Category Archives for Self-employment

Do I get sick pay as a freelancer?

In short, no. One of the main disadvantages of self-employment is that you no longer receive sick pay or paid holidays.  So, what can you do to protect yourself against the impact of an accident or ill health? In this post, I’ll outline the Government support available (hint: it’s not much) and explain some of the alternatives available.

What benefits do I get if I’m sick?

If you’re self-employed as a sole trader, you aren’t entitled to Statutory Sick Pay (SSP). Directors of limited companies can opt to draw SSP, but it would come from your own capital.1 Instead, you can claim the lesser-known Employment Support Allowance (ESA).

To be eligible for ESA, you need to have made National Insurance contributions. What you receive is partly dependent on your age and how many children you have, but the standard payment is currently £73.10 per week. You’re obliged to undergo a work assessment and then you are assigned to one of two groups: a work-related activity group where you’re interviewed about your job-seeking efforts, or a support group for those limited by disability. Failure to participate in the groups can result in benefit sanctions.

A successful claim for ESA means you can claim additional benefits, such as Support for Mortgage Interest (SMI).

Unless you lead a very modest lifestyle, ESA won’t be enough to cover your expenses. Let’s look at the alternatives.

Critical Illness Cover

Hopefully, you already have an emergency fund to keep you going for at least a few months. Most of us, though, would struggle to remain financially afloat in the event of a serious medical diagnosis. Critical Illness Cover (CIC) is an insurance policy that pays out a specified tax-free amount if you’re hit by a life-limiting illness such as cancer, stroke, or heart attack. The payout could help you pay off your mortgage, adapt your home, or make provision for dependents.

The cost depends on your age, lifestyle, and amount of cover.

Of course, these policies pay out only in extreme circumstances. For more common illnesses, you’d need income protection.

Income Protection

Income Protection Insurance is a policy that provides you with a guaranteed monthly sum if you’re unable to work for medical reasons. You can usually only insure up to 65% of your gross income, so payments would be slightly less than your net salary. This can be a good option to ensure your monthly outgoings are covered until you’re well enough to resume work.

There’s an important caveat for self-employed people. Some insurers would need two years’ accounts to prove your earnings. This would be tricky if you’re just starting out. If you have a limited company and pay yourself a small salary and a larger dividend, you should check that the insurer is covering your total income, and not just the salary element.

As income protection can be expensive, work out the minimum you’d need to cover your main outgoings. You could also opt for Short-Term Income Protection (STIP). As the name implies, it’s time-limited and therefore cheaper.

Conclusion

Obtaining critical illness cover and income protection can prove a significant monthly outlay. It’s important, therefore, to factor this into your business costs and how much you’re charging clients. If you’ve recently left a job to become a freelancer, you should consider the benefits you’ve sacrificed and which of those you need to replicate.

Everyone’s situation is different. Have a good long ponder about how you’d cope if you were unable to work for an extended period.  As a freelancer, you’re far more exposed, so you need to think seriously about protection.

For tips, tools, and resources on self-employment, please sign up for my monthly email.

Get in touch for a free no-obligation chat to see whether some coaching could help you plan your business.

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  1. In some instances, you can reclaim the cost from the Government. This depends on how your payroll is set up and is something for your accountant to advise on. []

Do I need an office if I’m self-employed?

You’ve decided that self-employment is for you, and you know what the world needs. Now it’s time to get yourself established. Where’s the best place to work? Is working from home a good idea? Or should you rent an office? And what about those fancy new co-working spaces where the cool kids hang out?

In this post, I’ll cover some of the advantages and disadvantages of working from home, using a co-working space, or renting an office.

Working from Home

Many freelancers opt to work from home for reasons of cost and convenience. Unless you have some space and privacy, though, it’s not always the right solution.

Advantages

  • Low or no cost. You can even claim some of the costs of using your own home as a business premises
  • No travel expenses or commuting time (unless the stairs are especially congested in the morning)
  • You don’t have to share your loo with anybody (apart from family members)
  • It’s easier to stay on top of domestic tasks, such as laundry and child-wrangling

Disadvantages

  • You might not have enough space. Working on the corner of the dining table isn’t ideal and almost certainly not good for your back
  • It’s harder to separate life and work. You might find you spend a chunk of the day taking in parcels, running errands, and deflecting chuggers.
  • If you need to meet clients regularly, you might not want them coming to your home (that could involve very high standards of housework).
  • Working on your own all day can be isolating.

Renting a desk in a co-working space

This is an increasingly popular option, with co-working spaces springing up in most cities and many large towns. Whether it suits you depends on the type of work you do.

Advantages

  • Gets you out of the house and maintains a separation between life and work
  • Forces you to get dressed and leave the house, rather than sitting there in your dressing gown all day
  • You’ll meet other people – potential collaborators, clients, and friends. There might be monthly networking events, too.
  • You often get access to facilities such as fast broadband, printing, and unlimited caffeine.

Disadvantages

  • It can be noisy. If your co-workers are in sales and marketing, they’re likely to spend most of the day on the phone. Some freelancers are much more interested in socialising than working.
  • There might be additional costs for hiring a meeting room to see clients. This could add up to a significant sum over the month
  • Cheaper co-working packages sometimes limit your access to standard office hours
  • If you have a lot of equipment or expensive gubbins, it could be necessary to hire secure storage space. The co-working space is likely to provide a desk and chair, but everything else is down to you.

Renting your own office

Many shared spaces also now office private offices with their own lockable door, although at a cost. This option comes with the most prestige, but it’s also very pricey.

Advantages

  • You get complete privacy and control
  • It’s ideal for meeting clients if you want to be on your own territory
  • There’s space to store all your stuff
  • It looks very professional with your shiny nameplate on the door

Disadvantages

  • This is, of course, the most expensive option. The cost depends on location, but you could be paying anything from £500-£1,000 per month for a single person office in the South East of England. You’ll need to pay a deposit (sometimes two months’ rent) upfront.
  • You might be liable for business rates, too.
  • And there’s the cost of furnishing and insuring your office.
  • You have to factor the cost into what you charge clients, which might make your rates uncompetitive.

My Experience

Earlier in my freelance career, I always worked from home. I was lucky enough to have a dedicated study of my own and few distractions (apart from inquisitive cats). However, I felt very isolated. Unless I made the effort to go out and meet people, I’d spend day after day alone until my partner came home. I’d interrogate her for news in a desperate attempt to get some vicarious stimulation.

I did a brief stint in an open-plan office, which was the other extreme. I found it impossible to focus and got very little done. Headphones and a forbidding expression weren’t enough to stop people interrupting me all the time.

When I started my financial coaching practice last year, I decided it was time to rent my own office. To ensure privacy for clients, I needed a dedicated space where we could talk. I didn’t want the faff of booking a meeting room for every session. Although many coaches run sessions only by phone or Skype, it was important to me to offer coaching in person.

My criteria for a suitable office were:

  • 24/7 access – I see clients during evenings and weekends. I also like to use my office for writing at odd hours.
  • A reception desk and waiting area – this means someone is available to greet clients if they arrive early and I’m still with someone else.
  • An event space – I run workshops and coaching groups, so it’s convenient if everything happens in one location.

Happily, I found the perfect space at Werks Central, and it was just about within my budget. Although it’s a big overhead for me, I think it was the right decision for my business. Knowing I have to pay the rent each month really pushes me to get on with marketing, too.

This office has also improved my quality of life. It’s an enjoyable 20-minute walk from home and I’m a short hop from the beach. I take a walk on the promenade most days and get some sea air into my sparrow lungs.

Conclusion

Renting your own office is a big step if you’re just starting out. It’s worth working from home or renting a co-working desk until you’ve got a decent monthly income. You could even mix the two. Some co-working spaces offer a one-day free trial or cheaper time-limited packages. If you do want a room of your own, make sure you understand all the costs. You’ll be locked into a contract for at least six months (often longer), so will need enough cash to cover the outgoings for that period, regardless of how much you earn.

Spend some time deciding whether it’s strictly necessary and working out if you can afford it. You won’t enjoy that swanky office if it’s plunging you into debt.

For tips, tools, and resources on self-employment, please sign up for my monthly email.

Get in touch for a free no-obligation chat to see whether some coaching could help you get started.

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Is Freelancing Right for You?

Do you dream of being as free as a bee? Setting your own hours, choosing the projects you work on, and enjoying more control over your life? Employees are increasingly shifting to freelancing, leaving their colleagues pea-green with envy. But is freelancing right for you? What are the advantages and the challenges?

