By Dave Chaplin
Freelancing can deliver skilled knowledge workers a huge range of benefits, which makes working for yourself such an attractive option compared to being employed. Higher pay, improved professional satisfaction and greater flexibility are just some of the benefits.
However, freelancing does not suit every worker, as there are some challenges associated with starting and running your own business. But, with the right support, none of these challenges are insurmountable and you will find that finding new work, keeping your skills fresh and taking care of business administration become commonplace.
Dave Chaplin is the author of The Contractors’ Handbook – Third Edition, which provides all the advice freelancers and contractors need to know whether they are new to freelancing or experienced old hands. Here he offers the key pros and cons of working for yourself that you might want to consider before taking the plunge.
Five good reasons to go freelance:
Increased earnings: you should find that you benefit from increased earnings in two ways: you are paid more per hour/day than an equivalent employee, and the favourable tax treatment design to encourage entrepreneurs means you take home more pay compared to an employee.
Great variety, work/life balance and flexibility: Most contractors list variety as the number one benefit of contracting. You choose your assignments and clients, so you can choose only to work on projects that interest you. It is amazing how much better many people feel when they have control over their own destiny. If you work for yourself, that’s what you will have. If you plan to use your increased earnings to subsidise taking the school holidays off with your kids, or learning to sail, that’s your choice. If work is everything to you, then you can spend all 52 weeks of the year in contract, which is your choice.
Holidays: When you are between projects, you can choose to take as much or as little time off as you like. Plus, because you are earning more, you have to work less to make the same amount of money as when you were employed.
Training: You choose which skills to develop and what training you take. Most contractors find they gain much greater satisfaction, and return on financial investment, when they are in control of their own skills development.
No more office politics: Being self-employed means you are independent from your clients, and are normally not line managing people. You no longer have to schmooze your boss for that promotion/pay rise/week off/training course/flexitime – you are your own boss! There is no pressure for you to put in excessive hours (you get paid by the hour/day), work weekends (unless paid) or strive for promotions to secure wage increases (if you want more money, you can simply choose a better paid contract, or put your fees up).
For many workers, freelancing is the answer to their work and lifestyle prayers. You can continue to perform a role that you love, train and develop your skills at your own pace, and choose when and where you work.
But it does not suit everyone. You must acquire a whole set of expertise, which we call ‘freelancing skills’, to ensure that you stay in work, earn the highest rates, keep your skills fresh and run your business compliantly and efficiently.
Five bad reasons to go freelance
Downtime between jobs: If you are not working then you don’t get paid. But by learning contracting skills and keeping your technical skills up-to-date, downtime should be minimised but you need to constantly be on the look out for the next project.
Skills and development: As a freelancer, you no longer have a human resources department or talent management team on hand to ensure you are properly trained and qualified to fulfil the roles you deliver. Some contractors find this liberating, others a chore
Safety net: You no longer have an employer who will continue to pay you if you are ill, or offer benefits such as death in service life insurance, medical insurance or a pension. You must take responsibility for each of these aspects of your physical and financial wellbeing. And if you don’t work, you don’t earn which means you don’t get paid holidays. What you should find, though, is that you are earning so much more that you can afford to take time off.
Time spent running your business: There are two main models of contracting: running a limited company or using an umbrella company. Each of these requires a degree of time spent on administration. On balance, though, admin time is being constantly reduced as contracting service providers develop new tools allowing you to minimise the time you spend running your business
IR35: This is a limited-company-contractor-focused piece of tax legislation that will crop up whenever you search around contracting online, or delve into contractor forums. Falling foul of the legislation can remove many of the financial benefits of contracting. But, by adopting some simple measures and IR35 best practice, you should be able avoid handing over more of your cash to the taxman than you need to.
Armed with the pros and cons, the choice can only be yours. The question is, do you always want to be asking yourself ‘what-if?’ Don’t forget that you can always return to the permanent workplace if being self-employed doesn’t suit you. But if you don’t take the plunge, you’ll never know what you’ve missed!
Dave Chaplin is author of The Contractors’ Handbook – Third Edition, which provides all the advice freelancers and contractors need to know whether they are new to contracting or experienced old hands