcare insurance and skills development levy. These are not included in the hiring cost of a freelancer.

Because the headcount cost of a permanent employee and a contract worker does not differ much, it would be easier for companies to reallocate the budget and hire the talent on a full-time basis. 

give contract work a try, you’ll never know if you’d like it 

Most fixed-term contracts in Singapore are at least a year long. If you are equipped with in-demand skills and looking for a job, be open to contract work as well. Not only will you gain new experiences, you’ll also be able to expand your network, which would lead to more job opportunities for you in the future. 

Connect with us to understand your options or explore the new jobs in the market.