Why Self-Employment is right for you

Please note information regarding self-employment is continuously changing and is based on information from the UK. Your country, state, or region may have different rules. Therefore, this article is meant to be a guide regarding the potential advantages of self-employment and before making any decisions please speak with an accountant or legal representative.

Can you remember a time before the internet and social media? Back then advertising was done on television, the radio and the newspaper. Phone books were how customers found you. It meant, working for yourself was an investment in a physical property and spending a lot of money on advertising. So, for many people self-employment was not an option.

After to banking collapse in 2008, saw a surge in self-employment and again, with coronavirus, COVID19, there is another surge in people looking at self-employment.

Unlike 20 or even 10 years, with the internet and social media, it is a lot easier to reach an exceptionally large audience very quickly.

What does it mean to be self-employed? This article will discuss it while looking at the advantages and some of the issues you need to consider.

Self-Employment versus Employment

How does self-employment differ from employment? This will vary by country and location; however, the defining features include:

Control – being self-employed means you have control on how the work gets done along with determining your rate of pay and what assignments you will undertake.

Length of work – means you will work on a specific piece of work for a defined period. You will not work for one business for an indefinite period.

Tools – you will typically provide your tools to complete the work. However, there are of course exceptions. Such as working in IT, the company may need to provide you software to authenticate your pc on the network or to limit access on their intranet.

Pay & terms – you have significant ability to negotiate your terms and pay.

Location – You may work on site for the business or you may have your own location.

Taxes – expenses are paid by you along with all taxes

Business structure – In order to minimise your taxes and pay for expenses you will need to opt for some type of business structure. Usually this is a limited company or in some cases a corporation.

Loss of employment rights – Your rights and obligations are contractual versus legislated. This means any dispute is not handled by an employment tribunal or the appropriate government agency but by the courts.

Self-Employment versus Agency Work

For clarity, I will briefly discuss how self-employment differs from agency work. Both, agency and self-employment, means you are not employed by the business. Also, both are there to work on a specific piece of work. The difference is twofold. First, when you work as someone who is self-employed your rights and responsibilities are defined in a contract. However, an agency worker does not have a true contract. Second difference, the agency controls the worker and can pull the worker at any-time for any reason. This means the agency work is very much at-will.

What is Self-Employment?

With an understanding of the basics of how self-employment differ from employment. The question naturally turns to pay. On self-employed basis, you will typically earn about 30% more than if you were hired by the business and you can dictate the frequency of pay (e.g. weekly or monthly).

At this point you may be thinking self-employment is the way to go. Stop, and think about it. The higher pay requires you to pay your accountant, pay VAT, pay taxes, and expenses relating to your business. Plus, you will need to have an income while there are any gaps between jobs. This will mean, you will need to determine a reasonable income and save the rest to help you make it through the lean times.

Length of Work & Type of Work

Next area, regarding self-employment is length of work. For you to be truly self-employed you must be employed for a specific piece of work that has a defined end date. Length of work can vary but it is no more than 2 years. To be clear, if you are involved in a multi-million-pound project and it is going to last more than 2 years, it is possible to remain a contract. However, you will begin to lose certain tax advantages if you are likely to remain at the same workplace for more than 2 years and it may, also, begin to raise questions regarding your exact employment status for tax purposes.

It is this author’s opinion, anything that may last more than 2 years will require to speak to appropriate tax and legal representative to advise you of your status.

Control

Third area regards control. Control is a broad area covering areas like, how the work gets done, who provides the tools, who decides what is done, where the work is done, and hours worked.

Right to Sub-Contract

Closely related to control is the right to self-contract the work. If you are self-employed you have the right to sub-contract the work whereby you retain the obligation of the contract but can assign the benefits to someone else. In an employement situation the right to sub-contract is lost.

Location

For someone, such as an IT contractor, this can become an issue but someone, for example, providing entertainment for a party, then location will not be an issue.

For someone who may have a contract lasting more than a year, then line between self-employment and employment can become blurred if you are working at the same location for more than a year. It is important for tax and legal purposes to understand the implications of the proposed working arrangements in order to enusre you are protected.

Taxes

Being self-employed means you are responsible for all taxes and tax related issues. The amount of taxes will depend on the size and structure of your business.

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@copyright exclusive career advice 2020

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Author: admin
Before moving to the United Kingdom, I worked in the U.S.A as a supply teacher who primarily taught math and taught at alternative education sites (e.g. juvenille detention, behaviour classrooms, and sites for students that were court ordered).When I moved to United Kingdom I chose to draw on my adaptive software skills knowledge. Whereby I developed administration and IT skills. Through my hard work I progressed into a senior health care manager role.I have several years experience in interviewing, reviewing applications and managing a team. Drawing on my experiences, I have created this site to help you.

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