Home Business, Telecommute, Freelance, Contract... What's the Difference?

Which Work-At-Home Option is Best for You?

Work-At-Home Choices
Which work-at-home option is best for you?. Tuomas Kujansuu | Getty Images

Like many industries, the work-at-home arena has many terms that often get mixed up or used interchangeably. Sometimes these terms are purposefully used as a form of deception. For example, some home-based opportunities will use the word “job” to suggest steady work when the offer isn’t employment. Of course, some people will use the word “job” for any type of work. But when it comes to working at home, it’s important to understand the distinctions between the different options, so you know what you’re getting involved in.

Here are the basic differences between having a home business, being a telecommuter or working as a freelancer.

What is a Home Business?

A home business is an entrepreneurial effort. You own and are the boss of the business. Just because a business is run from home, doesn’t mean it’s a part-time, side-line, or small-time venture. Many entrepreneurs run multimillion dollar companies that have employees from the comfort of home. Many large companies, such as Google and Disney, started from home.

Advantages of starting a home business:

  • Do work you enjoy. You can turn your passion or hobby into a home business.
  • Get paid what you’re worth. Especially for women, who typically earn less than men for the same job, a home business allows you to set your price.
  • Flexible schedule. This allows you to work around your family's needs or give more time to personal pursuits.
  • Manage the work in the way you see fit. If you've ever had a job that you felt could be done better, you'll love a home business because you can decide the best way to get things done.
  • Additional tax perks. Home businesses come with a variety of potential tax deductions that can save you money.

Disadvantages to running a home business:

  • The success of the business rests on you. It's a heavy burdon when every decision, every result, good or bad, rests solely on you.
  • No guaranteed income. Unlike a job, there is no guaranteed salary. 
  • Income fluctuations.Some times you'll be flush with cash and other times, money will be tight. You need to be smart with your home business budget and make sure you don't waste money.
  • May need to work more hours to achieve success. Especially during the start-up, you may work more hours than you would in a job.
  • Lack of resources. Many home business has little money and often no help.
  • More tax implications. While there are tax perks, there are also tax rules you need to follow.

While there are pros and cons to self-employment, ultimately, the best reason to start a home business is the ability to do what you want, how you want. Starting a business can be fast and affordable with proper planning and management.

What is Telecommuting?

Telecommuting, sometimes called telework, is a term used to refer to home-based employment. In this case, a company hires an employee that works at home or some other location. Like other forms of work, telecommuting jobs can be done part-time or full-time. Some offer salaries and benefits, while others don’t.

Pros to telecommuting:

  • Wages or salary offer a more stable income. One of the biggest appeals of telecommuting is a stable income.
  • Once you’ve been hired, the need to hustle for work (as in a home business) ceases. Like a traditional job, unless you get fired, the need to search for work stops once you're hired.
  • Ability to work from home or other location as acceptable to the employer. Depending on your employers wishes, you can work while you travel or from a java joint.
  • Some flexibility in your schedule. Many telecommuting jobs offer flexibility to set your schedule or take time off if needed.

Cons telecommuting:

  • Pay and hours are often lower, especially for non-technical or non-professional jobs. Most non-professional telecommuting jobs pay only $8 to $15 per hour.
  • Less flexibility than self-employed or contract workers. While you might have some flexibility, employers still have a lot of power in dictating when you work and whether you can take time off.
  • Most don’t offer benefits .Especially in the non-professional jobs, you may not have benefits.
  • Telecommuting jobs are not any more secure than other jobs.Just because you have a stable income in a job, doesn't mean your job is secure. Employers fire and lay off employees too.
  • Finding jobs can be a challenge if you don’t know how and where to look, or how to avoid scams. It's crucial to learn about telecommuting and do your research before seeking a work-at-home job.
  • Work-at-home jobs are extremely competitive. It can take months, even years to get hired.
  • Isolation. This isn't only for telecommuting. Any time you work from home, by yourself, you run the risk of feeling alone.

Although recent reports suggest that telecommuting is waning, more and more businesses are turning to virtual workers to save money while having access to the best workers regardless of where they live. That means, you need to be at the top of your game and be a responsible, accountable worker to get hired and stay employed from home.

What is a Freelancer/Contractor?

Both freelancers and contractors are self-employed, like in a home business. However, in the case of contractors, they can be “hired” full or part-time, but are paid as independent workers, not employees. That means they’re like freelancers or home business owners and need to do self-employment taxes.

One difference between a freelancer and contractor is that some companies that hire contractors will ask for a non-compete agreement meaning you can’t provide the same or similar service to businesses in the same industry. While you might be asked this as a freelancer as well, generally you have more control over what you do and who you work with as a freelancer than a contractor.

The benefits of freelancing or contracting are much the same as having a home business including a flexible schedule and greater independence than given in telecommuting jobs. But the negatives are similar as well, including no benefits, more complicated taxes, less job security, and isolation.

What Work Option is best for you?

Deciding what work-at-home road to take can be difficult. If you like the freedom and flexibility to make your own choices, and don’t like being restricted by a company’s rules and policies, then a home business or freelancing is ideal. However, if you like structure and the security of stable income, a telecommuting or contract job might be a better option.