As the UK moves increasingly towards a gig economy and technology affords many people the ability to do their job from anywhere, setting up as a freelancer is becoming the norm. A research paper from Kalido called ‘The Future is Freelance’ says that “64% of UK businesses currently use freelancers” and “39% of business owners predict that their use of freelancers will grow faster than their number of permanent hires in the next five years.” In fact, it says that half of all workers in the UK are expected to freelance by 2020.
What is freelancing?
Freelancing is creating your own job by offering specialist services and working on different projects for multiple businesses (who become your clients), as opposed to having one permanent employer. Freelancing tends to lend itself to work within the creative and media industries, or professional services, however, the roles and type of work done by freelancers are expanding the whole time. Here are some roles that are commonly freelance:
- Graphic designers
- Bookkeepers
- Management consultants
- Photographers
- Virtual Assistants
- Social media managers
- Journalists
Why is freelancing so appealing?
More and more people are choosing to make the move to the world of freelance, often citing the improvements in flexibility of when and where they can work and quality of life as the main reasons.
But another reason the supply of freelancers is increasing is that so is the demand. Employers are increasingly realising the benefits they can gain from the adaptability of freelancers and their work expertise. They may not need the resource for enough time to justify a permanent role. Other benefits to employers and reasons for them to look to freelancers include…
- Saving on costs
There are significantcosts associated with recruiting, employment and having someone work in the office. Many companies are now going to freelancers directly for things like photography, copywriting and design when they may have previously gone to a big advertising agency.
- Access to a large pool of talent
You can create a brief and match it directly with someone’s set of skills, trialling different people if necessary without a lot of commitment.
- Bringing in fresh ideas
You can bring in a freelancer for an hour, a day, a week, or a month to bring a new perspective to a project.
- Filling a gap in resource or a time of peak activity
Freelancers can be sourced and start quickly, for however long you need them.
What is the difference between freelancing and being self-employed?
According to Consultancy.uk, there are now 5 million people self-employed and 2 million freelancers in the UK. 41% of the self-employed are freelancers which shows that freelancers and the self-employed form two separate groups but there is a definite overlap.
Freelancers usually provide their services business-to-business and work for several clients at the same time or with short-term contracts.
Contractors, on the other hand, are also self-employed but will often work for one client on a contract at a time (this is common in IT).
The rest of the pool of the self-employed who aren’t freelancers or contractors are likely to provide products or services directly to the consumer, like plumbers, hairdressers and cleaners.
Neither has a permanent employer unless they are freelancing on the side. ‘Side gigs’ are often allowed by an employer if the services you offer as a freelancer don’t overlap with your job. It’s always best to speak to your employer first for permission to make sure you’re not seen as moonlighting.
Should I set up as a sole trader or limited company?
All freelancers are actually small business owners and they can choose whether to register as asole trader or limited company. This is a key decision when you’re starting out as it will have implications on the tax you pay and how you file your accounts.
The key differences are as follows:
| Sole trader | Limited company |
| The law sees you and the business as a single entity. | The law sees the business and its owners as separate legal entities. |
| You keep all the profits after tax. | Ownership is divided into shares. |
| You are personally liable for business debts. | Risk of loss is restricted to shares you own. |
| Free to set up. | £13 fee to register online. |
| Often cheaper and simpler from an admin perspective. | More tax-related admin and paperwork. |
Talk to an accountant about the tax implications of each option. Some people don’t see it as necessary to become a limited company but others find that some bigger clients prefer it and the structure is already there if you ever decide to grow.
