The Language of Freelancing

Whether you’re considering hiring freelancers or embarking on your own freelance journey, understanding the key terms used in the industry is essential.

The world of contract professionals, independent work and flexible talent solutions comes with its own unique vocabulary.

Our Freelancing Terminology Guide breaks down the most important terms so you can confidently navigate freelance hiring and compliance.

Why Understanding Freelancing Terms Matters

• For Businesses:

Businesses can be sure they’re hiring freelancers with clarity, avoiding mis-classification risks, legal pitfalls and tax implications such as IR35.

• For Freelancers:

Freelancers can ensure they know their rights, obligations, and the terminology that defines their professional status, helping them choose the best working structure.

Freelancer, consultant, or contractor – what’s the difference?

Here’s the gist: the terms “freelancer”, “independent consultant”, and “contractor” can, for the most part, be used interchangeably. The term “freelance” originates from “a free-lance”, historically meaning a mercenary for hire.

In today’s context, freelancers, independents, and contractors are all modern-day specialists for hire in their respective fields.

They all offer services on a contract basis rather than being employed full-time by a company. They may work via a limited company, umbrella company or through agency PAYE.

That being said, certain terms are most commonly used in certain contexts:

• Contractor tends to be preferred in corporate and technical sectors.
• Freelancer is more popular in creative industries.
• Independent consultant is often used by senior-level professionals.

How do freelance, consultants and contractors work?

Typically, these professionals work in one of two capacities:

1. Part-time or fractional roles

Professionals who take on part time or fractional roles often work with a portfolio of clients, manage their own time, and function either as a micro-agency or an outsourced extension of a larger agency.

1. Interim roles

The term ‘interim’ implies that professionals will be stepping into existing roles or taking on a short-term role that has been created on a temporary basis, such as an interim CMO, Corporate Affairs Director, CFO, or Mat Leave cover. Interim professionals tend to provide stability and expertise during periods of transformation, crisis or change.

However, interim roles are often on fixed-term contracts (FTCs), meaning "interim" and "FTC" can be considered interchangeable. The key distinction is whether the role falls inside or outside of IR35:

• When an interim role is inside IR35, it is typically treated as payroll employment. Usually in this instance, companies will put the professional on payroll themselves for the duration of the contract. This means they’ll be entitled to employee benefits from day one, and will accrue employee rights immediately. However, if they’re on an agency or umbrella payroll, the benefits may differ.
• When it is outside IR35, it is more likely to be a day-rate contract, often referred to as an FTC.

Does this apply to freelance work outside of the UK?

The regulations outside of the UK can differ, if you have specific questions, get in touch with us directly, or alternatively, keep an eye out for our upcoming guide to international freelancing.

What kind of notice period is typical when working with freelancers/freelancing?

Notice periods for day rates can vary depending on the employer, but as a rough guide:

• For shorter contracts, a short notice period is typical of one week.
• For longer-term engagements, a notice period of up to one month is common, even if on a day rate.
• Clients can also choose to retain freelancers for a set number of days per month, allowing them to manage their time flexibly.

The Work Crowd’s Freelancing Glossary: Terms you need to know

Fixed-Term Contract (FTC): An employment contract with a specified end date. If someone is on an interim or FTC contract inside IR35, and they’re on the company’s payroll, they’ll be entitled to employee benefits. From April 2025, they’ll be entitled to benefits from day one, accruing employee rights immediately. If they’re on an agency or umbrella payroll, however, the benefits may differ from those offered directly by the end company.

Sole Trader: A self-employed individual who runs their own business and is solely responsible for its debts and liabilities. A sole trader must register with HMRC and complete a self-assessment tax return each year, they must register for VAT once they’re earnings reach the VAT threshold.

Limited Company: A business structure where the freelancer operates as a company director, keeping their personal and business finances separate. This structure offers tax efficiency and liability protection but requires compliance with HMRC regulations, including Corporation Tax, VAT (if applicable) and annual filings with Companies House.

Umbrella Company: A payroll company that employs freelancers and contractors for a small fee, handling tax and National Insurance contributions on their behalf. It simplifies compliance but deducts all employment-related taxes, including employer's National Insurance, from the freelancer’s assignment rate. Umbrella companies allow for multiple assignments under one employment contract, offering benefits such as statutory sick pay and pensions. However, freelancers should be cautious of non-compliant umbrella schemes.

Agency PAYE: A method whereby a recruitment agency employs a freelancer directly, deducting taxes and National Insurance before paying them, similar to a standard employee set-up. It eliminates the need for tax self-assessments but often results in a lower take-home pay compared to a limited company.

IR35: A UK tax regulation designed to prevent “disguised employment,” where a contractor operates as a freelancer but functions like an employee to avoid tax obligations. IR35 applies to those working through a limited company or intermediary.

Statement of Work (SOW): A document outlining the scope, timeline, deliverables and payment terms of a freelance project, ensuring clarity between freelancers and clients. A well-defined SOW can help determine IR35 status by emphasising a project-based, results-driven arrangement rather than an employee-like relationship.

Day Rate vs. Fixed Fee

• Day Rate: A set amount paid per day for a freelancer’s work, often used for flexible and/or ongoing projects. They often include much shorter notice periods for both parties, commonly a week.

• Fixed Fee: A pre-determined amount paid for completing a specific project, offering cost certainty to clients and clear expectations for freelancers. Usually, the freelancer will provide a time estimate alongside a fixed fee to manage client expectations. Then, if the client requests excessive calls, reporting, or check-ins which may impact delivery time, the freelancer may be able to push back and request additional budget.  

Value-Based Pricing: An increasingly popular pricing method based on output, and the value of output to the business, rather than just time spent. For highly skilled freelancers, this model provides higher earning potential, as it aligns fees with business impact rather than hours worked.

Retainer Agreement: A long-term contractual agreement between a freelancer and a client, ensuring consistent work and payment over a period. Retainers help businesses secure ongoing freelance support while also providing financial stability for the freelancer.

Gig Economy: A labour market characterised by short-term, flexible work arrangements, where professionals take on project-based assignments rather than permanent employment. The gig economy spans various industries, from creative services to consulting and IT.

Navigating the freelance landscape with confidence

Here at The Work Crowd, we really do understand that navigating such a complex landscape can be challenging. We hope this guide provides a little help and for more advice and information on this or how to market yourself as a freelancer, check out our latest LinkedIn Live discussion.

Alternatively, please get in touch with us directly to find out how we can support you.