Figures Show Trends Towards Independent Contractors

John Krautzel
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Recent trends show Americans opt towards freelance work rather than full-time employment. A survey conducted in 2013 reveals more than 50 percent of full-time professionals who freelance on the side planned on becoming independent contractors within two years. There are advantages and disadvantages to this type of income structure.

The most important distinction between freelance workers and salaried employees revolves around income taxes. Hourly and salaried employees have their taxes taken out of their gross income before they get paid. This income is reported directly to the IRS, and employees get end-of-the-year W-2 forms that explicitly state how much income taxes they paid. Independent contractors do not have taxes removed from regular income and either receive a 1099 form or self-report income on tax forms.

States such as Pennsylvania began cracking down on independent contractors because the state felt certain firms misclassified workers as contractors to avoid paying unemployment insurance taxes. Other companies may pay such workers less than minimum wage or deny giving them benefits, even though they work full-time. Workers who derive their income using this method may under-report the money they make to the IRS, and then the federal government receives less tax revenue.

Despite drawbacks, freelancing continues to grow. Specialty website Elance reported freelance workers earned $60 million in the first quarter of 2013, a 40-percent increase over the first quarter of 2012. The number of independent contractors grew by 60 percent over the same span. Companies often hire such people to develop software applications, websites and technological improvements. Businesses also utilize consultants to improve marketing strategies.

Businesses that follow the law save costs by hiring independent contractors because no staff time is spent on recruiting, hiring or supplying benefits. Freelancers can work when they want, sometimes even from home, until the project is complete.

A second survey released by the Freelancers Union in September 2014 reports 53 million Americans, or one-third of the entire labor force, engage in some kind of independent contract work. Of these 53 million workers, 14.3 million hold some kind of regular job while freelancing as well.

Websites that vet such workers have become popular tools to automate the contracting process that links up workers with companies that need their skills. Task Rabbit, Elance, Lyft and Uber have become marketplaces for contractors who seek project-to-project work or even steady income.

The recession of 2007-2008 changed the way companies and employees viewed each other. When full-time jobs became unavailable, Americans became creative, and firms adapted their strategies for hiring skilled workers. Independent contractors filled an important gap - companies did not want to spend money to hire permanent help, yet they needed skilled people to complete projects. Signs point for this trend to become more popular in the future.


Photo courtesy of Stuart Miles at



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