Pros and Cons of Self- Employment
A recent survey revealed that there are 44 million self-employed people in the US, and this number will continue to grow in the future. With each passing year, more and more people are choosing to leave their regular employment. This trend is because there are quite a few benefits to being self-employed. However, there are also disadvantages. So, choosing whether to be independent or not boils down to comparing the pros and cons. Read on to discover the pros and cons of self-employment:
What Is Self-Employment?
A self-employed individual is different from an average employee in one fundamental way: There is no consistent wage.
In a situation where an employee receives a consistent wage by his employer, a self-employed person receives different compensation based on the contract. So, there is no set amount of income for an independent individual.
Another thing that differs between a self-employed/independent contractor and an employee is the withholding of the tax. Unlike regular employees, the employer withholds no charge when it comes to a self-employed individual. There are also other differences, but these are the important ones.
Pros and Cons of Self-Employment
There are several benefits and drawbacks to being a self-employed person. Therefore, you must carefully weigh in the options before you make a decision. The following are some of the benefits of self-employment:
One of the most attractive things about self-employment is that there are no set working hours. You can work whenever you like and for how long you like. Also, you can take a day off whenever you want to. This kind of flexibility in timings is not available to regular workers.
Work from Anywhere You Like
A self-employed person can work from anywhere in the world if the nature of the job allows it. For instance, if you are a writer, all you need is a computer and an internet connection, and you can take your work with you anywhere.
No Upper Limits on the Income
A self-employed person has no upper limits when it comes to income. Where a regular employee earns a set amount of salary, an independent person can make far more or far less depending upon the work he does. It is excellent for self-motivated individuals who have the potential to earn more than at their regular job.
Since no tax withheld from self-employed people, they have complete control over their charges. Also, it means that there are possibilities for tax deductions.
For instance, self-employed people can deduct their internet and phone expenses, that they use for business, from their taxes. Similarly, if you pay for your health insurance, which a self-employed person does, you can deduct that from the tax as well. You can also deduct your travels and meals if they serve a business purpose, and many more…
You Are Your Boss
Perhaps, this is the most significant advantage of self-employment. There is no boss to answer to, no meeting to attend to, and none of the other stuff. You own your business, and you decide how to run it.
Some of the cons of self-employment are as follows:
No Fixed Income
The self-employed have no fixed income. You do not know how much you are going to make which breeds income uncertainty. As a result, self-employed people need to manage their expenses more rigorously than regularly employed people.
Increased Home expenses
If you predominately work from home you might experience higher than normal bills. Since the internet is essential in remote working you may have to upgrade your internet package, also with more time spent at home you might notice an increase on your energy bill. To maximize on profitability of your business you will need to find ways to keep bills down by implementing good energy efficient habits as well as comparing Eversource electricity rates to make sure that you have the best rate. Another option is to vary your working location from time to time, a bench at the park or a coffee shop. Not only can this help your sanity but it can also help decrease your home bills as well.
No Employment Benefits
Self-employed people receive no employment benefits like paid leave and health insurance, etc. You have to pay for everything. So, if you do not have any money, you will not have any benefits.
If you are self-employed, then you are going to pay more taxes. Self-employed people spend the entire 15.3 percent of the payroll tax. Regular employees only pay half of this 15.3 percent because their employer pays the other half.
Self-employment has many benefits over regular employment. It also has its fair share of drawbacks. So, ensure you research these factors extensively before making a final decision.