The rise of mechanisms to access and filter the freelance market is inevitable. I can definitely see large businesses deploying both Freelance Market Systems and “Alumni Labour Clouds” to manage a bench of available talent (predictions 1 and 2).
If you’re like me, planning and resolving for the new year is a slow-cooked, ruminative affair. However, if you are still in planning mode, here’s a couple of posts to kick-start that move from planning to doing.
FlexJobs has surveyed 1,000 (US) freelancers and found, yet again, that these are not desperate and abused individuals forced into abusive contracts by uncaring, capitalist overlords.
In fact, as TechRepublic summarises:
the average full-time freelance worker is a female Gen Xer working in the writing, marketing, editing, or creative career fields. This person works primarily for small companies and individuals, and juggles two to three jobs at a time, the report found. The average worker freelances by choice, and has been doing so for at least three years, and envisions continuing this type of career for the long-term, though they have worked at traditional companies in the past.
A recession, or at least a significant downturn, is inevitable. No-one knows when or what the cause will be, but recessions are a part of the economic cycle. Will you be ready?
It comes with the deal. If you are a sovereign professional, your sovereignty requires that you make provision for whatever fate my fling at you. That can be tough to hear if you haven’t even got the hang of saving cash for your tax bill.
Levies for allegedly unpaid taxes, no supporting calculations and no right of appeal. The House of Lords finds that HMRC has been acting aggressively and disproportionately to freelancers it suspects of having avoided tax.
From David Byers in The Times:
The economic affairs committee in the House of Lords this week said that HM Revenue & Customs (HMRC) was overusing “disproportionate” powers that allow it to demand swift payments of unpaid tax from those it suspects of tax avoidance. Those suspected have no right to appeal to a tribunal.
Members said that accelerated payment notices (APNs) and follower notices were being aimed unfairly at lower and middle-income freelancers such as IT workers and NHS nurses, rather than the promoters of tax avoidance schemes.
Lord Forsyth of Drumlean, chairman of the committee, said the balance of power had “tipped too far in favour of HMRC and against the fundamental protections every taxpayer should expect”.
When you’re a sovereign professional, or run a small business, it often feels like a crazy, reckless sin to turn down work.
Nicholas tells us why we should…
- Most great things (time, energy, attention) are finite. Another yes will destroy their power.
- And the few astonishing things (the night sky, true love, appreciation for Chopin) which are infinite, require a no to appreciate them fully.
- There is not a single reason why you should take on the consequences of their poor planning and ruin your evening.
- Babies are not small and cute for very long at all.
- To respect yourself.
- To have time to go to the gym.
- To-paradoxically-build your value because of the focus and quality of your work.
Read the full 22 here and mull over Christmas.
Understanding the earnings of sovereign professionals (in the UK) is more difficult than it might first appear. This report from the Office of National Statistics (Trends in self-employment in the UK) makes a good stab and much of the data below comes from that report. However, it is necessarily flawed and, I would argue, most likely understated, especially for full-time self-employed.
How to define self-employed
The problem lies in legal status and the way that income is taxed. In the UK, if you are a sole trader, then you trade on your own account. You bill your services as, say, John Smith, Plumber. That income less your business expenses is subject to income tax (ignoring national insurance, another form of employment tax, for simplicity).
However, there is another option. you can incorporate a limited company and trade through that. The limited company has its own legal identity and the profits it makes belong to it (and its shareholders). You can then take your share of profits as a dividend on the shares you own and/or the company can hire you as an employee and pay you a salary. Both dividend and salary are subject to taxes, but the rules are different and the net effect can be different, too. It’s often more tax-efficient to use a limited company structure (though less so than it used to be).
There are other reasons, too. Many people like the clear separation between business and personal. Being Director / Managing Director / CEO of ABC Ltd. can appear more senior and lend gravitas to a business card. It can also signal, perhaps, greater seriousness or commitment to the business. These things can be illusory, but effective. Perversely, a limited company (by definition, limited in its liability) can find it easier to obtain business loans than a sole trader (who is liable to the full extent of their personal worth).
In the business-to-business (B2B) market (e.g. independent consultants, designers, interim managers etc.) and especially at the more expensive or senior end, the limited company model is (I would suggest) much more common than the sole trader. And, in any survey, the sole employee-director of a limited company will necessarily respond that he or she is most definitely NOT “self-employed”.
About the self-employed
All of that said, the ONS report throws up some interesting data.
There are now 4.8 million self-employed people in the UK, 15.1% of the labour force and up from 3.3 million (12.0%) in 2001. And, more of those self-employed people are solo workers: 4.0 million in 2016, compared to 2.4 million in 2001.
