Self-employment is an option for workers in many career fields and industries. It can help you start, advance, or round out your career. Read about different types of self-employment, and then read about some of the pros and cons to self-employment.
Gig employment. You may have been hearing of and reading about the so-called gig economy with more and more frequency over the past few years. But there is no official definition of the “gig economy”—or, for that matter, a gig. The U.S. Department of Labor defines a gig as a single project or task for which a worker is hired, often through a digital marketplace, to work on demand.
Some gigs are a type of short-term job, and some workers pursue gigs as a self-employment option; those concepts aren’t new. However, companies connecting workers with these jobs through websites or mobile applications (more commonly known as apps) is a more recent development. Learn more about working in a gig economy from the Bureau of Labor Statistics.
Freelance. Being a freelancer isn’t necessarily different than working in the gig economy. But the term is often used to apply to more skilled and long-term projects. Freelancing simply means you offer your unique skills or talent on a pay-for-service basis, outside of a regular employer-employee relationship. Common freelance options include:
- Web design
- Repair work (specializing in jewelry, furniture, vehicles, or other areas)
- Personal training/fitness coaching
Start your own business. Running your own business isn’t necessarily different from freelancing: some freelancers are running their own business, and even employing others to help them conduct their business. But here, we’re talking about running a business that has a physical location and/or employs others to make or sell goods or provide services. You might do this by starting your own business, buying a stand-alone existing business, or joining a franchise program. Learn more about planning, launching, managing, and growing your business from the Small Business Administration.
Is self-employment right for you?
Working for yourself can be a great way to tailor your work to your specific talents and interests. It can also be a great way to be able to set your own schedule and workplace expectations. But, being self-employed can have challenges too. It’s best for people who are motivated and able to keep themselves on task. Check out these lists of benefits and challenges to self-employment to help you decide if it’s right for you.
Benefits to self-employment
Opportunity to do what you love. It can be easier to tailor self-employment directly to your own interests, skills, and values than it is to match those qualities as an employee. As your own boss, you get to choose which projects to accept or decline as well.
More flexibility. You can have more say over your hours, location, and working conditions such as dress code, break times, environment, etc.
Expenses. There are some work-related expenses you can often cut when you’re self-employed: you’ll often spend less on your commute and your wardrobe, and you can usually save more tax-free for retirement as well as deduct additional business expenses (but read about taxes in the below list of challenges too!)
Challenges to self-employment
Lack of benefits. Don’t underestimate the value of benefits you might receive as an employee. Employer-paid portions of health-care, retirement contributions, education reimbursement, and paid time off can add up to l nearly 40 percent of a salary.
Increased risk. It’s true you can’t get fired when you’re your own boss, but you also have no paycheck to fall back on when business is slow or something else goes wrong.
Taxes. Taxes can—but don’t always have to—become more complicated in self-employment. Depending on your situation, you might have to hire an accountant. And while there are some tax advantages, don’t forget that you also have to pick up the half of employment taxes (Social Security and Medicare) that employers are responsible for—that adds another 7.5 percent to your tax rate. Read more about self-employment tax form the IRS.