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Becoming a self-employed worker straight out of university may sound like a daunting prospect. However, the number of graduates taking this route to work straight out of university is on the rise. Despite being your own boss, there is plenty of support available to you.
The number of self-employed workers is rising
The number of self-employed workers in the United Kingdom is rising, and it has been for some time. There were over 4.77 million self-employed workers in the United Kingdom in November 2016 – over 15% of the entire workforce. This is a 23% increase since 2008 (Office of National Statistics, 2016).
Graduates are contributing to the rise in the self-employed workforce
Interestingly, 87% of graduates with a second class or first class degree have thought about freelancing already and consider the gig economy as a “highly attractive and lucrative career option”. 29% of students who have not graduated yet have considered becoming a freelancer within 5 years of completing their university studies, according to Elance (Elance, 2013).
Why are so many people turning to self-employment?
There is a number of reasons why people are becoming self-employed. Some of the main ones are as follows:
- If a contract does not go as planned, you can decline future offers from the client.
- You are in a position to negotiate terms – if there are specific conditions you require, let your client know at the stage of negotiation.
- Contractors usually earn more money than full-time employees.
- Working with a variety of clients will help develop your skills.
- If you are able to have some spare time, you can learn new skills and develop your knowledge. There is an opportunity to become an expert in your field and earn a well-respected reputation.
- You will avoid the dreaded office politics.
- You are presented with an opportunity to grow your own business.
- If you don’t like contracting – don’t worry! If you decide that you no longer want to be a contractor then it is easy to close your limited company (if you decide to operate through one) and look for a full-time role.
If you are self-employed, how do you get paid?
Typically, the self-employed operate in two ways, through their own limited company or through an umbrella company. There are advantages for both of these options.
Being paid through an umbrella company eliminates the large amount of paperwork that a self-employed worker could potentially face if operating through their own limited company (personal service company). If you choose to work through an umbrella company, you effectively become an employee of the umbrella and will receive the same pay as an employee in a full-time position. The umbrella company will make the correct tax and National Insurance Contributions to HMRC on your behalf. You will be entitled to Holiday Pay, Statutory Sick Pay, Statutory Maternity Pay and Statutory Paternity Pay. Whilst an easy way to operate as self-employed, working through an umbrella is not the most tax efficient.
If you are looking to legally maximise your take-home pay in full compliance with HMRC, setting up your own limited company may be the perfect solution. By running your own limited company, you will become the director and can appoint yourself as a shareholder. Then you are able to pay yourself legally with a combination of salary and dividends. It is also the most professional way to present yourself in front of prospective clients. Whilst there is a large amount of paperwork involved, you can select a contractor accountant that will provide assistance with this, making your life easier.
To compare the difference in take-home pay between setting up your own limited company and using an umbrella company, you can request a personal calculation using a contractor calculator.
What should you look for from a contractor accountant?
- They should be specialists
- They should be accredited by reputable industry bodies (such as APSCo and Professional Passport)
- They should be fully compliant with HMRC legislation
- They should make their terms incredibly clear (for example, is there a tie in period?)
- Their solution should match your requirements
- They should offer you extra (for example, an online portal for your convenience)
- They should have experts ready to answer your calls and emails
- They should provide continued support throughout the setup and running of your limited company
Finding your first role as a self-employed worker
Finding your first role as a self-employed worker may sound scary. However, there is a lot of support and help available. The number of recruitment agencies is always on the rise and there are specialist businesses that exclusively focus on finding work for the self-employed. Don’t forget to make sure you have an updated LinkedIn profile and you are connecting with the right people (recruitment agencies, potential clients etc.). Have a look on local forums – are there any events that you can attend as a networker?
It is always a great idea to ask the people close to you for advice. Do any of your friends or family members know people that can help you? As a student, your university will provide careers assistance – get in touch with them to find out how they can help and support you.
If you are looking at becoming self-employed straight out of university – best of luck!
This guest article has been written by Andrew Trodden, Marketing Executive at Churchill Knight & Associates Ltd – specialist contractor accountants