One of the biggest changes to the way we work in recent years has been the rise of the ‘gig economy’. Companies like Uber and Deliveroo have made it easy for people to work on a job-by-job basis, rather than signing up for large pieces of work like a traditional contractor would.
For example, an Uber driver is employed to take any fares as and when they choose to work. This means they can spend 12 hours working or simply pick up a single person and then call it a day. They have a lot of control over their work days, and it is easy to see how the lifestyle is attractive. However, is it better than traditional self-employment?
There are a number of disadvantages to working in this way that contractors will not usually come across. Here are the main reasons to avoid the gig economy in favour of becoming a traditional freelancer:
Lack of progression
As a participant in the gig economy, you have a lot of control over how much you earn. Generally, if you want a job you can take it, and you can work as much or as little as you want, whether that means driving someone to the airport with Uber or programming a website thanks to Upwork.
However, one of the only ways you can increase your earning power is by working more. You generally won’t be able to earn pay rises or charge more for your time. Compare this to a contractor, who can build up a reputation, become more in-demand and start charging more and more, taking on larger clients and progressing in their career.
This is not always the case with the gig economy. Selling art through Etsy, for example, can give you the same level of control as demand for your products increases. However, generally the best way of earning more is to become self-employed as a contractor or consultant rather than working on a gig-by-gig basis.
Inability to brand yourself
The common theme within the gig economy is that of platforms: services like Uber that don’t actually supply a product or service, but act as a facilitator for others to do so. This makes it easy for people to immediately access a large market, as consumers generally trust the platforms and know they will be able to contact someone who can meet their needs.
However, the downside of this is that customers aren’t engaging with you, they’re engaging with your platform. This means that, while it allows you access to a market, it doesn’t give you any control over your branding. If the platform makes a poor marketing decision, you can lose business as a result with no control over it.
Little financial control
As a contractor, you can operate as a sole trader or start up a limited company. Both options have a range of benefits and drawbacks, financially. Furthermore, you could operate under an umbrella company or utilise a recruitment agency. All of these options are generally unavailable if you operate using the gig economy.
One popular way to increase earnings as a freelancer, for example, is to set up a limited company. You can reduce the tax you pay by paying yourself a small salary and using the rest of your income as dividends. You also have a range of options when it comes to claiming certain items on your expenses.
Accountants such as Brookson can help you out in a major way when it comes to your finances when you are self-employed. If you do your research, you may find out that contracting is much better for you than joining the gig economy.