Are You Best Suited To Employment or Freelancing?

Employment, entrepreneurship and freelancing are all viable ways to earn a living. There are, however, important differences between them. Finding the one that works best for you can make a world of difference to your mental health and wellbeing. With that in mind, here is a quick guide to help you work out which option is best suited to you.

The basics of employment vs entrepreneurship vs freelancing

Employment is when you work for someone else. Entrepreneurship and freelancing have vaguer meanings. In general, however, entrepreneurs are people who set up their own companies to sell goods or services. They are in charge of the company but the company is its own entity and as such can be divided and/or sold.

Freelancers are typically sole traders. This means that they are legally registered as individuals who act as businesses. Freelancers are their businesses and vice versa. That means freelancers can’t sell on the business they grow the way entrepreneurs can. If they decide they want to do that, they need to become entrepreneurs.

Choosing between employment, entrepreneurship and freelancing

Here are the four key questions you should ask yourself when choosing between employment, entrepreneurship and freelancing.

Do you prioritise stability or flexibility?

Even today, if stability is a high priority for you, then you would probably be better suited to being an employee than an entrepreneur or freelancer. With that said, the differential is less than it used to be. On the one hand, employment is much less secure than it was in the past. The days of “a job for life” are now long gone.

On the other hand, employers are now increasingly looking for employees prepared to show flexibility. They’re also increasingly willing to show flexibility in return. For example, remote-/hybrid-working was on the upturn long before the pandemic because employees wanted it.

Likewise, being an entrepreneur or freelancer may offer less flexibility than you might have imagined. In simple terms, you’re going to have to make yourself available when your clients need you. That means you’re probably going to have to follow much the same work cycle as you would if you were an employee.

With that said, as an entrepreneur or freelancer, you are likely to have a lot more control over the specific hours you work. This is particularly true if your work is task-based so you’re dealing with deadlines rather than schedules.

How much legal administration are you willing to tackle?

As an employee, all you need to do is ask provide the information for pre-work checks such as your right-to-work check. As a regular freelancer, you will need to register for tax and file tax returns. You may also need to arrange insurance coverage.

As an entrepreneur, by contrast, you’ll have more administration to handle, potentially a lot more. To begin with, forming a limited company takes more paperwork than just registering as self-employed. With that said, you don’t need to do it all yourself. There are companies that can organise your company formation and registration from £12.99.

Once your company is up and running, you not only need to register for tax and pay tax returns, you’ll also need to file statements at Companies House. You’re also likely to need some form of insurance and potentially some accreditations you can show (potential) clients.

If you stay as a one-person operation, this will essentially be all the administration you need to do. If, however, you start to take on employees, then your administrative overhead will increase.

For example, you’ll have to deal with PAYE, auto-enrolment and employer’s liability insurance. You’ll also need to be able to demonstrate compliance with relevant laws such as the Equality Act 2010.

Are you happy to be the face of your company?

In the world of employment, there are roles to suit both extroverts and introverts. If you love being in the limelight, then you could be perfect for jobs that involve presenting. This could mean anything from sales to teaching. On the other hand, if you prefer to be out of sight and out of mind, then there are plenty of options for behind-the-scenes work.

In the world of entrepreneurship, by contrast, you are almost certainly going to have to become your company’s figurehead. Essentially, you’re going to have to go out there and promote it until it can stand on its own without you. This reality is why successful entrepreneurs can become celebrities, even if only local ones.

Freelancing is more of a grey area. Realistically, if your ambition is to chase the highest earnings, then you’ll probably need to hustle for them. If, however, you’d rather have a quiet life out of the limelight, then there are still a decent amount of options. For example, you could work mainly through freelancing platforms where portfolios and reviews tend to be the key means of promotion.

There’s also a decent bit of space in the middle. This could suit people who’re happy to do some level of promotion but within limits. For example, if you’re not thrilled about getting in front of a camera and doing YouTube, you might feel more comfortable doing podcasting or blogging instead.

How comfortable do you feel about self-management?

This is arguably the make-or-break question when choosing between employment, entrepreneurship and freelancing. As an employee, you will always report to someone else. Even if you’re the CEO of a company, you’ll report to the company’s owner(s). If you’re an entrepreneur or freelancer, by contrast, then you’re entirely your own boss.

As your own boss, you’re responsible for managing both your own time and your own finances. This includes working out where your strengths and weaknesses lie and what to do about them. No matter how honest you are with yourself, it can be very difficult to analyse your performance as effectively as a good manager can.

Even as an entrepreneur or freelancer, you can get help from other people. In fact, it’s very common for entrepreneurs and freelancers to work with mentors. It is, however, down to you to find them and work with them. You are not going to have a manager to build a development plan for you and guide you through it.

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