Working for Yourself (Part 2) Blog

Working for Yourself
(Part 2)

Self-Employed v Employed

How many of you imagine leaving your jobs, starting your own venture, and obtaining success and freedom?

The Office for National Statistics commented that to November 2019.

there were a joint record 27.71 million paid employees (84.2% of all people in employment), 179,000 more than a year earlier.
there were a record 5.00 million self-employed people (15.2% of all people in employment), 145,000 more than a year earlier.
It is worth noting that earlier ONS figures showed that.
in 2001 the figure for self-employed workers was 3.3 million.
In 1999, the figure for self-employed workers was 890,000.

It is evident therefore that more and more individuals are choosing the self-employed option.

Being self-employed can produce certain rewards but working for yourself is hugely different from being employed by someone else.

Before taking the plunge, it helps to understand the differences which can be both good and bad.

Here are some comparisons

Responsibility

Clearly, many employees are in responsible and diverse positions, and many also have both specialised and/or widespread skills. However, many employers expect their employees to focus on limited task areas suited to the employee’s ability. That is the reason they were hired in the first place.

Individuals who are self-employed, however, are likely need an understanding of not only the main operations of their business but also sales & marketing, accounting, customer service, and I.T. This responsibility exists throughout the business world – regardless as to whether you might be a tradesman, professional, artist, or service provider. The responsibility stays with the self-employed even if the tasks are delegated to third parties or employees.

Paperwork

The self-employed might seem to be buried in a never-ending maze of paperwork. The start-up documents e.g. partnership deeds need careful thought – together with ongoing requirements such as registrations required, consultancy arrangements, contractor documents, sales contracts, invoices, rotas, permits, HR contracts, regulators, and many more.

Whilst the employed person may deal with paperwork in the course of employment, its not quite the same!

Risk

Self-employment brings with it a high-risk burden. When you work for yourself, your decisions and actions will DIRECTLY affect your INCOME. It follows then that poor decisions can be costly and may impact on you personally. On the plus side, wise and productive decisions are likely to benefit you personally.

If you have invested funds in your business, this investment will be at risk until your business reaches the point when this investment is paid back to you.

When you are self-employed, your income may substantially vary from month to month. Your trade might be seasonal or your cash flow dependent on external factors.

Employees are not risk free though – they also face risk, and if their employer struggles, they may be laid off or otherwise released from their employment. Employees can however more readily rely on a regular wage coming in as long as their work is up to scratch.

The self-employed take the risks but also the rewards.

Hours of Work & Holidays

Most employees work regular, anticipated hours each week, on a 5-day working week basis. They typically enjoy at least 4 weeks paid holiday each year on top of Bank and Public holidays. Furthermore, they may have pension rights, sickness pay benefits and other trappings such as memberships, company cars and bonuses.

When you work for yourself, it is not quite the same. Professional lives and personal lives are often confused by long hours and working weekends. It may cost you loss of income to take time off to go on holiday with the family!

Even being sick can cost the self-employed money.

Taxes

Employees receive payslips with tax, NI, and perhaps pension already deducted. The self-employed business owner must keep track of all the income of the business as well as any personal income taken and file returns at HMRC at certain intervals. Furthermore, accounts are likely to be required to be drawn up by a professional. Yet more paperwork for the self-employed!

Considerations

The reason why being self-employed appears so attractive is that the draw of the freedom, sense of accomplishment, and trappings of success for those who achieve it justify the hard work and risk.

Those who take the plunge and manage to successfully grow their businesses tend to achieve considerable personal wellbeing as well as financial rewards that many employees do not get to enjoy.

John Davies

22nd April 2020

Are you looking for change?

This is the second (you can find part one here) in a three part series exploring the pros and cons of working for yourself.

If your looking take that entrepreneurial leap, our perhaps a contractor or self employed individual (working via an agency or work arranger), please stay tuned for the final blog.

We be explaining what's needed to make what can be a life fulfilling change! In the meantime, you can check-out our "Business as Usual" template collection. It's packed with templates useful to the self employed and small business.

Can't find what you are after?

Well don't forget, as well as self service legal templates, we can offer a bespoke service ! It's easy to get in touch right here .