Becoming fully self-employed is a dream career move for many people. Increasing your independence, controlling your work/life balance, making your own money, and being innovative and a decision maker are highly appealing to many people.
Self-employment has become a reality for people worldwide. In the UK, for example, more than 4.5 million people are self-employed; in the US, this number rises to 9.6 million. So, whilst at times fulfilling the dream of becoming self-employed may seem like climbing a mountain, these figures show it is a highly achievable goal.
If you are considering making the switch, take your time to reflect on whether this is the right career step for you. There is so much to think about when moving into self-employment and choosing between a guaranteed salary and career development over financial rewards, flexibility, and autonomy.
To help you make this decision, we have provided a guide to help you understand what self-employment entails, the advantages and disadvantages, and how we can support you.
What is Self-Employment?
When you are self-employed, you are working for yourself and generating your own income, rather than working for an employer who pays you a salary. In essence, you are your own one-person business.
Self-employment is common in most occupations, but self-employed individuals tend to be highly skilled in a specific area. Examples of roles with high numbers of self-employed workers are construction, financial services professionals, software developers, and solicitors.
It is possible to be employed and self-employed at the same time. For instance, you could be employed by a company during the day and run your business on the side in the evenings or at the weekend.
Regardless of industry and profession, weighing up the pros and cons of making the switch is always beneficial. By doing this, you are presenting a balanced argument that will leave you in a positive place to make a potentially life-changing decision. So let's start with the advantages.
Advantages of Self-Employment
Going out on your own and working for yourself means you have control over your daily processes and operations. Being self-employed allows you to be innovative, take risks, and explore new opportunities and avenues to grow and develop your brand. Whereas if a company employs you, your creative freedom is more limited as the leaders of the business will have the final say on significant changes within the organisation.
Since the Covid-19 pandemic, there has been a rise in the demand for flexible working options. In a recent study by Remote, 76% of employees now want flexible working options with a significant reason being an increase in a work/life balance. When you are self-employed, you are in charge of how flexible you want your work and lifestyle to be.
You can decide whether to work in an office or from home. It is up to you when you take your holidays and for how long. You just need to use your judgement and initiative of what works for you when making these decisions rather than relying on someone to make them for you.
One of the biggest reasons that people choose to go self-employed is the independence it brings. Choosing your destiny and direction and making your own decisions is a major pull factor for professionals making the switch. Furthermore, you have the autonomy to determine how you price work, deliver work, and who you want to work with.
Unlimited Income Potential
One of the most significant benefits that come with self-employment is that you have the chance to earn an unlimited amount of income. Whereas when you are employed, you earn a specific salary that is only raised when reviewed by the employer, in self-employment, your salary isn't capped, and you have a level of control over how much you can earn.
You can decide how hard you work, your hours, and how to grow your brand. Of course, with growth comes extra responsibility; for example, do you need to put some of your income into building a team to take on the increased work? However, going back to independence, these decisions around your money, time, and brand are entirely yours.
If you would like ideas about how to grow your self-employed brand and pipeline, discover our blog from our ‘employed or self-employed’ series.
Disadvantages of Self-Employment
Being employed versus self-employed gives many advisers the comfort of knowing they have financial stability and a guaranteed monthly income. Furthermore, being an employee means being protected by employment law in areas such as annual leave, sick pay, maternity leave, and working hours rights. In self-employment, these regulations and laws do not apply to you.
However, there are steps you can take to increase job security in self-employment, including:
If you have concerns about making the switch, you can always test out self-employment before fully committing yourself. Do freelance work or start your own business on the side of your main job.
This will help you understand the market and business opportunities in the sector you want to work in. Importantly you will establish if you enjoy working for yourself. If self-employment doesn't feel like a viable option, you have a full-time job to fall back on.
Join a Union
You may be asking why I need to join a union if I'm self-employed when I have no employer to dispute over pay and working conditions, and a manager can't dismiss me. However, being self-employed doesn't mean that you don't face issues in your work, and joining a union may quell some of your concerns about making the switch.
Unions can offer support in areas such as tax, insurance, negotiation of deals, and discrimination, all of which can be challenges in self-employment. This support can provide peace of mind around job security and mean you are not alone when facing a difficult situation.
Be Financially Astute
The financial implications are one of the most significant factors when deciding on self-employment. Some months your income will be higher than others, and you don't get paid when taking that hard-earned holiday.
However, the more financially organised you are, the easier this will be. First of all, before you start on the road to self-employment, ensure you have some rainy-day funds already behind you. Having savings set aside means you have increased financial security in more challenging months.
Secondly, many self-employed people have different bank accounts for different parts of the business. So, for example, you could have a separate bank account exclusively for customer payments. It is then easy to understand when a payment has been made, if it is correct, and which part of the business the money can be invested in. This also means you can keep on top of your customer accounts and ensure you are paid for your work.
Finally, as you are now self-employed, you are responsible for your tax affairs. While employees pay tax through the PAYE system, self-employed workers must complete a self-assessment income tax return form at the start of every year. Tax is only paid on a certain amount, known as the personal tax allowance.
Ensuring you understand the tax rules means that you avoid paying too much tax and stop you from getting into trouble with the tax authorities. It is also worth remembering that the tax for any income you earn in a particular year will be taxed the following year, so ensure you include tax when working out your profit margins.
When self-employed, you are your own boss and, as we have discovered, responsible for all aspects of your work and business. With so many responsibilities, it leaves little time for learning and development.
While you may not have the structured training programs that come with working for an organisation, plenty of training tools remain open to you. Stand-out learning tools include:
- Ted Talks
- Linkedin Learning
- Employment support services such as British Association for Supported Employment
These tools allow you to develop your understanding of a vast range of areas, including advice on self-employment, insights and updates on the industry you work in, and how to develop personally and professionally.
Being a self-employed adviser can mean working alone for long periods, which can be a significant change for people who are used to working in a busy workplace.
For some, the idea of working alone and their ability to choose what their comfortable level of sociability is is a significant advantage. However, for very sociable people, not having the same level of daily interaction can be extremely challenging when starting their self-employment journey.
Here are three top tips to stay feeling connected and supported when self-employed:
1. Change your Working Environment
Try to add some variety to your working environment. For example, avoid working from home all the time. Instead, if finances permit, consider an office space or a working hub, which have become increasingly popular post-pandemic. This flexibility will allow you to be around others and provide network opportunities. In addition, these workspaces may have extra amenities, such as gyms and yoga rooms, that you can use.
2. Connect with Fellow Self-Employed Workers
You are not alone in seeking social interaction as a self-employed worker. With social media sites such as Linkedin, you have the power of communication at your fingertips. Connect with other self-employed people, especially ones who live locally. These connections may lead to someone you can meet up with to discuss ideas and opportunities. If someone you've connected with lives outside of your location, then you can use communication tools such as Zoom and Teams.
3. Interact with your Client Base
You've worked hard to build your client base, so why not use it for some human interaction? Instead of just talking to them over the phone or on a video call, stop by and visit them in person. These in-person visits will add a personal touch to your business dealings and, at the same time, increase your social interaction.
Need Further Advice on Self-Employment?
Being employed or self-employed is a big decision; naturally, you will have many questions. At MCS Group, we have over 14 years of experience working with employed and self-employed advisers, so we know the nuances of each and the technicalities involved.
To learn more about the self-employed and employed roles we manage, contact our recruitment specialists for an in confidence chat.
Ensure you follow MCS Group for the next series, where we will look at how revenue splits work and if self-employed advisers are better rewarded.