The pros and cons of freelancing
| Pros | Cons |
|---|---|
| In a recession, companies might be more likely to take on freelancers than commit to permanent staff. | You may feel you have less job security with clients who are able to end contracts/work with little or no notice. |
| The demand for freelancers is increasing, meaning more work. | The supply of freelancers is increasing, meaning more competition. |
| You can get great work satisfaction from a variety of projects and the chance to improve your skills. | There are fewer higher level opportunities. |
| There’s the chance to earn more the more you work and, on average, freelancers earn more per hour. | It can be hard to know what to charge and pay may start low while you build a reputation. You’re not guaranteed a regular income so cash flow can be a problem and you may struggle to get a mortgage. |
| You can achieve great work/life balance. | There can be enforced downtime when you don’t want it and lots of work that you don’t get paid for – pitching, networking, accounts, marketing, chasing invoices. |
| You can have the flexibility to choose who you work for. | There’s job pipeline uncertainty and you won’t get employed benefits like pension, healthcare, maternity/paternity leave, holiday and sick pay. |
| Generally, there is ease of entry into freelancing, particularly if you don’t need much equipment to get started. | It can take time to build a good client base. |
| You can have the freedom to work from home or wherever you want to which can save on costs. | It can be isolating and you can be prone to distractions at home. |
| There’s a great community of freelancers you can meet up with and chat to for support on social media like Freelance Heroes, and industry alliances like ProCopywriters. | It can be lonely. |
Finding your first clients
Going freelance can be incredibly liberating, but with that comes the pressure of having to go out and find paying customers and clients. Before you take the leap, it’s important to do your research and see what demand and competition there is for the services you’re offering. Also, by checking out your competition you’ll get a feel for the sorts of businesses that they are freelancing with and who to potentially target.
Here are some of the ways you can find your first paying clients…
- Through recommendations and referrals
Recommendations and referrals could come from current or past customers, friends, ex-employees/employers or other freelancers. It’s the way most freelancers prefer to get work as these leads normally have the best conversion rate and a higher guarantee of reputable work.
- Enquiries from your own website
Have a well-designed website and make it work for you by improving its SEO for your target keywords.
- Social media
Sharing content and interaction can build you a useful network of contacts.LinkedIn, Twitter and Facebook can be good for generating leads but Instagram shouldn’t be overlooked, particularly if you are in a creative industry.
- Networking
Try to attend events that aren’t purely deemed as for ‘networking’ as everyone tends to be at those to sell to others. Try to see every opportunity as a networking opportunity.
- Directly contacting potential clients
Cleverly worded letters or emails to carefully selected potential clients or agencies that might outsource can work well.
- Online portals and directories
These can be useful to fill gaps in work but it can be time-consuming to find and pitch for projects. Some websites generate a ‘race to the bottom’ in pricing and have reputations for low quality work.
Checklist: How to become a successful freelancer
Follow these ten steps to set you on the way to freelance success.
You must be logged in to use this checklist
Login or Register
Do I need insurance?
As with any self-employed individual, freelancers need to consider insurance. The two most relevant types of insurance are likely to be:
- Professional indemnity insurance
This insurance covers you in the case of a client/customer making a claim against you if they suffered financial loss as a result of work you’ve completed for them. If you do need to defend a claim made against you, professional indemnity insurance will help to cover these costs including legal fees and compensation payouts. - Public liability insurance
Similar to the above, this insurance covers you if a member of the public claims for accidental damages or bodily injuries that occur at your place of work.
Whether you need to take out either type of insurance policy will depend on the nature of the freelance work you’re providing. For example, a freelance financial advisor or a catereris probably more likely to see damage claims raised against them than someone providing copywriting services. Indeed, professional indemnity insurance is required in some professions by its regulators and governing bodies.
There are many other types of insurance available from buildings and contents coverto personal accident and sickness. The only two that are legally required are Employer’s Liability Insurance (if you employ anyone other than yourself) and motor insurance (if you need to use a car).
How to work out freelance pricing
Research by Kalido states that freelancers make an average of £50 per hour compared to £14.60 for permanent staff. More than a quarter (27%) of millennial freelancers claim to be earning to their full potential, with 6% earning more than £301 per hour.
Most freelancers will charge a day rate that can be divided down into a half day or an hourly rate if necessary. Clients usually want to be led on how long something is likely to take before the work takes place, so try and work this out as best you can. Make sure you are charging enough to cover all your time and to feel motivated to produce your best work. As well as your time, make sure you also take into account covering all of your costs.
Example list of costs a freelancer incurs:
- Travel (to meetings, networking, and when working in client offices)
- Office furniture
- Computer and printer
- Office space rent
- Increased bills (if working from home) – heating, electricity, wifi, landline, mobile
- Any specialist equipment (for example, photographers)
- Insurance
- Tax
- Sales and marketing including printed collateral, website design, hosting and domains
- Professional memberships
- Client meetings and entertaining
- Stationery, printing and software
- Accountant
- Pension
- Healthcare
- Allowing for holiday and sick pay
End of Article
Recommended reading
