Freedom is always one of the biggest perks people mention regarding freelance work. As a small business with a sole proprietorship, you get to earn money while being your own boss.
That said, there are scenarios where it’s beneficial to have a contract. Freelancers can even take it upon themselves to propose the document or request it from clients.
Freelancer Vs. Independent Contractor
While both freelancers and independent contractors are considered third-party contributors to their clients, there are still key distinctions to make between the two.
A freelancer creates a personal business out of their services and handles multiple clients. Independent contractors tend to work for one company at a time, as they often have more complex and long-term obligations depending on their agreement.
Do Freelancers Usually Have Contracts?
Freelancers usually decide whether they’ll operate with or without a freelance contract. Some trust a written email or verbal agreement before doing the work. Others receive documents from a client and review the details before signing.
Many people work for themselves instead of a company these days. In fact, the number of freelancers is expected to increase up to 90.1 million in 2028.
I recommend that you arrange a formal agreement to protect your business. The Freelance Isn’t Free Act, which has been passed in New York City, advocates that companies utilize contracts for more than $800 of work from freelancers. This bill acts as payment protection in the field and court of law.
5 Pros and 1 Con of Contracted Freelancing
1. A Contract Gives You More Stability
A freelancer’s contract cites a project’s working schedules. Once the project is over, the work period is finished. Getting a contract can provide a sense of stability to your working relationship with the client.
That said, both contracted and non-contracted workers are equally more susceptible to removal compared to full-time employees.
2. Contracted Freelancers Own Their Work
When you freelance without a contract, the work you produce can be up for grabs. While you might assume you own the rights to a project you worked on, your client might think they should hold that intellectual property.
By laying out the terms for who actually owns the rights to the work output from the beginning, a contract can mitigate the chance of miscommunication. It can prove a prior agreement and help you retain ownership of your work.
3. Contracted Freelancers’ Responsibilities Are Defined
A contract can help freelancers define their responsibilities when working for clients.
For example, if you’re hired as a freelance social media manager, you might expect to write and publish social media posts. Without a contract, however, the company might ask you to do something outside of your expertise, like managing their blog.
A contract provides an outline of exactly what a client can expect of you — no surprises.
4. Contracted Freelancers Receive More Benefits
Clients may include in a contract that they are amenable to paying you for overtime and allowing you leave during the holidays. While the full plan of a regular salaried employee is more lavish, the arrangement is still a level up from getting paid for your services only.
5. A Contract Can Make Tax Season Easier
As a self-employed individual in the U.S., you are responsible for your information return to the IRS. You must make sure all your clients submit a 1099-NEC form, which you then use to file your taxes. A contract can prove you have been hired by a certain establishment.
6. A Contract Limits Flexibility
Freelancing without a contract offers more flexibility than with a contract.
For example, if you write an article for a publication one time without a contract, you can decide if you want to write for them again. If it’s not a good fit for you, you have no obligation to them.
If you sign a contract requiring you to write for six months, however, you will have to uphold that commitment and work on their schedule.
6 Signs to Ask for a Freelancing Contract
If you’re a freelancer thinking about getting a contract, here are some ways you can be sure it’s right for you.
1. When You Want to Set Certain Pay Rates
Freelancers are usually paid per deliverable they complete for a company. If you want to get paid by the hour instead, however, get a contract where you can lay that out. You can discuss the rate with your client or put a price for them to agree to or negotiate.
Talk about how and when you will get paid. Some people prefer a monthly payment, while others want a weekly or biweekly payout. Make sure to outline late payment fees in the contract as well. That way, your client will be more disciplined in paying on time.
2. When You Need a Steady Stream of Work
Freelancers usually have a flexible schedule based on the amount of work they have. More employers, however, are being cost-conscious and selective with hiring. It’s been increasingly difficult for job seekers, including freelancers, to land a role.
Getting a contract with a client can be a great way to have a steady stream of work and income while still maintaining independence. Just preface the agreement with the transparency that you will also be working with other clients.
3. When Your Work Is Creative
Freelance creatives are always wary of having their visual art, films and written works stolen. For instance, some professionals have had their work fed to artificial intelligence programs. A contract can state where a client can use their freelancer’s works.
Well-trained generative AI can put many freelancers out of the job. The Department for Professional Employees AFL-CIO, which supported the United States Copyright Office’s study into the technology, notes how vital it is for professionals to retain their intellectual property rights for their livelihood.
4. When You Require A Clear Working Arrangement
Freelancers and clients may quarrel over the logistics of completing work. A contract can provide a clear-cut answer for when and where you’re supposed to work. These defined timelines allow you to draw better boundaries outside the role.
5. When You Desire a Position-Based Role
Some professionals use contracted freelance roles as a gateway to becoming a full-time employee. You can, however, simply remain in that role. Become even more acquainted with a company, and maintain a positive relationship while exploring work with other clients.
6. When You Want to Set a Notice Period
Most freelancers get abrupt cancellations that can leave them with no time to find extra work. A contract can set a notice period — whether it be 30 working days or simply two weeks’ notice — between the worker and the company when it’s finally time for their working relationship to end.
Protect Your Work With a Contract
Knowing when to ask for a contract is a big step for freelancers. In some cases, you might prefer to keep your flexibility, but there will be other situations where you want stability and structure in your role. Consider the pros and cons of having a contract to best navigate your freelance career.
