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How risky is working for yourself?

Date
It pays to weigh up your options before deciding which path to take.

It pays to weigh up your options before deciding which path to take.

Is it safer to work for yourself than for a big company? A few years ago, the answer would have been unequivocally no. Those seeking job security were better off with a corporate job, regular pay cheque, defined workplace conditions, holiday and sick pay.

Perish the thought of an ambitious young entrepreneur forgoing a university education and “safe”’ career in government, teaching, or the professions. Or not doing a trade.

That answer is no longer as clear-cut, at least in some industries, and depending on your definition of risk and how you define starting a venture.

For most, the biggest risk of a corporate job is being axed. But there are others:

  • Your pay is deflated by stealth thanks to no or low pay rises over several years, and an ever-increasing workload. You do much more for the same or less as the cost of living rises.
  • You're asked to take on your boss’s role and responsibilities for nowhere near the same pay. Role “deflation” increases career risk.
  • Conditions are eroded as the company takes advantage of a weak labour market to reduce costs. Penalty rates and other perks are re-negotiated.
  • Your employer has poor training programs or you become so specialised in a job you are virtually unemployable – at least at the same rate – if fired.
  • Your new boss goes out of his or her way to sink your career. A once-promising journey up the corporate ladder is derailed because you now report to a buffoon.
  • Your physical and mental health suffers from workplace stress.
  • You make a poor return on the huge investment of university fees and other training programs. Graduate salaries remain flat for years and rapid pay increases are rare. You end up earning $45,000 after spending $70,000 at university, and face years of student debt.

On the flipside, the budding business owner:

  • Is able to build a portfolio of clients because of rapid growth in the micro-jobs market.
  • Can start ventures cheaper than ever before thanks to new technologies and a growing emphasis on lean entrepreneurship and getting into the market faster.
  • Can take more calculated risks because it can cost far less to develop proof-of-concept in many tech-based industries compared with five years ago.
  • Is better placed to combine launching a venture with a few decent-paying micro-jobs to cover the bills.
  • Finds the flexibility of self-employment and being his or her own boss removes a layer of stress rather than adds to it.
  • Is able to earn a higher salary much faster and build a financial buffer if the business slows or fails – a redundancy payment, so to speak.
  • Is able to take risks with a venture or portfolio of micro-jobs while his or her partner has full-time employment.

Of course, the full-time employee who is good at his or her job and has worked for a secure company for years still has much more job security that an entrepreneur launching a risky start-up venture. High failure rates and the prospect of losing capital are significant threats.

But I’m interested in the shades in between: comparisons between the self-employed, who contract to companies or build a portfolio of regular micro-jobs, and full-time workers who feel their job security continues to weaken as companies restructure and redefine their workforce.

Have we finally a reached a point where it is safer to be a contractor, freelancer, consultant or other professional who has several employers, but no concrete guarantee of recurring work? In a growing number of industries, where jobs and conditions seem less secure, the answer has to be yes.

What’s your view? Is it still much safer to have full-time company work than work for yourself? Has the gap narrowed in recent years, and how do the self-employed reading The Venture feel about their job security? Is it as much of a risk as it once was to work for yourself? And why has the risk gap between full-time and self-employment closed in recent years?

Post a comment and let us know what you think.

20 comments so far

  • The biggest problem faced by many of us ex-corporate small business types is that the corporates we contract to for ‘micro-jobs’ are all aggressively trying to cut input costs. In many cases they are turning a pretty profit and are just using the GFC ripples as an excuse to gut costs.
    I know in my area of specialised editorial and communications work that even the biggest end of town now wants to pay up to 50% for jobs than it was paying two years ago. I now turn work down in some cases as the remuneration offered wouldn’t cover costs to generate work of the quality that is to my personal standard.

    Commenter
    Rex
    Location
    Turramurra
    Date and time
    January 23, 2014, 8:10AM
    • This problem also applies to retail and other products where bigger companies can absorb or reduce costs all otther areas of the business.

