Contractor vs freelancer: What’s the difference, and who should you hire?

The terms contractor and freelancer are often used interchangeably. While they may seem similar, there are critical differences that impact how you hire, manage, and pay contractors or freelancers. 

In this article, Remote walks you through the distinctions between contractors and freelancers, the pros and cons of working with each, and how to choose the right option for your business needs.

What is a freelancer?

A freelancer is a self-employed individual who offers their services to multiple clients, often on a project-by-project or short-term basis. Freelancers typically work independently, setting their own schedules, negotiating their own rates, and managing contracts and payments without formal long-term commitments.

Freelancers often find work through recruiting platforms, direct outreach or referrals, and social media or personal websites. They are particularly common in industries that value creativity, speed, and flexibility. 

Because freelancers often juggle multiple clients, they prioritize autonomy and flexibility over deep integration with any one business. They’re best suited for clearly scoped deliverables or short-term needs, rather than ongoing operational roles.

What is a contractor?

A contractor is a self-employed professional who provides services to a business under the terms of a contractual agreement. Unlike freelancers, contractors are often engaged for longer-term projects or ongoing support — sometimes working full-time hours for a single client over an extended period.

Contractors may work independently or through an agency, and they typically:

• Work with a clearly defined statement of work or service agreement
• Follow the client’s project timelines or processes
• Use company tools or collaborate with in-house teams
• Submit invoices for time worked or milestones completed
  
  

Contractors are often embedded more deeply into a company’s workflow than freelancers. They may attend team meetings, collaborate on internal tools, or manage parts of a project — but they are not employees and don’t receive employee benefits.

Key differences between contractors and freelancers

While both freelancers and independent contractors are self-employed and not classified as employees, their roles, relationships, and legal implications can differ significantly. Understanding these distinctions helps you choose the right engagement model and avoid compliance risks.

Contractor vs freelancer: Which is right for your business?

Choosing between a freelancer and a contractor depends on the nature of the work, the level of involvement you expect, and how long you need their support.

Here’s a breakdown to help guide your decision:

Hire a freelancer when:

• You need quick-turnaround work like design, content, or marketing tasks
• The project is well-defined and short-term
• You’re managing a tight budget and want flexibility
• You’re testing different talent before making a longer commitment
• The person can work fully independently, with little integration into your team
  
  

Hire a contractor when:

• You need someone for a longer-term engagement
• The work is complex or specialized, like IT architecture or financial modeling
• You want the person to be connected with internal tools, systems, or in team meetings
• You’re filling a temporary gap in your workforce (e.g., parental leave, scaling phase)
• You require greater accountability, documentation, or deliverables
  
  

Bottom line: Freelancers are ideal for flexible work, while contractors are better suited for ongoing, specialized roles that may resemble employment. The closer the relationship to your team, the more important compliance becomes.

Compliance matters: Avoiding misclassification risks

One of the most important differences between freelancers and contractors is how labor laws classify them. Although neither is considered an employee, the level of control your company exerts over their work can affect how they're treated under the law.

Misclassification happens when a worker is hired as an independent contractor or freelancer, but their working conditions legally resemble those of an employee. This can include:

• Setting strict work hours or schedules
• Requiring using company tools or offices
• Managing the worker like an internal team member
• Limiting their ability to take on other clients
  
  

Misclassification can lead to legal penalties, back taxes, unpaid benefits, and reputational damage, especially in countries with strict employment laws.

Simplify contractor management with Remote COR

Whether you choose a freelancer for flexibility or a contractor for deeper collaboration, hiring is just the beginning. The real challenge lies in managing contracts, payments, and compliance, especially when you are hiring across borders.

That’s where Remote Contractor of Record (COR) makes the difference. Remote COR helps you:

• Classify contractors correctly, no matter where they’re located
• Protect your IP with localized contracts and secure agreement templates
• Pay international talent on time in 70+ currencies
• Onboard quickly, without needing to set up legal entities
• Stay compliant with evolving labor laws in every country
  
  

With Remote’s COR solution, you get peace of mind, legal protection, and scalable infrastructure in one platform. Learn more about Remote COR or get started today.