Employment vs. Self-Employment: Key Factors to Consider

The UK has experienced significant changes in self-employment patterns in recent years. The pandemic, combined with the increased availability of high-speed internet and changing work demands, has influenced the landscape of self-employment. As of 2023, there were approximately 4.23 million self-employed workers in the UK, according to data from the Office for National Statistics. This represents a decrease from the peak of over 5 million in early 2020, largely due to the impact of the COVID-19 pandemic. Despite this recent decline, the number of self-employed individuals remains significantly higher than the 3.2 million recorded in 2000, reflecting a long-term trend towards increased self-employment in the UK workforce.

So, what might tempt you to make the switch to the world of self-employment? And what factors might you need to consider before doing so? Let’s take a look.

Responsibility

When you’re self-employed, you have absolute control over every aspect of your business. This includes finance, marketing, sales, equipment, and operations. This contrasts with a salaried lifestyle, where these decisions might be taken on your behalf by a larger organization. Of course, with this responsibility comes a duty to oversee things like safety, and to invest in personal protective equipment and other essential items.

Tax

If you’re self-employed, then you’ll be responsible for paying the right amount of tax, rather than relying on PAYE. This means keeping records, which in some cases might justify hiring an accountant or administrative assistant.

“Self-employment provides several benefits. First of all, the earning potential is generally much higher than in a traditional job. A survey showed that some freelancers make 100% more on their own than they did while working at a full-time position.” – Are You Self-employed?

Income

Self-employed people should expect a little bit of inconsistency when it comes to payment. In some cases, this inconsistency is more pronounced and may require a little bit more judgment and prudence. For example, if you’re an artist doing a single one-off project over many years, you might lack a reliable income on a month-to-month basis, and be more vulnerable to interruptions.

Perks and Benefits

If you’re self-employed, then you’ll have to pay for everything – which means no built-in perks and benefits like company cars, holidays, pensions, and sick pay. This means that your take-home pay will be effectively much less than you’re bringing in. If you fall suddenly ill, or you’re injured in a workplace accident, then you could be left without any means of generating an income. You can offset this risk with the right insurance – but then this will add to the amount that you pay each week.

Freedom and Flexibility

One of the greatest perks of self-employment is the freedom it affords you to set your priorities and strike a healthy balance between your personal and professional lives. If you have commitments with family, then you can build your schedule around them. If you want to work every hour of every day, then you’ll have the freedom to do that, too. You can sometimes even refuse work because you don’t feel like doing it – which is often frowned upon when you’re being employed by someone else.