Freelancer, contractor or employee – what is the difference?
It is decided by how the arrangement actually works, not by what the contract is called. An employee is marked by a personal duty to work, direction and control by the business, and little risk of their own. A self-employed contractor by responsibility for the result, their own equipment and real economic risk. From 1 January 2024 an employment relationship is presumed unless the engager makes it clearly more likely than not that there is none.
Employee
Typical features are a personal duty to work, direction, management and control by the business, integration into ordinary operations, and little economic risk of their own. The more the person looks like one of your own, the more heavily this weighs – regardless of what the agreement is called.
Self-employed contractor
Typical features are responsibility for the result, a duty to put defects right at their own cost, their own equipment and costs, independent organisation, and real economic risk. That last point is the core: does the person actually bear a risk that the engagement goes badly?
A freelancer is a third category
A freelancer carries out work or engagements without being employed, but without running a self-employed business either. The fee can be subject to reporting, withholding and employer's contributions. A freelancer is therefore not a way of avoiding payroll obligations – it is a category in between, with its own obligations.
The contract does not decide on its own
An organisation number, a sole proprietorship, an invoice or the word «consultant» does not settle the classification. A sole proprietorship is a factor, not an answer. Work through one's own limited company also has to be assessed on the substance – the Supreme Court's Bye judgment shows how much weight responsibility for the result and economic risk carry.
The presumption rule from 2024
From 1 January 2024 an employment relationship is presumed unless the engager makes it clearly more likely than not that the engagement is genuinely self-employed. The burden therefore sits with the engager. That is a real change: previously the person claiming to be an employee had to show it; now it is the starting point.
Employment law, tax and social security do not always agree
The Working Environment Act, the tax rules and the National Insurance rules have related but not identical classifications. For tax the key point is whether the work is carried out for the person's own account and risk. You can therefore in principle get different answers under two of the three regimes, and both have to be dealt with.
An engagement or hired labour?
In a genuine engagement a result or a service is bought. In hired labour, labour is largely placed at the customer's disposal. That is a separate line with its own, stricter rules – see Hiring in labour
What misclassification can cost
Getting it wrong can trigger corrections to the a-melding, advance deductions, employer's contributions, holiday pay, overtime and working-time claims, pension and insurance, and employment protection with a claim to permanent employment. The claims often arrive together and backdated. A «consultant» who has invoiced for three years can become an employee with three years of holiday pay owing. In regulated industries this can also come up on an inspection – see A labour crime inspection on site
A practical checklist
Is the person selling labour or a defined result? Who directs the work? Who is responsible for the result? Who bears the costs and the risk? Who provides the equipment? Can someone else do the work? Is the person integrated into the organisation? And can we document why this is a genuine engagement? That last question is the important one after 2024. The assessment should be written down when the agreement is made, not reconstructed when someone asks. We can handle the tax and payroll side of the assessment. Two industries where this line comes up constantly: hairdressing and beauty with chair rental, and transport and courier work with platform work
Read more
This is general guidance, not advice on your specific case. Deadlines, rates and amounts change – always check the current rules, or get in touch with us.
More on payroll and employees
- Your first employee – what has to be in place before the first payroll?
- Holiday pay – how is it calculated and paid?
- Sick pay and reimbursement from NAV – what is the employer responsible for?
- Employer's national insurance contributions – which zones and rates apply?
- Hiring in labour – when is it lawful?
- Expense claims, subsistence and mileage – what can be paid free of withholding?
- Temporary lay-offs – which rules and pay obligations apply?
- Employees abroad or foreign employees in Norway – what applies?
- A monthly checklist for the payroll run – what has to be done, and when?
Is it urgent?
We can work out what actually has to be done, what documentation exists and how quickly it can be sorted. You can also reach us in the evenings and at weekends.
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