You might be tempted to think of self-employment as being your own boss. That’s true, but you are also your own HR department and finance department as well. Those in formal employment may have access to in-work benefits in the case of ill health and a formal redundancy process, with appropriate payoff, if they find themselves surplus to requirements at their place of employment. Those in self-employment, however, need to take care of themselves and there are some key points they should consider.
Pricing for goods and services needs to be sufficient to make it possible for you to earn a decent living
This may seem like stating the obvious but it’s one of the most fundamental lessons any (potential) freelancer has to learn and learn quickly. If you price your time at the sort of rate you would expect to be paid if you were in employment then there is a distinct possibility that you will find yourself financially worse off because you have failed to allow for the fact that your hourly rate in employment is calculated not just taking into consideration statutory deductions such as tax and national insurance, but also the cost of providing in-work benefits. You may find that this fact is counterbalanced by the fact that you no longer have to support the cost of travelling to work, but this is not guaranteed. You may also find that you are quite happy to accept a reduction in take-home pay in return for a better quality of life, however, you are only going to have a better quality of life if you can manage to pay your bills month after month, otherwise, you are simply going to have a whole lot of stress. In short, when it comes to freelancing, pricing matters a lot and should be amongst your first considerations.
Insurance can give you great peace of mind, provided that you use it strategically
One of the first points to remember about insurance is that you may need to update your policies to reflect your change in employment status. For example, if you are planning to work from home then your home contents insurer will probably want to know about it. They may well be perfectly happy to continue your cover, possibly even at the same rate, but they are likely to want to know about it and there may be implications for people in certain types of job, for example, if you are planning to have clients come to your home.
Personal insurance can protect you and your loved ones against life’s misfortunes
There are all kinds of insurance policies you can take out as a self-employed worker. Common ones include income protection insurance, critical illness cover, health insurance, dental insurance and pet insurance. You may also want to look at extending cover to other members of your family who might otherwise have been covered by your (former) in-work benefits, for example minor children.
Professional insurance may be a legal requirement and if not can still be good to have
Depending on the nature of your business, you may find it useful to take out professional indemnity insurance and/or public liability insurance. You may also want to take out insurance to protect your business assets, such as your electronics equipment and, possibly even more importantly, the data it contains. Cyber liability insurance has been around for some years now and given the environment in which we now live and the extent to which so many people do so much business online, it could be a very worthwhile investment since it is entirely possible that the data stored in your electronic devices is far more valuable than the devices themselves.
There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk.