Last week I dove into the differences in mindset that separate freelance workers from regular full-time employees: things like how you view your job, how you schedule your time, and how you relate to coworkers. (If you missed that post, definitely check it out before you read this one!)
I had a lot to say (and the post title definitely grabbed people’s attention!), but I’d be remiss if I didn’t talk about the negative aspects of working for yourself as well, since it’s not all wine and roses.
Interestingly, when I talk to full-time employees about differences in our working lives, a lot of them are quick to point out the cons of self-employment, which they’ve clearly given a lot of thought to. In some cases, though, I think they focus on the cons because they don’t know how they would handle them if they were working for themselves.
I recently heard an entrepreneur on a podcast say that even though starting a business in the internet age is easier and involves less risk than at any point in history, people still feel scared to try it. That’s because they’re stuck in a pre-internet mindset, where working for yourself involves a lot of start-up capital and could cause you to lose everything, which was more common with brick-and-mortar businesses.
I don’t consider being a creative person with alternate self-employment income to be a high-risk venture, but there are plenty of challenges you have to deal with. As such, here’s a list of those challenges, along with how I handle each one.
No Benefits
This is the drawback that every full-time employee I talk to mentions first. “But how do you get health insurance?” they ask, or “What happens if you get sick?” They come at self-employment with the mindset that the job you work should provide benefits that allow you to live and make your way in the world, eventually leading to your retirement and separation from the working world forever.
However, here’s the thing people don’t think about: literally every benefit that a job gives you can be purchased by bringing in extra money.
Here’s a quick list of benefits that traditional full-time jobs offer their workers, and how self-employed people can get them too:
Health insurance
Most jobs pay the majority of an employee’s health insurance costs. However, freelance workers in America can buy health insurance through HealthCare.gov, which also helps them apply for no-cost Medicaid if their business income is below a certain amount.
Retirement
A lot of American companies offer 401(K) retirement plans, where employees can contribute to a retirement plan and the company will match it up to a certain amount. This is of course a great deal, but self-employed people can still open their own IRA (Individual Retirement Account) and put in up to $6,500 a year, though without the employee match.
What happens when you want to invest more than $6,500 a year toward your retirement? I’ve been looking into a special retirement account for self-employed people called a SEP (Simplified Employee Pension Plan). While I don’t contribute enough to my retirement right now to gain tax benefits from a SEP, it’s REALLY good to know about as an option for future.
Sick Days and Vacation Days
Most full-time salaried jobs offer some sort of sick/vacation day plan, so if you catch a cold or want to head to Hawaii, you can essentially get paid for not going to work.
Well, you can’t really buy sick days as a self-employed person, but you can charge more money for services to cover the days you don’t work. (More on that in the next section!)
Figuring Out How to Charge For Your Work
This is, no joke, REALLY stressful. When I first started editing, I had no idea how much editors charged and how much my time was worth as a rookie.
Fortunately, though, my first few editing jobs came with set budgets, so I didn’t have to worry about pricing out my time. For more casual jobs, I also used a Pay-What-You-Want system where clients could set their own prices depending on their financial situation and the quality of the work. I don’t do many Pay-What-You-Want jobs anymore, but I still offer it to friends, people experiencing financial hardship, and younger people just starting out.
As I expanded, though, I started getting more clients who asked me the dreaded “What do you charge?” question, which left me stumbling and baffled about how to respond. My current system evolved by trial and error, but I now stick close to the Editorial Freelancer’s Association chart for different kinds of editing work, and have basic starting rates posted on my website, which can be hourly or per word depending on the kind of job.
Figuring out what to charge, though, can be REALLY stressful, and based on what I’ve read online, freelancers setting their prices too low is a more common problem than setting their prices too high because they’re afraid of being turned down or scaring away customers. While pricing low can seem like a good idea to get more jobs, it can lead clients to question the quality of your work, along with burnout and financial stress when you’re not bringing in enough money.
Now, to tie this back to sick days and other benefits: standard freelance rates per hour should be higher than what regular employees make per hour because regular employees get benefits and self-employed people don’t. The extra cost that freelancers charge per hour goes to cover health insurance, retirement, and business costs while also covering the self-employed person when they need to take time off for illness or a break.
No Overtime Protections
Longtime followers of this blog will know that I’m a big believer in overtime protections for employees to stop them from getting taken advantage of by companies who can essentially get them to work for free. While American overtime laws under the Fair Labor Standards Act (FLSA) are complex and should really be updated for inflation, the basics are that if non-exempt workers work more than 40 hours per week, they have to be paid time-and-a-half (1.5 times their regular wage) for extra hours worked.
However, self-employed people don’t fall under the FLSA, which means that if they work over 40 hours, they still make the same rate without overtime benefits. Of course, they could charge more for their services when they’re busy and know that they’ll be spending more time at the desk, but this requires careful planning and might cause you to lose jobs if customers don’t want to pay your fee. (I occasionally find myself in a position to do this and have lost the job about half the time, which left me wondering whether I’d made the right choice.)
Overall, though, overtime laws give companies incentive to keep workers at their desks for a reasonable amount of time per week. Self-employed people, though, have to set their own boundaries, which brings me to my last (and biggest!) drawback…
Too Many Deadlines and Too Much Overwork
This might be an unfair disadvantage, because there’s PLENTY of jobs where bad timing or incompetent management leads to everything being due on the same week. For self-employed people, though, when this happens the responsibility is all on you, and deadlines can come from all different sources that have nothing to do with one another but all have to be done at once.
I struggled with this a lot during the fall, when I took on too many projects and gave clients unrealistic expectations of when I could finish them, especially when issues in my non-work life came up that I had to take care of. I found myself working every night, sitting down at my desk on weekends, and overall scrambling to take care of everything.
This wasn’t a good situation to be in, but I had no to blame but myself.
In the long run, though, it taught me a LOT about making promises and setting expectations. It also influenced the importance of understanding my own schedule and keeping a work rhythm, which in turn has helped me plan future projects more efficiently. Now, I always err on the side of caution if I’m not sure I can deliver something within a certain timeframe.
Still, though, overwork and burnout are very real, and I’m trying to be more reasonable with what I take on and how I structure my work time.
Final Thoughts: Know the Advantages and Disadvantages of Different Kinds of Work
I wrote this two-part post partly because I was meeting a lot of people who had preconceived notions about the self-employed life: for example, that being employed full time was the only way to get health insurance. I also wrote it to keep some of my own biases in check: for example, to remind me that being in control over your own schedule often means scrambling for deadlines from different sources.
Overall, though, I think creative people planning out their work lives should first look at how much time and space they need to do their creative work, then find a working style that allows them to do that work the way they want to. As a writer who wants to devote more time to writing, self-employment has allowed me to structure my days so that my writing comes first, as well as allowed me to pay my bills without spending 40 hours per week on non-creative projects.
For you reading this, the work setup that best allows you to balance your creative goals might very well look different than mine, and that’s OK. It’s important, though, to understand what options you have open to you, and to not make assumptions that could stop you from moving forward.