Sunday, April 21

Employment vs Self-Employment: Which is Right for You?

Man with a bag and book walking on the road.

When searching for a job, your opinions for positions fall into two categories: employment or self-employment. Regardless of what you choose, there are advantages and disadvantages to both. Understanding their differences will help you decide which is more suitable for your needs.

The Differences Between Employment and Self-Employment

To find an employer who’ll meet your needs, navigate here. But before you go, you’ll need to decide if you want to pursue regular employment or switch over to self-employment.

1. Definition

An employed person works for a company for an indefinite period, is entitled to benefits, and receives a fixed salary. A self-employed person runs their own business and typically works on a contractual basis. They earn money by collecting profits and aren’t entitled to certain benefits.

2. Independence

An employed person has to work under the direct supervision of managers and often doesn’t have a say in general business matters. A self-employed person represents themselves and can work when they want, where they want. They can choose to hire, fire, or deny client work.

3. Profit-Making

An employed person doesn’t make additional profits if the business is experiencing growth, despite their labor playing a part. A self-employed person will have access to their total profits and can negotiate pay for services. However, they also have to manage company losses.

4. Responsibilities

An employed person typically does what’s asked of them and isn’t responsible for supplying their own tools. A self-employed person performs a wide range of business responsibilities that stay consistent across industries (accounting) or specific to their role (social media influencer).

5. Environment

An employed person has to follow the rules of their workplace while they’re within it. These rules revolve around dress, work hours, lunch, or decorations. A self-employed person has control over their work environment and can dress how they want or eat and work when they want.

6. Earned Benefits

An employed person often receives benefits, like paid leave, pension, life, dental, and medical insurance, through their employer. A self-employed person can pay into those benefits per their opt-in and receive tax benefits for their premiums. They can also take time off without approval.

7. Work Hours

An employed person typically has a standardized working schedule that they must abide by, or they’ll be reprimanded. A self-employed person often has a flexible work schedule, but they often work over 40-hour weeks. Self-employment doesn’t guarantee a better work-life balance.

8. Job Security

An employed person often has a more secure job and is guaranteed a paycheck on their usual schedule (typically bi-weekly). A self-employed person may face more job security risks and isn’t promised a paycheck every single week. It can be hard to find clients in some fields.

9. Financial Risks

An employed person won’t bear the business’s operating costs or financial risks, and they’re protected if the company declares bankruptcy. A self-employed person bears the full risk of their startup but can minimize these risks if they keep their personal and business finances separate.

10. Tax Burden

An employed person can split their tax burden with their employer, which slashes the amount they have to pay in half. A self-employed person has to pay their entire tax burden. But, they can take advantage of a few deductions that allow them to save more money on their expenses.

In Summary

If you’re someone who prefers structure, inexpensive benefits, and job security, then consider employment. If you’re someone who values your independence, profit potential, and flexibility, then become self-employed. You can also try the gig economy if you’re not sure what to choose.

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