It's no secret that we are in the season of the "Gig Economy." Within the next decade freelance workers will outnumber traditional salaried employees. A study by UpWork and the Freelancer's Union concluded that 57 million Americans did some sort of freelance work in 2017. As a business owner (or future entrepreneur), understanding this phenomenon can help you hire correctly and sometimes better understand your employees needs, and in some cases, is something you may want to consider for your own career.
Even while freelancing is soaring in popularity and on its way to eclipsing the employment norm, however, there are still many myths surrounding this type of work because some are so skeptical. So, whether it's in reference to a side hustle or a full-time career, here are five cliché notions surrounding freelance work that just aren't true.
Myth 1) You are your own boss
Most full-time freelancers have heard; "I'm so jealous you have no boss to answer to." Self-employed or not, freelancers work for clients. Contract work can be unsteady and seasonal, which is stressful enough on its own. Building a well-diversified client base with multiple customers equates to a stable income. So while a freelancer no longer answers to 'the man' per se, 5 clients = 5 mini-bosses. Juggling those clients, being availability and communicative, and hitting deadlines can honestly be more challenging than having just one supervisor.
Myth 2) It's not like you're starting your own business
Actually, freelancing can absolutely mean starting a business. For consistent part-time freelance workers, and especially full-time freelancers, it is recommended to set up a business, rather than working as an individual (IE independent contractor). There are several financial benefits to setting up a business. The most common way for freelancers to set up their own business is an LLC (Limited Liability Corporation). An LLC offers legal sanctities, in that it separates your personal finances from your business. Therefor if someone sues an LLC they cannot come after an individual's personal assets. There are also tax benefits to setting up an LLC vs. staying in an independent contractor. A freelance company is likely to come across as much more professional to new prospects as opposed to just a person pitching services. This is one of the many reasons that freelance work isn't something to just pick up and run with. There's a foundation that needs to be built just like any other legitimate business.
Myth 3) It's easy money
Difficulty of actual work aside, the money aspect of freelancing is anything but easy. From collecting income, to managing finances, caution and care need to be taken each step of the way.
- Getting Paid- It's an unfortunate truth that many businesses will stretch 30-day terms. When pennies need to be pinched, it's not payroll that a business puts off, it's the payment to contractors. Freelance workers need to be organized and steadfast with invoicing and following up for payments. Fortunately they are lots of tools and systems to help along the way. However, accruing a paycheck can often be more difficult for freelance work than the bi-weekly check a typical salaried employee receives.
- Managing Finances- Also different than a classic job, freelancers shouldn't just deposit checks into their bank account. For both an LLC, or independent contractor, it is recommended that freelance income is kept in a separate bank account. Separating freelance wages from other personal day-to-day banking will make life much easier come tax season. Especially for those who freelance in addition to their full-time job.
- Taxes- Freelance compensation is completely untaxed, therefor the worker needs to keep track of all their income and pay any taxes due on this. Figuring out how much is owed to the federal and state government is not an easy task. Tax rates vary by state, and percentages are dependent on income bracket. In fact, a new (highly-publicized) tax bill recently passed in the senate, which equates to all the rules changing for 2018.This is quite different from receiving one W-9 each January and entering info to TurboTax. Freelancers need to track down multiple 1099s from every gig and keep track of all possible expenses to write-off. Depending on volume, seeing a tax professional is often necessary, and quarterly appointments/payments might be necessary to avoid a large bill come April 15th.
Myth 4) You can work from home, whenever you want, in your underwear!
While freelancing does usually offer the freedom of remote work, working whenever and wherever you want is a common misconception. Freelancers need to adhere to somewhat normal business hours in order to communicate with clients. They also need to be somewhere with reliable Wi-Fi service, so while working from a beach is a nice fantasy, it's an unrealistic environment for productivity. Furthermore, video calls with clients or co-workers are commonplace, which requires wearing appropriate clothing. Even without the prospect of meetings, recent studies have shown that the act of getting dress significantly boosts productivities levels. So, while freelance work can be done in PJs and yoga pants from time-to-time, most successful individuals try to keep a semblance of a normal life and appearance.
Myth 5) Freelance workers are loners or introverts
It is true that a significant portion of freelance work is done from home, at a coffee shop, or a co-working space, etc. Some people mistakenly believe that type of career path would be perfect for an introverted personality. In reality this couldn't be further from the truth. Freelance workers are their own marketing team, and the face of their brand. Effective freelancers need to work extremely hard to build their client base, often attending meetups or networking events. Whether a freelancer is starting a business or trying to keep a side-hustle, they need to be outgoing and resourceful.
Dispelling the Myths
We are entering a new generation of how work is done. When you ask someone what they do, answers like 'self-employed' or 'small business owner' are increasingly popular. With this transformation of the American workforce, hopefully freelance stigmas no longer stick. Until that day of enlightenment comes, freelancers will need to defend that their career path is just as difficult, if not more difficult, than a traditional worker.
What are your thoughts on freelance work, whether on the side, or full time? Let us know your thoughts and your story in the comment section below.