A man jumps from one cliff that says 'Employment' to another cliff that says 'Self Employment'. There is a deep ravine between both cliffs. There are clouds in the background.

Salaried vs self-employed – what’s best for you?

(Salaried vs self-employed – 3 minutes)

A man jumps from one cliff that says 'Employment' to another cliff that says 'Self Employment'.

There is  a deep ravine between both cliffs. There are clouds in the background.

The debate of salary vs self-employment has been going on since time immemorial. Now with the threat of a recession looming on the horizon, some of us are thinking of back-up plans should we get laid off. Lots of employees are looking towards self-employment as a means of surviving this recession.

But is the grass always greener on the other side?

Let’s take a look at some comparisons of salaried VS self employed work

Salaried vs Self-employed: Predictability

With salaried work, you know when you are going to get paid. This is great for planning your financial future. You know how much you can contribute to your mortgage. It’s easier to set regular deductions from your accounts to go towards your investments.

If you use the ‘bucket system’ of budgeting – it’s very simple to math out a set amount you need to go into your different accounts every time your pay comes in.

Being self employed means that you don’t know where your next paycheck is coming from. It can take years before you set up a steady stream of work. Even then, your income will vary from month to month. Budgeting your household expenses any further than 3 months ahead is challenging.

Salaried vs Self-employed: Stability

Initially, salaried work offers a lot more long term stability compared to self-employment. Predictability and stability go hand in hand.

However, big corporations and business owners will look to lay off staff at the first sign of trouble. That’s just how it is. So yes, while being salaried typically means job stability, the impact of a layoff is huge.

Bouncing back from a layoff is highly dependent on your skills, experience and the job market. Some of us make it, some of us don’t.

Being self-employed is quite chaotic at first. You have very few clients and you’re doing everything yourself. But over time, your client base will grow, you will develop processes and you may even hire staff. In the long run, self employment offers greater stability than salaried work. You will also find that your biggest worry isn’t paying yourself – its paying your staff.

Instead of having one big boss to worry about, you have hundreds of smaller ‘bosses’ in the form of your clients. If one of your clients leave you, it sucks – but it isn’t the end. If you are salaried, then if your boss decides they don’t want you – it hurts a lot more.

Salaried vs Self-employed: Structure and Freedom

Salaried work gives you a structure to work within. You turn up for work at 9 am, work through your tasks for the day and leave at 5 pm. Easy. Some people find this order to be reassuring and calming. You know what you need to do and how to do it.

However, some people find structure chafing. Cool new ideas and strategies are typically shot down in an employment setting. This inspires some people to take up self employment.

Self employment gives you more freedom to approach problems. Of course, there are still rules you need to follow (especially if you work in tax and compliance!). However you are less constrained by any ‘organisational standards’ and are able to fine tune your response to different client issues.

The drawback is that, as a business owner, you are responsible for motivating and disciplining yourself. Which can be exhausting at times. Some days even I feel like it would be nice to have someone tell me what to do for a change.

What works for you?

I don’t believe that salaried or self employment is better than the other. It all boils down to what works for you and what aligns with your financial goals. Remember that owning your own business doesn’t mean you’ll suddenly become wealthier.

Self employment and running a business is hard work. It can be years before you even see the fruit of your labour. A steady paycheck is still a valid way to build your personal wealth for the future.

If you like structure and predictability – stick with salaried work. There’s still a lot of demand for good workers in the business sector. If you can make a name for yourself in your field, there will be plenty of demand for you.

If you like freedom and long-term stability – you should go with self employment. No one can take your job away from you. You also get to approach your work the best way you see fit. Treat your clients well and they will refer more clients to you.

Regardless of your choice, I do have one final piece of advice – and that is to:

Stay positive!

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