      Commenter
      LJanes
      Date and time
      January 23, 2014, 8:58AM
  • Tax evasion would have to be a great incentive to start your own business especially if it can do the transactions in cash.

    Commenter
    Taxman
    Date and time
    January 23, 2014, 8:27AM
    • I like it...+1
      It's Tax Minimisation not evasion...back to my yacht.

      Commenter
      Mr Smith, the fraud
      Location
      Canary Islands
      Date and time
      January 23, 2014, 10:11AM
  • I think the risk of job loss as an employee is pretty much the same as the risk of loss of business to a self-employed person, given you're at the mercy of the market and the quality of your reputation when you're self-employed. Where I think being an employee will always give you more security than being self-employed is the fact that you need your additional cash as a self-employed person to cover yourself for holidays and any time off sick, given no-one's going to pay you if you aren't working, and the fact that the cash flow can be a bit lumpy - people take a while to pay and some people never pay, meaning you need to work out if you're going to get anything if you bother to take them to Court.

    Of course, as the article points out, risk is only one factor you need to think about when evaluating being employed versus being self-employed. For me, the autonomy and the quality of work mean that self-employment is worth the risk!

    Commenter
    gwch
    Date and time
    January 23, 2014, 9:31AM
    • If you can afford to do it, then it is not a problem.

      In most cases you have to be prepared to go some months before getting enough money in to pay yourself a wage.

      Most people do not realise the amount of money involved in setting up your own business, WorkCover, Insurance, bookkeepers, Super has to be paid, and then getting paid for your work.

      Yes I do run my own SOHO business and have done so for the last 20 odd years.

      Commenter
      Tc
      Date and time
      January 23, 2014, 9:51AM
      • And do you reckon that any of this stuff is taught in schools?

        It seems that in "education" these days it is better to know about how white western Christianity has shaped the world instead of giving students any idea whatsoever about how to be more than cogs in the consumerist society instead of the many other options available.

        Commenter
        DC
        Location
        Melbourne
        Date and time
        January 23, 2014, 12:56PM
    • I've got Accounting and Training qualifications and spent much of the last 20 years bouncing back and forwards between PAYG roles and self employment. Not surprisingly there are pluses and minuses to both and it depends a lot on the lifestyle you want. One thing that is common is you need to manage your skills and experience - formal qualifications, certifications, the industries you work in, etc - so that yu remain attractive in the marketplace. Always ask "where cuold I go if I had to stop doing what I'm doing now"?

      Commenter
      topender
      Date and time
      January 23, 2014, 1:26PM
      • Great article!
        You are spot on about career deflation: First we lost pay rises to Superannuation, which is paying for adult daycare for and "industry" that has negative efficiency.
        Then we had the casualisation of the workforce, the grey ceiling of boomers in middle mangement, and the rise of "flipping" as the socially acceptable way of stealing from children.
        The issue now is most businesses are run by dinosaurs who are desperate to keep their roles to pay off over-leveraged investments, which means that succession is rarely done properly any more, and they insist on "leading" IT projects by bringing in profiteers who destroy the local talent with "white anting" and "Good practise" ("Good" meaning profitable for them).
        Beware if you are productive and like to produce real results...the workplace is highly toxic at the moment for those that "makes the others look bad"...by working properly!
        The only "career" you can rely on is your own business...get in early.

        Commenter
        Andy
        Location
        Melb
        Date and time
        January 23, 2014, 1:28PM
        • Many advantages to building your own business. Every day i get up for my own business is a plus after the corporate sector. My partner and. I are able to deal with our customer base how we want and are much more nimble than many suppliers. Nothing worse than being in a corporate waiting for their business model to fail and be part of the never ending cycle of cost cutting and outsourcing.

          Commenter
          Sipper
          Date and time
          January 23, 2014, 2:03PM

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