Working from home is the dream of many workers today. The home office replaces the daily commute, allowing individuals to work at their own pace. Before seeking out such an opportunity, it would be wise to consider the pros and cons of self-employment.
What Are the Pros of Self-Employment?
1. You get to set your own hours.
When you are self-employed, you get to work when you want to work. Clients might set deadlines, but you get to decide which clients receive work. This allows you to have flexibility in your schedule throughout your day.
2. You set your own rate of pay.
If you want to be paid $100 per hour for the services you provide, then you can request that rate. There isn’t a guarantee that you’ll be hired, of course, but you do get the opportunity to earn what you believe you are worth instead of what an employer says you are worth.
3. You have the opportunity save money.
There are numerous ways that you can save money when being self-employed. It starts with the commute and traveling expenses. You get to eat at home instead of eating out on a regular basis. You can drink your own coffee. Plus all of your office expenses have the potential to be tax write-offs, which lowers your overall profits and tax responsibilities.
4. You get to pursue something you love.
A focus on self-employment allows for the opportunity to pursue something that you may be passionate about. The focus shifts from earning a paycheck to earning a paycheck doing something that you love to do. As an added benefit, those who are self-employed typically earn more than their traditionally employed counterparts.
5. There are still benefits that you can access.
Groups of self-employed individuals have come together to create healthcare insurance associations so you can gain access to a high quality plan without paying a small fortune. There are self-employment 401k opportunities available as well. You won’t have the employer match, of course, but any matching out of business funds that you give yourself could reduce your current tax responsibilities.
6. You don’t have to justify the time off that you need.
If you want to take a mental health day, then you can do so when you’re self-employed. There is never a need to “seek permission” from a boss because you want to step away from your workload for a day. If you have an extended illness, you won’t need some sort of permission to return to work. You work when you’re ready and don’t when you’re not ready.
What Are the Cons of Self-Employment?
1. You pay a higher effective tax rate.
Taxes for those who are self-employed are a standard 15% on all profits made in the United States. Those who are self-employed are also required to pay the employer’s share of taxes that are levied by the government, such as for Medicare or Social Security. This can make for an effective tax rate of at least 23%.
2. Down time equals unpaid time.
If you have an equipment failure at your home office and can’t work from home, then you don’t earn money until that problem gets fixed. This rule also applies to sick days, vacation days, and other time off you may need to take.
3. You only get paid for delivered work.
Self-employment is different that telecommuting because it typically happens on a contracted basis. This means you only get paid for the deliveries you make. Time spent gathering resources, sending messages, and other administrative tasks must be built into the final cost quotes and not every person who is self-employed remembers to do this.
4. You are competing with others who are doing the exact same thing.
There is always someone who is willing to work longer hours than you. Or work for a cheaper rate. When you are self-employed, there is always pressure on you to perform at your very best so that someone else doesn’t take your spot.
5. It can become a lonely experience if you are not careful.
Working from home, being self-employed, does take you out of the social networks that a formal workplace provides. You can avoid this isolation somewhat by working in co-op locations, coffee shops, and other gathering spots, but at the end of the day, being self-employed is basically you against the rest of the world.
The pros and cons of self-employment show that it can be a beneficial setup for those with an entrepreneurial spirit or a desire to get rid of the daily grind. As long as the negatives are recognized and have a plan of action developed for them, it can be a very rewarding experience.