Put off self-employment? Four freelancing facts to make you undeterred
The government’s ‘provision for self-employed people during coronavirus’ was not one of the response options we offered the 1,000-plus people we quizzed in February to discover what puts them off ‘going’ freelance.
But as well as the 10 categories of deterrent we did offer, it’s clear that many creatives will in future consider the treatment of the freelance community over the past year of coronavirus before taking the leap into self-employment, writes Liza Haskell, chief administrative officer at Tide.
Before exploring that issue, let’s first look at the more classical factors that stop people from becoming their own boss. And after both of those, read on to find out how those factors can be mitigated so that daydreams as an employee can be turned into a commercial reality as a freelancer.
Whether it’s in the form of lost job security, perceived lack of financial security, lack of sick pay, the costs of setting up, or the loss of other employment benefits, most people delay going freelance because of money. Or specifically, money worries.
It’s worth sharing our quite firmly-held belief that regular employment often provides the perception of security and safety, more than the reality of security of safety. These days, no job is guaranteed, and you may be more secure if you are free to control your work, income, and safeguards.
Moreover, once you’re freelance, you open yourself up to the opportunity of having multiple clients, so potentially there is an element of increased stability compared to having just one full-time job. In practical terms, it means that if you are self-employed and have two clients, even if one leaves, then you still have the income from the other client to fall back on. Compare that to being in full-time work, because if you’re made redundant, then you have lost all of your income in one go (aside from any redundancy pay that you are due).
Interestingly perhaps, when we look at the 'r-word' as a push factor, only 4 per cent of people identified ‘Redundancy’ as their motivation for becoming self-employed, making it as much as a reason to freelance as caring for a relative is. So as a motivator, it ranks quite low -- behind ‘lack of viable alternatives,’ voiced by five per cent.
But it is ‘viability’ that has unfortunately weighed heavily on the minds of many creative industries professionals this last 12 months – industries which have a higher than average concentration of freelancers.
During the pandemic, the government put a range of support into place for businesses with employees, including loans, tax relief, and cash grants. Most notable was the furlough scheme, where businesses could apply for a grant to cover up to 80% of their employees’ usual monthly wages, up to a limit of £2,500 a month, per person.
Freelance-friendly support from the government during covid-19
In addition, the government announced the SEISS (Self Employed Income Support Scheme), offering a taxable grant worth 80% of average monthly trading profits to sole traders, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total.
The grants did not need to be repaid to those who were eligible, but are subject to income tax and self-employed National Insurance -- and must be reported on 2020 to 2021 Self-Assessment tax returns.
But the SEISS was (and is) widely viewed as inadequate, partly because millions of self-employed people still fall between the scheme’s gaps. Up until Budget 2021 -- so only last month, this included the newly self-employed (individuals who set up in business after April 6th 2019). Also ineligible and still ineligible because it was not addressed at the March Budget, are individuals with a PAYE/self-employment mix where less than 50% of their income comes from the self-employment. Freelancers and sole traders with trading profits of more than £50,000 are left out of SEISS coverage too, as are the directors of limited companies who pay themselves via dividends. Although such incorporated freelancers should have been able to get part of their salary covered under the furlough scheme referred to above (the Coronavirus Job Retention Scheme), the many groups left out has instigated an uproar. Many self-employed people feel that they have been excluded from any meaningful government support.
Another sad truth is that self-employed people operate with fewer rights and protections than full-time employees, and this issue in itself could be an additional factor which deters creatives from 'going it alone.' In fact, absence of ‘sick pay’ was the third biggest turn off to becoming self-employed, our February survey found, voiced by more than one in four of our sample.
But there are plenty of other ways to make freelancing feel more secure. You can ensure you always have a healthy mix of clients in different industries, and continue marketing even when you’re busy (so the leads never stop coming).
1. You can moonlight as a freelancer first
Unsure if self-employment will suit you? Or worried that you don’t have the creative skills or experience to make it work? (N.B. Fourteen per cent in our survey were put off making the leap because of ‘lack of confidence or belief in abilities’).
Well, you may be able to start freelancing during evenings and weekends -- just to get a little experience, learn about working with different clients, and explore how you will market yourself.
2. Those employment benefits? You're free to replace them with premium resources
Yes, leaving a job does mean becoming self-reliant. You will be in charge of every aspect of your income, prospects, and future. You will need to manage your own holiday allocation, sick pay, professional support, training, and development.
The good news is that these are all straightforward enough to do. But you can aim to do more than simply replace or replicate your experience of work – why do the same when you can do better?! Take this opportunity to create your ideal working conditions and practices.
3. As a freelancer, you can simply spreadsheet your way to clarity
Feeling nervous about the financials? That’s natural. Preparing financial forecasts may help ease your mind. Figure out your day rate, and then consider how many days you will need to work each month to cover your bills and expenses. How much money do you need to survive? And how much to thrive?
Plan to build a savings fund, and also consider other financial back-ups like income protection or critical illness cover.
4. The choice to take control of your own job security (and enhance it) is yours
Thirty-one per cent of people are put off self-employment because of ‘perceived reduced job security.’ It’s the second biggest deterrent, only marginally behind the largest obstacle -- ‘perceived risk of financial security.’
But as the pandemic has shown quite painfully, jobs can disappear overnight. While the same is true of a client, it’s much less true of all your clients. So as we advised above, make sure your freelance businesses relies on several clients for its turnover and your income. This automatically makes you more secure, because the ‘risk’ is diversified.
Time to go freelance? Only you can really know the answer
Going freelance is not right for everyone, and it’s undeniable that you will need to work hard, push yourself in new directions – and possibly face some scary moments. But on the flip side, going freelance will open doors, potentially boost your income, and dramatically change the way you work and live. You’ll also get a control and autonomy that employees crave! If you decide that freelancing is right for you, remember that -- allowing for a largely unforeseen global pandemic -- there are ways to minimise the biggest risks, and make the most of the limitless opportunities.