Perversely, some of the main advantages of freelancing also embody most of the challenges. Here are my top three:

1. Unpredictability

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Most freelancers quickly discover there’s no such thing as routine. Either you’re scratching around for work like an impatient chicken, or three clients arrive all at once with a screaming deadline. If you are used to a consistent work pattern as an employee, this can make you feel out of control. There are no bosses to allocate the tasks – it’s all down to you.

Some people embrace this unpredictability. The adrenalin rush of a big project with a tight deadline is intoxicating. If you have caring responsibilities, though, this could be disruptive. You can’t always finish at 5pm or ensure your weekends are free for family time. There are no colleagues to cover for you and clients expect their deadlines to be met.

As a workaholic, I’m comfortable with accommodating sudden surges. What I find tough, however, is the need to keep marketing when I’m immersed in those priorities. Even when you’re super-busy, you have to line up future work. Otherwise, you’re heading straight for a slump. That means working long hours to get everything done, then going to a networking event and making small talk over vol-au-vents.

In short, it’s fun when the work comes in, but you never know whether it’ll be a drop, a trickle, or a torrent. Too little work can lead to despondency and financial difficulties; too much could mean burnout, lower standards, or turning down interesting projects.

The advantages of unpredictability:

  • No two days are the same, so you’re unlikely to get bored
  • You’re working on lots of different projects
  • There’s a buzz from a tight deadline

The disadvantages of unpredictability:

  • Competing deadlines are stressful
  • Your work/life balance suffers
  • Even when you’re busy, you still need to tout for business

2. Flexibility

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As an employee, you usually have a job description that sets out your responsibilities. Although freelancers have a defined skill set, clients often ask for something different. After all, they know you’re reliable and they’d rather not have to look elsewhere.

A few years ago, I ran a series of workshops for a client. Towards the end of the series, they asked me to host a webinar, too. I was appalled. I’d never run a webinar before and this felt like a major challenge. Although profoundly sceptical, I did my homework and worked out what I needed to do. It went really well and I now love delivering webinars. Unless that client had pushed me, I might never have tried it.

There have been other instances, though, where I was too flexible, attempting tasks that I didn’t enjoy and weren’t in line with my strengths. It’s good to be open-minded, but not at the risk of trying to do everything. Also remember that learning or further developing skills takes time, and time your client won’t necessarily pay for.

The advantages of flexibility:

  • You’re always learning new skills
  • Change is stimulating
  • You can move into new, unexpected directions

The disadvantages of flexibility:

  • You need to allow a lot of (unpaid) time for learning
  • Not everything works out
  • You can lose focus

3. Responsibility

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If, like me, you’re not a team player, self-employment could be a good choice for you. I like having complete control over my work, not having to worry about what other people are (or aren’t) doing. This means I get the credit when something goes well, but it’s also me who has to fix any problems.

When I worked as a freelance web developer, websites would inevitably go down at 4pm on a Friday afternoon. It was up to me to liaise with the engineers to get it up and running again, regardless of how long that took. I hadn’t done anything wrong (OK, sometimes I had), but it was my responsibility to oversee the solution. I couldn’t tell the client I’d take a look on Monday morning.

Reliability is crucial as a freelancer – that’s how you get repeat business. Making mistakes is OK, so long as you take full responsibility and fix them right away.

The advantages of responsibility:

  • You enjoy a high level of control
  • You can pursue your own standards
  • You get all the glory

The disadvantages of responsibility:

  • You have to fix stuff when it goes wrong. Immediately.
  • There’s no team to fall back on, so you’re highly visible
  • Things only go wrong at the worst possible time

Conclusion

As you can see, there are some distinct advantages to freelancing, and also some palpable challenges. It’s definitely not for everyone.

Over the next few months, I’ll be writing a series of posts covering some of the practical demands of freelancing, such as deciding how much to charge, managing cashflow, and investing in your business. If you’re still trying to decide on your niche, taking a look at my post on Finding Your Ikigai.

For tips, tools, and resources on self-employment, please sign up for my monthly email.

Get in touch for a free no-obligation chat to see whether some coaching could help you get started.

In the meantime, best of luck with your freelancing plans.

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