Self-employment: introduction

“Crafting your work beats being told what to do.” ― Richie Norton

What is self-employment?

It’s working for yourself rather than for someone else. It’s one type of worker self-management – others include worker co-ops, partnerships or employee-owned businesses. Owning your own job, individually or collectively, means that you avoid: a) being told what to do by bosses, and b) having part of the value of your work extracted by owners or shareholders who do no work. Self-employment is the most basic form of this, as there’s no-one else to do any bossing or extracting. It’s just you, and so the responsibility for success or failure is entirely yours. Depending on your personality, this might be an attractive or a terrifying proposition.

You’re self-employed if you are generating your own income, rather than receiving a salary or commission from an employer. This can be full-time or part-time – i.e. you can work for an employer some of the time and be self-employed some of the time.

tooting-market

Markets are nurseries for sole traders. Walking round Tooting Market, for example, you’ll find clothes repairers, fishmongers, knitters, brewers, cooks, greengrocers, distillers, butchers, soap-makers, booksellers, bike repairers, masseurs, restauranteurs, beauticians, tailors, juicers, bar owners, bakers, sewing machinists, shoe repairers, musicians, key cutters, acupuncturists, jewellers, computer repairers, card-makers, recyclers, upcyclers, artists, beekeepers, travel agents, hairdressers and palm readers.

Why is self-employment a low-impact topic? It’s because self-employment is an important part of a non-corporate economy, and if we are to live sustainably on this planet (which is essential if we’re going to survive), then we have to develop an economy that isn’t dominated by, and has to adhere to rules set by, the corporate sector. See here for more. Also, there’s a particular type of self-employment that we’re most interested in – one that helps to provide the essentials of life for local communities. With the current state of the economy, that will require some re-training to provide the products and services covered in our topics. If we don’t provide things for ourselves in our communities – bread, vegetables, meat, cheese, clothes, firewood, baskets, cups, plates, leather goods, shops, restaurants, repairs (cars, computers, houses etc.), renewable energy installations – anything – then we’ll all have to get those things from the corporate sector.

Some definitions

Sole trader: if a self-employed person is a sole trader, it means that there is no distinction between the individual and the business. The person is the business, and so is personally liable for any debts, losses or assets accrued. Not so much paperwork as other options (although you do have to register with HMRC) and you can use your personal bank account rather than having to set up a business bank account, so it’s the easiest and cheapest way to start out.

Making sense of self-employment – an exploration of the benefits of working for yourself.

Limited company: you can start a limited company on your own. It means that you’re not officially self-employed, but if you’re on your own, finding employment for yourself and in control of your own work, then in reality, you are. This only works if you own all, or a majority of, the shares (or you set up a company limited by guarantee, with no shares) – otherwise you’ll be giving up control and ownership. You have to register your company with Companies House. One advantage of being a limited company is that it is a separate entity, and you are not personally liable for debts or losses; also, the ‘Ltd.’ at the end of your company name may appear more professional to some potential customers.

In partnership: two or more self-employed people can come together to form a partnership (which may just require a contract) or a limited liability partnership (LLP, which combines aspects of partnerships and limited companies) or a producer co-op, which involves a specific legal entity that enables self-employed people and small businesses to co-operate to market and sell their products and services.

For information about the advantages and disadvantages of becoming a sole trader or a limited company, see here, here and here; and here for a comparison of sole trader, limited company, partnership or LLP.

self-employment-rise

There has been a steep rise in self-employment this century. Source: Office for National Statistics, Labour Force Survey

Freelancer: a word that was coined by Sir Walter Scott in Ivanhoe, it refers to medieval mercenaries who weren’t tied to one feudal lord, but who were free to tout their lance wherever they wanted. It’s a subset of self-employment, not precisely defined – but it’s more about doing work for a bigger company rather than selling your products and services to the public directly. You’ll sometimes be working in-house for another company, maybe using their desks, computers, phones etc., but you won’t be on the company’s books/payroll, and so unlike other people working in the same place, you’ll be responsible for your own taxes and won’t receive sick pay etc. This usually means that you’ll receive a higher hourly rate than workers on the payroll of the company.

Freelancing is generally not so interesting from a low-impact perspective, as the work usually involves helping to make profit for a large company rather than providing goods and services for your community.

A word about the ‘sharing’ economy

What we’re definitely not talking about is the kind of ‘self-employment’ typified by the new ‘sharing economy’. Ũber drivers, for example, are tied to a company that provides no vehicles, insurance, minimum wage, job security, sickness, holiday or maternity pay, and which extracts 25% of all the income they generate, for providing a platform that can instead be provided by a drivers’ co-operative. Platform co-ops could become very important and beneficial to self-employed people, allowing them to remain self-employed, but collaborating on mutually-owned platforms to meet customers without other people (who do no work) extracting money from their work. See here for more.

self-employed-jobs

Not everyone wants to climb the corporate ladder; many people would prefer to feel genuinely useful by providing essential goods and services for their local community. In the modern world, this might require re-training; but there’s a lot of goodwill out there for independent traders – plenty of people are sick of chains and brands, and are happy to pay a premium for locally-produced goods, especially if they’re also produced sustainably.

