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Why a person would decide to work for someone as an employee rather than becoming self-employed

Self-employment is a term used to describe people who work for themselves. The person who is self-employed are their own boss as they have set up their own business and are making money from that business. However, there are many reasons why a person would prefer to be an employee rather than be a self-employed person.

Some of these reasons can be broken down into financial disadvantages and non-financial disadvantages of being self employed.

Financial disadvantages of being self-employed

Irregular Income

A self-employed person's wage relies on how much money the business has made at that time. Throughout a working year, there may be months when the business may have done very well and so the self-employed person may get paid quite a lot, however there may be other months when the business has not done so well and so the self-employed person may have a low income.

When a person is an employee, this would not be a worry as they will get a set/agreed wage every week or month and would not have to rely on how much profit a business is making.

No holiday/sick pay

A self-employed person will usually get paid for when they work. So therefore when they are not in the business (or not in work) because they are away on holiday or they have to take time off work because they are sick then they will not get paid.

When a person is an employee, there are workplace laws that entitle the employee to receive a certain number of holidays' pay and sick pay so the employee never has to worry about falling sick.

No pension

Unless of a self-employed person sets up a private pension scheme of their own and puts their own money away in to that then they will have no pension when they retire from work.

When a person is an employee, part of their pay, each month, will contribute to a pension scheme that will save up and the employee can access this when they retire from work.

The business may fail

When the business fails, the self-employed person can lose money, have to pay back money they have borrowed and have difficulty finding another job.

When a person is an employee, they will not have the worry and stress of owning a business as they prefer to have a stress-free life.

Non-financial disadvantages of being self-employed

Working long hours

Someone who is self-employed may have to work outside of the normal working day to meet the demands of the job.

When a person is an employee, they will usually have set hours to work each week and so they will have time to spend with their family and enjoy a social life.

Staying motivated

When a person is self-employed, it can be difficult to have the energy enthusiasm and drive needed for self employment, usually because that person works alone and so has no one to keep them motivated.

When a person is an employee, they just have to turn up to work and fulfil their work duties and not have to worry about their own levels of motivation.

Lack of social interaction

Many self-employed people work from home so they miss out on the team interaction of working in an office.

When a person is an employee, there is always someone to report to, to talk things through, to help along with key decisions that need to be made. This can be a real support to the employee.

Impact on work/life balance

When a person is self-employed, the working day and environment can invade the home environment and time. They may find that running the business takes up a lot of their time and on account of this, time with the family and social occasions may be pushed into the background.

When a person is an employee, they can finish work at the agreed time and not have the worry about how the business is running. After work, they can spend time with their family and friends.

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