What is a Contract Job?

8 min read

After years of navigating Covid shutdowns, mass layoffs, and unstable economic conditions, workers are diversifying their income and redefining job security by contracting across different companies. Some workers are giving up traditional paths altogether in favor and embracing that digital nomad life.

Whether you’re interested in contract work yourself, or have questions about hiring a contractor, we’ll tell you everything you need to know.

What is a Contract Job?

A contract job, similar to freelance work, is performed by a self-employed worker who is hired to complete specific tasks for predetermined pay. While freelancers generally tackle one-off projects, contract work consists of long-term projects and ongoing relationships.

What does it mean to be a contract employee? Being a contract employee, or independent contractor, means you are hired for a predetermined period of time for a set task and paid by the hour or per project, rather than salary.

Why Become an Independent Contractor?

Independent contractors trade full-time employee benefits like paid time off and health insurance for flexibility and autonomy. Other reasons to make the switch in

  • Diversity of work: rather than being tied to one company, work for multiple teams

  • Flexibility: more than just your schedule, decide what work you do and how

  • Pay rate: managing multiple contracts allows you to make more money

  • Networking: build a larger professional network by working with different companies

  • Career exploration: test out different industries and skills

  • Getting a foot in the door: if you click with a company culture, you may be a shoe-in when they’re looking to hire permanent employees

  • Skillbuilding: you choose the projects and skills to build, rather than a company dictating your path

  • Time to hire: starting a new job as a contractor is usually faster and easier than the lengthy interview processes of permanent jobs

Qualities of a Successful Contractor

If you want to start contracting, it’s important to consider the qualities that will make or break a successful contract career.

As a business owner, you’ll need a high level of self-motivation, accountability, and follow through. If you say you’re going to do something and don’t, it’s your reputation on the line rather than a company’s. To be successful as a contractor, you must be both qualified and reliable.

Contractors should be:

  • Motivated

  • Organized

  • Self-aware

  • Ready to learn new things

  • Great at communicating

  • Able to work with a team sometimes

  • Committed to boundaries

How Long Does Contract Work Last?

Contract work varies in length; a typical contract is arranged in short-term increments of 3 to 6 months, but may last as long as 12 months or more.  

Can you quit a contract job? You can quit a contract job at any time, since you are an at-will worker. Know that your client my also end the contract at any time, as well. This is why it’s especially important to know the terms of your contract, including termination clauses.

Contractors vs. Permanent Employees

Unlike permanent employees, workers operating on a contract basis are required to handle their own taxes, healthcare costs, and equipment. But those costs aren’t the only differences. Check out the chart below for the full breakdown.

ConsiderationsContractorPermanent Employee
IRS FormsW-9/1099 tax forms; taxes are not automatically deductedW-2 tax form, taxes automatically deducted
TaxesIncome taxes +  self employment taxes Employer pays income taxes & FICA taxes (social security and medicare)
Employment BenefitsNoneDepending on the position: health, vision, dental, PTO, paid holidays & more
PayHourly or per projectHourly or salary, on a set schedule
Length of EngagementA temporary contract for a set amount of time (monthly, 6 months, etc.)Ongoing full-time position
Opportunity for UnemploymentNo; unless you can prove a company misclassified you as 1099 when you were performing the duties of a W-2 employeeVaries case by case
Control Over ScheduleTypically a set number of hours per week or monthEstablished by the employer
EquipmentSelf-suppliedTypically company-supplied

Becoming a Contract Employee

Becoming a contract worker requires you to be your own accountant, human resources department, salesperson and marketing team — unless you decide to outsource. Either way, it’s important for you to understand everything you take on when you make the switch from permanent employment. 

HR Stuff for Contract Employment

As a contract worker, you’ll file your own taxes; in the U.S. that’s the 1099 form rather than the W-2. Similar to a W-2 employee, you’ll still pay your income taxes but you’ll also be required to pay self-employment taxes (the sum of Medicare and Social Security taxes) equating to about 15% of your taxable income. The conventional self-employment wisdom is to save 25-30% of what you make to cover taxes. 

You’ll also be required to provide your own health benefits and you’ll need to allot for any other benefits such as saving for time off. Consider these factors when determining the rates you charge your clients. 

Finding Contract Work

There are many ways to find contract work, such as through networking and referrals or job boards and marketplaces.

At MVP Match, we help connect skilled, technology workers with companies looking to hire contract teams and freelancers. But we’re more than just a marketplace; we’re building a community network of technology professionals looking to make waves in their fields.

Bidding For Jobs

If you use a job board or marketplace like Upwork, you’ll need to be prepared to bid for jobs. A bid proposal is a report that subcontractors and freelancers use to outline their services and pricing to potential clients for specific projects. The bid proposal is a way to showcase your skills and expertise.

What are the pros and cons of a contract job?
ProsCons
FlexibilityHigher taxes
Diversity of work across companiesNo employee benefits (PTO, healthcare, etc.)
Automony to pursue only the work you wantLess job stability
Opportunity to make more moneyYou must perform other duties outside your primary domain (marketing and sales of your services, accounting, etc.)
Get your foot in the door and test out different companies to potentially work for full time, down the roadYou must supply your own equipment

Should I leave my full-time job for contract work?Leaving your full-time job for contract work is a complex decision; only you know what is best for your unique situation. Consider the pros and cons table above as you weigh your decision to determine which is right for you.

Hiring Contractors

For companies looking to hire a contractor, it’s important to evaluate the full picture to determine if it’s the right option for your business. Consider the insights below.

What to Look For in a Contract Worker

When deciding whether to hire a contract worker, look for evidence of their work systems in place and ask to see examples of prior work and the results. Consider references, reviews, or testimonials to learn from other’s experiences working with the contractor. 

Your HR Responsibilities

The benefits of hiring contract workers are plenty. The paperwork and hiring process is much simpler; you’ll save time. Since contract workers come to you with specific skill sets, you won’t be required to go to extensive lengths to train them.

What are the pros and cons of hiring a contractor?
ProsCons
Cost-effective staffing solutionPossible remote communication barriers
No need to spend the time and money on trainingThey might not be available when you need them
Hire for specific skillsYour business might not be their highest priority
Lower commitment,

Drafting an Employment Contract

To hire a contract employee, you’ll need to first create a contract

Some examples of contract elements to include:

  • Names of both parties and their legal relationship

  • Project scope or services to be provided

  • Project time frame

  • Payment terms

  • Constraints around revisions

  • Copyright and intellectual property rights

  • Termination clause

  • Signatures

  • Client policies

Common Contract Employee Opportunities

There are endless contract employee opportunities as more companies choose a contract heavy workforce. A few of the more common fields which lend well to contract services, include:

  • Professional services: accounting, legal services, teaching

  • Marketing services: social media marketing, writing, graphic design, public relations

  • Technology: web development and design, search engine optimization 

  • Virtual assistants and online business management

  • Data entry

  • Research

How MVP Match Can Help

If you’re looking to hire skilled tech talent, let us help you find and connect with talented freelancers or even a full team

If you’re a freelancer, join our network and community of freelancers. We can help you connect to your next great work opportunity.

About the Author

Match wants to bridge the perspectives of talents and companies, and Marta’s job is to blend all the elements without burning the engine. She translates backstage know-how into practical insights and stories. What can’t be written on a blog will land on socials as a meme. She believes that shaping the #futureofwork is all about transparency and courage in communication. While collaborating with writers and authors from all over the world, she makes sure that everything that ends up on the Match blog makes the bridge stronger than ever.