Self-employed professionals are often referred to by recruiters and clients as contractors or freelancers. Contracting and freelancing can be extremely rewarding, but there are some concerns that may arise when professionals are first breaking into the world of self-employment.
We’ve addressed some of these concerns and have tried to dispel a few common myths about being self-employed in the UK.
Myth 1: Being self-employed is risky
It may be true that job security is more of an uncertainty in the world of contracting and freelancing, but the amount of risk you have is the amount you give to yourself. When you are self-employed you are not relying on bosses or upper-level management to provide you with employment and job security. Being self-employed means trusting and believing in yourself alone to find work and earn a comfortable living.
Myth 2: Self-employment is more stressful than permanent employment
If you left a permanent role to become self-employed, chances are there was a good reason to do so. Many professionals choose to switch to self-employment to increase their earning potential, develop their personal and professional skills and have more flexible working hours. That’s not to say there isn’t a possibility of stress – being responsible for your own tax matters can be daunting – but with the right support, the benefits of being a contractor or freelancer far outweigh the shortfalls.
Many skilled professionals have caught on to this, which is why the contractor industry now makes up 15% of the UK workforce – a 21% increase of self-employed workers from 2008 to 2015. Find out why so many professionals are switching to contracting and freelancing.
Myth 3: You have to work ridiculously long hours
Some think that being self-employed means working at all hours of the day and night just to earn their keep. While working for yourself requires a certain amount of dedication, you can choose to apply for contracts that suit your desired lifestyle. You can set your own working hours and as long as you complete the work required, you can spend the rest of your time doing whatever you like.
Being an efficient contractor or freelancer calls for a high level of focus, especially if you’re a consultant working from home. Read about how having your own workspace at home can increase your focus and efficiency.
Myth 4: It’s hard to find work unless you go through a recruitment agency
Recruiters are great at helping you find the role you’re looking for, but they aren’t the be-all and end-all of finding contract work. It’s important to have a good recruiter on your side as they can find you roles quickly and with minimal search effort on your part, but it is possible to find good work on your own. You can do this by keeping in contact with your past clients and networking with potential future clients via online forums, exhibition events and meetups.
It’s also important as a professional to have a complete LinkedIn profile, where you can include your skills, past roles, education, and current position. Read our helpful contractor’s guide to LinkedIn profiles for advice on how to optimise your professional profile.
Myth 5: It’s impossible to find contract work when the economy is bad or unstable
Hiring generally fluctuates depending on the state of the economy, but you should know that hiring temporary workers for contracts doesn’t necessarily suffer more than permanent employment in times of economic uncertainty. If anything, clients tend to look for more temporary workers in uncertain times or to fill supply gaps in specific areas of skill.
Have a look at one of our previous blog posts for tips on how to find new contracts.
Myth 6: You have to do all of your accounting by yourself
When people hear the word ‘self-employed’ they tend to think of how old-school sole trader types take care of business, i.e. keeping piles of receipts and spending hours organising business and tax affairs. However, there are other options available that minimise the administrative burden, such as working through an umbrella company or having your own limited company.
A good accountant that specialises in the contracting and freelancing industry will be able to provide these options to you, and can understand your tax and accounting needs better than a traditional high-street accountant. Contractor accountants can also handle your payroll, invoicing and bookkeeping so that you don’t have to spend stressful hours poring over piles of paperwork. Read more about finding a good accountant.
Myth 7: Limited companies are only worth having if you have a long contract
Limited companies sometimes have the stigma of being ‘too much hassle’, especially when you have a contract of three months or less. While the financial benefit of a limited company does become most apparent when consistent contract work is undertaken, don’t let that stop you from allowing yourself the best opportunity to increase your take home pay.
Some contractor accountants, such as Churchill Knight, can put your company into dormancy whilst you are not contracting instead of closing the company altogether. This allows you to quickly begin using your company to pay yourself again as soon as you pick up another contract role.
Myth 8: Umbrella companies are the easiest option
Umbrella companies are similar to PAYE (Pay As You Earn) in that they take care of paying your taxes, such as National Insurance and Income Tax, by deducting them from your gross pay before you receive it. This way you don’t have to think about how much tax you need to pay, and you can carry on with your contract work. However, this is not the most efficient option if you want to increase the earnings you take home.
Having your own business by way of a limited company allows you to increase your take home pay by as much as 15% compared to an umbrella company. A good contractor accounting service will also take care of the majority of the administration burden for you without you having to buy complicated accounting software. Read more about limited companies vs umbrella companies and decide which option is best for you.
Still not convinced that becoming self-employed could be a rewarding career move? Visit our blog for helpful tips and tricks to help you make the most out of being self-employed.
We are always on hand to advise you on the best payroll options for you and help you maximise your take home pay. Contact us on 01707 871622 or request a callback to discuss your accounting options in a free consultation.