The rise of the freelance economy has changed how people work and access to global clients. Can a freelancer be considered an employee?
While both freelancers and employees perform work for organisations, their legal status, rights, and obligations are very different. Understanding these distinctions is essential for both workers and employers to avoid legal or tax complications.
What Is a Freelancer?
A freelancer is a self-employed individual who provides services to clients on a project or contract basis. They usually work with multiple clients rather than being tied to one employer. Freelancers often operate under their own business name or as independent contractors.
Common traits of freelancers:
- Work independently on a project or hourly basis
- Use their own tools and resources
- Set their own working hours
- Handle their own taxes and insurance
- Have no entitlement to employee benefits (like paid leave or health insurance)
What Is an Employee?
An employee works for a company under an employment contract. They are directly controlled by their employer regarding working hours, methods, and results. In return, they receive a salary and employment benefits.
Common traits of employees:
- Work under supervision or management
- Receive regular pay (salary or wages)
- Are entitled to benefits like leave, bonuses, or retirement plans
- Have taxes and social security contributions deducted by the employer
- Often have job security and legal protection
Key Differences Between Freelancers and Employees
| Aspect | Freelancer | Employee |
|---|---|---|
| Work Relationship | Independent contractor | Bound by an employment contract |
| Control & Supervision | Works autonomously | Works under employer’s direction |
| Payment | Per project or hourly | Regular salary or wages |
| Benefits | Not entitled to benefits | Receives benefits like leave and insurance |
| Taxes | Handles own taxes | Employer deducts and reports taxes |
| Job Security | Temporary or flexible | Stable, long-term employment |
Can a Freelancer Become an Employee?
Yes, a freelancer can become an employee if the nature of their work and relationship with a company changes. For example, if a freelancer starts working full-time for one company, follows their schedule, and receives regular pay, they may legally be classified as an employee.
Examples of when a freelancer might transition to employee status:
- They start working exclusively for one client.
- The company dictates how, when, and where they work.
- They receive regular monthly payments like a salary.
- The freelancer gains access to company benefits or tools.
In such cases, the company might need to reclassify the freelancer as an employee to comply with labour laws and tax regulations.
Why the Classification Matters
The distinction between freelancer and employee is crucial for legal, financial, and ethical reasons.
- For Employers: Misclassifying freelancers as independent contractors when they function like employees can lead to legal penalties, back taxes, and compensation claims.
- For Freelancers: Knowing your status helps you understand your rights, responsibilities, and tax obligations.
Governments around the world including the U.S., U.K., and Qatar are tightening regulations on employment classification to protect workers and ensure fair taxation.
Hybrid Roles: The Modern Middle Ground
With the growth of remote and hybrid work, many professionals operate in a grey area between freelancing and employment. Some companies hire workers as contract-to-hire starting as freelancers, then offering full-time employment after a trial period.
This model benefits both sides:
- Freelancers get to test the company culture before committing.
- Employers can evaluate performance before making a long-term offer.
Legal Tests Used to Determine Employment Status
Different countries use different legal tests to decide whether someone is a freelancer or employee. For example:
- The “Control Test” — Who controls how the work is done?
- The “Integration Test” — Is the worker integrated into the company’s structure?
- The “Economic Reality Test” — Does the worker rely on one company for income?
If most answers point toward company control, the individual may be legally considered an employee, even if labeled as a freelancer.
Can a freelancer be an employee?
Yes, but only if their working arrangement meets the conditions of an employment relationship.
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