Becoming a freelancer can be both exciting and scary. Exciting because of the prospect of freedom and control. But scary because of the risks you inevitably open yourself up to as a freelancer.
The risks are great enough that if you’re a freelancer already, you’ve probably asked yourself countless times by now whether it’s actually worth it. But if you’re just starting out or thinking of making the leap into self-employment, it’s important to be aware of the possible rewards, but also the potential risks in advance.
To help guide budding freelancers, IPSE has conducted a survey of its members to find out about their biggest concerns and whether the rewards really do outweigh the risks.
Why take the risk?
So, why do people take the risks? Experts aren’t entirely clear on this, and there are many different theories. One popular view is that, by and large, people are willing to take risks because they anticipate significant rewards.
Starting and running your own freelance business can certainly be extremely rewarding. It is well documented that many people decide to go freelance out of a desire for greater control over their careers, and past research by IPSE has shown that working for yourself can have a very positive impact on personal wellbeing.
This most recent study set out to discover what exactly it is about freelancing that makes it so rewarding. Four out of five respondents said the most satisfying elements were not having to deal with office politics (82%), and having the freedom to choose projects they actually want to work on (81%).
As well as giving people the freedom to pick and choose their projects, freelancing also significantly increases earning potential.
In fact, 79 per cent of IPSE’s respondents said this was another of the most rewarding aspects of freelancing.
This correlates with the results of IPSE’s quarterly Confidence Index, which has consistently shown that UK freelancers earn up to 2.5 times more than employees in equivalent roles.
The survey also showed that not having to deal with company bureaucracy and having greater variety of work are two more of the most rewarding aspects of being a freelancer.
From this perspective – as a career free from bureaucracy and filled with professional freedom and financial prosperity – it’s hardly surprising some people just dive straight into freelancing without worrying about risks and potential challenges.
But freelancing isn’t just easy rewards: there are risks and challenges too, which you need to consider and prepare for.
What should you prepare for?
One of the biggest risks freelancers fear is that they will not be financially prepared for their retirement. In fact, 69 per cent of IPSE’s respondents said this was among their biggest concerns about working independently.
The state of the current pension system and how it works for the self-employed was also a significant concern for almost half of those surveyed (46%).
Many of the pension options on offer at the moment just don’t work for the self-employed because they don’t take into account key factors such as fluctuating incomes and periods without work. As a result, many self-employed people find themselves struggling to save for later life.
Another of the main risks for freelancers is being investigated by HMRC (65%). Not only do HMRC investigations cause considerable anxiety for freelancers, they are also a significant financial burden.
Many freelancers (60%) also fear not being able to work as a result of illness or injury. As a freelancer, you aren’t entitled to either holiday or sick pay, so it will pay – literally – to factor in downtime and non-working periods when you negotiate your rates.
IPSE’s survey also showed that for many freelancers (60%), the availability of work is another major concern. The good news, however, is that IPSE’s Confidence Index has consistently shown high activity in the freelance sector, so perhaps this is more of a perception than a reality.
Is it all worth it?
More and more people are following their dreams and going freelance, braving the risks to pursue the rewards.
And with more people than ever before breaking out of the nine-to-five grind to become masters of their own destiny, the big question is: are the rewards actually worth the risks?
Well, most freelancers seem to think so. The vast majority (83%) of those surveyed said they felt the rewards they get from self-employment outweigh the risks.
Clearly, even fears about retirement savings and HMRC investigations can’t overshadow the advantages of having full control of your career.
Freelancing will always involve a degree of risk, but based on these results, perhaps the biggest risk of all is not taking one.
Preparation, preparation, preparation
The more you understand the challenges of freelancing, the less likely you are to be hit by nasty surprises. There are bound to be bumps in the road, but by preparing for potential disruptions, you will put yourself in a much better position to overcome them and enjoy a genuinely rewarding freelance career.
By Kayte Jenkins