What are the benefits of self-employment?

For individuals

It provides more interesting and satisfying work, rather than what David Graeber provocatively calls ‘bullshit jobs’. Most people wouldn’t dream of carrying on doing their job after retirement, but often, people take up things like growing food, DIY, pottery, basketmaking, woodwork etc. Why not do those sorts of things for a living, if that’s what you enjoy?

You get control over your own work and life. You don’t have to take orders from anybody else; there are no owners or shareholders extracting value from your work; and you have the flexibility to fit your work around other commitments, like childcare.

You might be able to work from home – even if that means setting up a workshop, studio or office (although you may just need a laptop and phone), which means cutting out a tedious (and polluting) commute.

Some aspects might be financially beneficial – like being able to deduct certain expenses (tools, travel, some energy or phone bills) from your tax liability. However, you won’t be entitled to the national minimum wage, whereas employees, including casual workers, temps and people on zero hours contract all are; and remember, if you go on holiday, or if you’re unable to work for a while through illness etc. – you won’t get paid. It takes a lot more thinking about than just turning up to a job.

non-a-uber

Über drivers are not really self-employed (beware the ‘sharing’ economy) – they’re employed by a giant platform that extracts 25% of the value generated by drivers all over the world. The technology now exists to allow drivers to build their own co-operative platforms – like RideAustin, a driver-owned platform in Texas that could be replicated anywhere.

For society

Self-employment helps to build the non-corporate economy. Other people then have more ways to get what they need from non-corporate sources – and it helps steer money away from the corporate sector. This in turn keeps more money in the local community, and creates more jobs. Contrast what happens to your money if you buy (for example) biscuits made by a local person compared to branded biscuits.

It can shorten supply chains, which is good for the environment, and it helps create more interesting communities and more unique products and services. Small businesses can also bend the rules a bit and offer a personalised service that it would be difficult or impossible for a corporate employee to offer.

What can I do?

Support self-employed people

Buy from self-employed people locally. Self-employed people don’t have the economies of scale that large corporations do (or the ability to avoid tax, employ sweatshop labour or get favours from politicians), and so their prices are often higher. What you get is higher quality, but it’s more than that. If you’re aiming to become self-employed yourself – especially to produce quality goods and services for your community – receiving a fair price is essential. In the end, if a loaf of bread costs 50p or a t-shirt £2, then people are being exploited and the environment is being damaged. More on prices here.

A sole trader and an owner of a limited company compare the pros and cons of their choices during a car journey.

Become self employed

First, decide what you want to do (we have some ideas) and get training.

Second, work out if it’s feasible. Is there a market for it? What are the benefits and pitfalls? Discuss it with family members. It’s hard work and there’s nowhere to hide. You’ll have to find your own customers and do all your own administration (or pay someone else to do it). Are you the kind of person to make a success of it? To make success more likely, maybe you could reduce your outgoings by downshifting first.

Third, decide whether to be a sole trader or a limited company.

Sole traders have to register with HMRC as self-employed for income tax and national insurance contributions within 3 months of starting trading. There’s no fee for sole trader registration (although there is for a limited company). You’ll have to submit a self-assessment tax return every year, and pay income tax, national insurance, and if turnover is above a certain level, register for VAT.

home-workshop

Depending on your trade, you might be able to set up a home / garage workshop and avoid the dreaded commute.

Here’s more information from the government about the legal responsibilities of setting up as a sole trader.

Here’s information about other ways of working for yourself, including as a limited company or in partnership.

And here are various places that you can get advice and support, including on taxes and business plans.

Plus see our links page for articles and sites with information on start-up, insurance, taxes, invoicing, advertising, setting up a website etc. Have a read of a few for ideas and inspiration.

If you start off as a sole trader, you can easily switch to a limited company whenever you want to.

Finally, if having control over your own life is good for you, then it’s good for others too. If you’re self-employed and grow to take other people on, then consider taking them on as equal partners, by forming a co-op.

amazons-billion

They’re right you know. Buying from Amazon damages your community and takes jobs from the self-employed / small business sector. Here are some more reasons not to give money to Amazon.

Networking

Local groups can be formed to network small businesses, including co-ops and the self-employed, that can help to provide a ready market of like-minded people who would prefer to purchase from and trade with local, small-scale businesses, for the reasons outlined above. Small businesses and the self-employed can commit to trading with each other locally – to be local consumers as well as producers, or ‘prosumers’, if you like. These kinds of groups could develop the basis of a different kind of economy, founded on sustainability and democracy, with collaborative credit as the means of exchange.


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