EMPLOYEE VS SELF-EMPLOYED

What is the better option? Working for a company as an employee or working for yourself?

A lot of people will tell you that you need to work for yourself and that working for yourself IS THE ONLY WAY TO MAKE A LOT OF MONEY or THE ONLY WAY TO BE HAPPY AND FREE. But I like to think into things a bit more to get down to the truth.

In this article, I am going to assume that being self-employed means that you are an independent sole business owner. I’m not comparing working for a company to owning a big business with employees. I’m comparing working that job to its equivalent sole business.

For example. Working for a company as a plumber vs working for yourself as a plumbing contractor.

Now, some examples of some independent service based businesses are,

Plumbing

Electrician

Other trades

Pest control

Car detailing

Car tinting

Cleaning

Selling insurance

Selling real estate

Gardening

Pool cleaning

Hair dressing/beauty

Computer fixing

Graphic design

Book keeping

 

Most of these businesses you can set up with a small upfront investment and little training. Most of these businesses you can set up with just a phone, internet connection and some equipment and because these are services that people need you have a pretty low risk of failure if you work hard to get clients.

 

Ok, let’s get down to it.

 

If you earn $50,000 from your job as a plumber or $50,000 from being a plumbing contractor you still earned $50,000 a year. So which is better? It depends, being an employee vs being self-employed has its pros and cons.

 

EMPLOYEE PROS AND CONS

 

PROS

 

You get paid a retirement fund amount (called superannuation in Australia and 401k in USA, in Australia your employer pays you 9% of your salary superannuation on top of what you earn)

 

So in the above example you earn $50,000 a year you get $54,500 however you can’t access that $4,500 until you reach retirement age.

 

You get paid when you call in sick.

 

You get paid a regular salary so you know how much and when you will receive money.

 

You get annual holiday leave and get paid for it.

 

You don’t have to chase business.

 

You don’t have to do extra paper work like bookkeeping, invoicing etc.

 

Other employees can help you and do some of your task if need be.

 

You can’t get sued as easily.

 

If there is a big fuck up the company usually pays for it instead of you.

 

Usually you can switch off at the end of a day and leave work at work.

 

Opportunity to further training/education at company’s expense

 

Social interaction with other employees.

 

CONS

 

Can’t generally increase your earnings unless you get promoted or do overtime.

 

Hourly rate might be quiet low; $50,000 is about $25 an hour.

 

You need to work 40 hours a week to make $50,000 a year.

 

The commute to work every day.

 

You need to seek approval when you want a day off or a holiday.

 

You need to bring in doctors certificates if you call in sick on a Monday or Friday.

 

Bad bosses and bad co-workers.

 

You may hate your boss and co-workers.

 

You need to answer to your boss as well as clients (who aren’t really your clients)

 

Lack of autonomy/freedom.

 

Set time breaks, unpaid breaks.

 

Any pay rises are likely to be minimal and infrequent.

 

If the company succeeds you are not likely to feel any of the effects.

 

SELF EMPLOYED PROS AND CONS

 

PROS

 

You can make what you normally make in a day in an hour or two. Take our plumbing example. Instead of working 8 hours for $200 you can go do one job and make that in a short amount of time and take the rest of the day off.

 

If you are busy and self-employed you can make way more than you would if you were and employee. And if you are quiet and self-employed you will experience great work life balance. I believe this is the major benefit of being self-employed.

 

For example. You make $200 in 2 hours as a self-employed plumber. That’s 10 hours a week for $1000 and roughly $50,000 a year.

 

If you are busy enough to do 4 jobs in a day that’s $800 a day and $4000 a week. That’s roughly $200,000 a year!! Of course you need to take out running cost out of both examples but you get the concept. That is the power of working for yourself.

 

However not all services pay so well, you will need to work more hours to make $200 in cleaning, lawn mowing and many other services. This is why you need to pick wisely.

 

Answer to no one except your clients, but they are your clients now so you will be happy to make them happy.

 

You can take a day off or weeks of when you want (provided you don’t have to service clients and you have the funds)

 

More flexibility and freedom in your day.

 

More pride and independents.

 

The freedom to fit work around your personal life.

 

Escaping the commute (In some cases)

 

CONS

 

Lack of employment security.

 

Lost earnings if you take days off or go on holidays.

 

Taking work home with you (paperwork, issues)

 

If you work alone, you can become isolated as you don’t have the staff at a company to socialise with. (This is effects some people more than others)

 

You need to pay for all the cost involved in running the business like,

 

Insurance.

Your own retirement fund if you choose.

Company van registration, fuel, insurance, maintenance.

Phone plan and internet.

Book keeping, advertising.

Fuck ups.

Tax.

Equipment.

 

Those are some of the pros and cons of being and employee vs being self-employed. What you need to do is have a think to yourself and decide what is best for you. Don’t believe everything you here about how you have to be self-employed to make lots of money. If you are working for yourself washing cars for $20 a pop I can guarantee you someone working as an employee for $100,000 will be making way more than you once you take out all the running cost of the business and all that.

If you want to learn more about why you should start an independent service based business, Will Freeman from revolutionary lifestyle design has a great article here.

But maybe you want to choose self-employment for the freedom it can provide or some other reason. The choice is yours. I hope with my article you can make a better decision.

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