Median income for full-time self-employed in the financial year ending March 2016 was £347 per week (£18,044 pa).
Median incomes for the self-employed have not increased as much as those of employees or general inflation:
- Increase for full-time male self-employed (2000-01 to 2015-16) = 22.8%
- Increase for full-time male employee (2000-01 to 2015-16) = 44.8%
- Increase for full-time female self-employed (2000-01 to 2015-16) = 22.9%
- Increase for full-time female employee (2000-01 to 2015-16) = 52.8%
- Cumulative inflation over the period = 51.8%
Interestingly, the share of self-employed with degree-level (or higher) education has grown from just 19.3% in 2001 to nearly one third (32.6%) in 2016.
Degree-educated, self-employed people now make up 4.9% of the total (employed plus self-employed) labour force compared with just 2.3% in 2001. As the ONS report says:
Growth in self-employment has been driven mainly by those who have a degree (or equivalent), increasing its share amongst both the self-employed and total employment, showing that relatively highly-qualified individuals are becoming more concentrated in self-employment.
In terms of property wealth, for the 35-54 year-old age bracket, 27.0% of self-employed have property worth over £250,000, compared to just 17.6% of employees.
For the over 55 age-group, the difference is even more marked: 56.2% of self-employed compared to just 37.5% of employees.
By contrast, the self-employed typically have much smaller pension pots.
Aged 35-54, just 14.0% of self-employed have a pension pot of £100,000 or more compared to 34.2% of employees. And, 45.1% have no pension provision (other than state pension) compared to just 16.4% of employees.
In the older age group, 34.8% of self-employed have a pot of £100,000 or more compared to 56.4% of employees. Nearly a third (30.3%) of 55+ years have zero pension provision compared to 14.2% of employees.
In terms of cash, the figures are neck and neck except for the two extremes of the 55+ age group, where the self-employed generally have greater cash wealth. There are fewer self-employed with less than £20,000 in cash assets (51.9% compared to 59.4% of employees) and more self-employed with greater than £100,000 in cash(19.4% compared to 12.2% of employees).
What about those limited companies?
Elsewhere, ONS data hints at possible growth in sovereign professionals operating through their own companies.
- The number of micro-businesses (0-9 employees) has grown by 28.2%
- The number of employees in those businesses has grown by only 18.9%, meaning the average 0-9 employee business is smaller.
- In fact, the average employees per business has dropped from 2.5 in 2010 to 2.3 in 2017.
- At the same time, the average revenue per employee has increased from £127.7k to £144.2k. Total revenue has increased by 34.2%.
- By contrast, in the next band of 10-49 employees, number of businesses and number of employees have grown by around the same mount (17.9% and 17.6% respectively), while revenue has grown by only 12.3%.
In essence, there are more businesses of smaller size, generating income more effectively.
Given the wide bracket of 0-9 employees, that’s hardly definitive, but it is at least suggestive. The next task is to try and get more granular on size and on business sector.
In the meantime, I hope this is a useful summary for those interested in the world of sovereign professionals.
This looks interesting and useful.
The home page gets off to a great start:
A freelance graphic designer earns $25,000 for an ad campaign. A teacher drives for Uber on the weekends. An electrician owns and operates a successful small business. A stay-at-home mom sells Mary Kay cosmetics on Facebook. A recent immigrant cleans houses under the table. A retired woman knits hats to sell at craft fairs. What do these workers have in common?
There is more to what is currently called the gig economy than flavour-of-the-month media stories suggest.
The Data Hub is a collaboration between the Aspen Institute’s Future of Work Initiative and Cornell University’s ILR School. The data appears to be all US-focused, but the lessons and many of the findings will doubtless translate at least to the UK and possibly beyond.
Yet another essential Basics 7 list from Nicholas Bate:
Tip 1: ensure it captures not only what you have to do but also what you want to do.
Tip 2: ensure it also addresses a world beyond work.
Tip 3: measure productivity by pay-off not simply the tick: go beyond ease, urgency and what’s next…
Back in the century of 9 to 5, there was Home, there was the Commute and there was the Office.
In the age of the sovereign professional, the Commute often disappears. Home and Office become one.
According to the UK’s Office of National Statistics, 4.3 million people now work from home. That’s 13.6% of the total workforce (both employed and self-employed). However, the data suggests that half (50.3%) of all self-employed people work from home, either wholly or using home as a base from which to visit clients.
That’s a lot of home-offices.