When you go into business for yourself, particularly when you work from home, you certainly get to enjoy certain benefits. Since you don’t actually need to see anyone (and, more importantly, no one actually needs to see you), you can choose to work all day in your pajamas if you want. Since you work from home, you have convenient access to your own fridge and you don’t have to worry about Paula from Human Resources stealing your ham sandwich.
At the same time, getting into the life of the self-employed professional comes with its share of sacrifices too. The inconsistent income is a big one, of course. You also don’t have access to “free” company resources, like the coffee in the break room… because no one is buying you coffee and you don’t have a break room. This isn’t to knock the dot com lifestyle. However, a reality check is in order for anyone considering taking that leap of faith.
What employee benefits might you miss when you quit the day job, get out of the rat race, and strike it out on your own? Here are several that I’ve never been able to enjoy myself, seeing how I started my entrepreneurial journey almost straight out of college.
Paid Sick Days
When you’re not feeling well, for any number of possible reasons, you can usually call in sick for work. And, as I understand it, it is generally illegal for your employer to require a sick note from your doctor outside of specific circumstances. (Don’t quote me on that.) And most employees have some sort of allotment for the number of paid sick days they can take each year.
If you’re sick, you call in sick, and you still get paid, so long as you haven’t gone over your limit for the year.
But when you are the business, there’s no such thing as a paid sick day. If you’re a freelancer like me, if you don’t work, you don’t get paid. This is yet another reason why developing passive income streams are especially important for self-employed individuals.
Paid Vacation Time
It’s true that time and location freedom are among the greatest benefits of making money online. On the flip side of that, however, it also means that there is no such thing as paid vacation time either. This is just like the paid sick day scenario described above.
Here in Canada, a minimum of two weeks of paid vacation each year is the standard. Some employers give out more, particularly with seniority. When you work for yourself, again, if you’re not working, you don’t get paid. What this means, then, is that if you want to take two weeks “off” a year, you’ll need to factor in those two weeks of “lost” income into the 50 weeks that you are working.
In other words, you’ll need to earn 52 weeks’ worth of money in 50 weeks. If you want more vacation than that, time where you won’t be working, then you’ll need to adjust those ratios accordingly.
Generally speaking, at a regular job, if you work more than a certain number of hours in a day, in a week, or in a pay period, you are eligible for overtime pay. This might be 50% more than your regular rate of pay (1.5x) or it might even be double if you work more over your regular time (100% more, or 2x regular pay). That’s the norm for a lot of people, in some form or another.
When you’re self-employed, there’s no overtime. You could “put in” 16 hours today and still make zero dollars. You could work for 80 or more hours this week, and still make the same amount as you would when you worked 40 hours (or less). You have to get out of the mindset of trading hours for dollars. Instead, every hour you put into your business is an investment.
Pension Programs and Stock Options
I’ve never had the opportunity to partake in any of these additional employee benefits. Depending on where you work, your employer may offer employee stock options where you effectively get to own a piece of the company. You might also have a “matching” program where your employer will match your contribution to a retirement fund. This is fairly typical, particularly in a corporate environment.
There’s none of that when you work for yourself. Indeed, for those of us in Canada, we have to pay both the employer and the employee portion of the Canada Pension Program as self-employed individuals. But then again, you might never retire, so maybe none of this matters anyhow.
Extended Health Plan
It’s not just about sick days where you might have the common cold. In the US, the average family pays nearly $10,000 a year in health insurance coverage, plus an average deductible for about $8,000. That means if the family meets their deductible, they’re spending almost $20,000 a year on health care. (The equivalent figures for individuals are about about $4,000 each on insurance and deductible, for an annual total of about $8,000.)
Many families rely on company extended health plan coverage, because they’re able to access coverage that is far better, more comprehensive, and more affordable than what they’d be able to get as individuals. When you’re a company of one, particularly if you want to provide coverage for your whole family, you can expect to pay a lot more for medical insurance.
For comparison, in Canada, the average family spends $2,000 on health care, plus $4,000 on private insurance premiums. Your mileage may vary, of course, depending on your country and circumstances.
Sides of a Coin
This might give you the impression that going into business for yourself as a self-employed professional — whether that’s as a blogger, Internet marketer, influencer, or freelancer — is one that is filled with doom and gloom. It’s one where you’ll be bombarded by all sorts of added expenses, and you’ll be sacrificing an untold number of benefits.
The truth is that this life, as with everything in life, is about a series of trade-offs. You may no longer be able to get “free” pens and paper clips from the supplies closet, but you will have access to several income tax deductions that traditionally-employed individuals do not.
And really, the dot com lifestyle is worth it. You just have to be aware of what it might cost you.