Your are probably more familiar with being employed than you are with self-employed, but luckily for you we have an expert to explain the benefits of self-employment vs. employment.
There are benefits to being self employed and employed and depending on financial circumstances, work life balance and attitude to risk will determine which you choose. You may even want to be both.
What’s the difference between self-employment vs. employment?
When you are employed you are considered an employee of a company, which means you receive a regular income, holiday pay and other benefits. Your pay will also be taxed at source by your employer.
On the other hand someone that is self employed works for themselves and owns their business, and is responsible for paying any tax that is due.
What are the benefits of employment?
Working for a company is probably going to be most peoples experience of the working world, and comes with weekly or monthly pay in return for you being under contract.
When you are under contract with a company this means you receive certain benefits such as a paid holiday each year, a pension which your employer may/or may not contribute to, and sick pay.
You also have the security of knowing that whilst you are under contract you will receive a regular income each week or month. In most cases your income will be a constant which in itself is very comforting. You also have the security of employment law which protects you whilst you are are under contract.
If your fortunate to work for a large organisation you will be surrounded by people of different ages and experiences. This presents great networking opportunities to progress your career as well as opportunities presented by your employer to gain further qualification, which can lead to an increased salary.
What are the benefits of Self-employment?
The advent of the gig economy has given people increased opportunity to work differently, to progress careers and start their own business. One such business opportunity is working for delivery apps, and you can read this article if you are interested in finding out how much do uber eats drivers make.
Who doesn’t want to earn more money, and self employment allows you to do this. Being able to choose how much you charge for your services or products allows you to increase your earning potential.
Working for an employer has been many peoples only opportunity to work, however self employment has given people greater independence. Making your own decisions when self employed is an appealing prospect, allowing you to choose how you work rather than being dictated to by a boss.
I have already discussed the power of self employment allowing you to choose how you work. It also allows you to choose when you work. Choosing when you work is a major factor in why people move to being self employed, as its allows flexibility to set your own hours of work to fit around family commitments. If your profession allows it, you have the ability to work from a coffee shop one day, and work from the kitchen table the next. It’s this type of flexibility which makes self employment very attractive.
Conclusion: Benefits of Self-Employment vs. Employment
Factors Affecting Flexibility of Self-Employment vs. Employment
Flexibility may be a major factor when choosing how you plan on earning an income. If you plan on being self-employed then its a major win for choosing how and when you work, who you work for and who you don’t.
Being able to work flexibly to suit your family life or trying to strike that perfect work life balance is very appealing. As someone that is self-employed you get to choose your customers and projects or companies that you want to work with, which can ultimately make for a happier lifestyle.
If however you choose the employment route unfortunately you don’t get the same type of flexibility you do as someone that is self-employed. This is because when you are employed you are bound by the working constraints of the company you work for. Your hours of work, which tasks you have to carry out, and when you can take holiday are mostly at the choosing of your boss.
Factors Affecting Income and pay of Self-Employment vs. Employment
Where employment lacks the flexibility of self employment it can make up for in terms of consistency of income. When you are employed as I have already mentioned, you are contract bound and therefore receive a consistent salary each week or month, which is very reassuring and allows you to plan and budget over the longer term.
However, over the longer term, when you are self employed you may not enjoy the same kind of income each week or month. When you are self-employed you are responsible for generating business and clients to work for and if you don’t you wont get paid. If you are somebody that is motivated by this type of working then self-employment is for you, if you aren’t and you prefer the consistency of a weekly or monthly salary then employment will be a better option.
When you are self-employed the better the job you do for you customers the more work you are likely to get as ‘word of mouth’ is the best form of marketing your business. This success allows you to charge more for your skills and work, and might mean that you are are able to earn more than somebody that is employed for a similar role. Whilst you can of course progress and increase your pay when you are employed you are not in control of the final decision for pay, that is your boss so should be taken into consideration.
Did you also know that when you are self employed you have the option to set yourself up as a Limited Company which has many positives and negatives. You can read the article Self-Employed or Limited Company; Expert Explains Which Is Better i have written which gives more information on setting up your business.
Working Environment of Self-Employment vs. Employment
The working environment can be very different for self-employed people compared with employed.
Working in an office or factory as we have discussed above brings both social and networking opportunities.
If you enjoy this type of working environment you may want to consider this before going self-employed. Being self-employed might mean that until your business takes off you are working by yourself for a lot of the time which can limit your socialising opportunities.
Conversly, not working in an office maybe something your enjoy. After all you will save time commuting each day which could allow you to spend more time with your family.
Pension scheme of the self-employed vs. Employment
As an employee of a company, by law you are automatically enrolled onto a pension scheme which both you and the employer contribute towards, which in the long run is very beneficial.
If you self-employed however you don’t automatically get entered into a pension scheme so the responsibility falls with you to set one up and contribute to. Having a pension in place as a self employed person is one of the most overlooked pieces of financial planning, after all you are not going to be able to work forever.
Ugo Tax 