Around one in four people giving up full-time employed jobs to work as contractors, freelances or to run their own businesses earned more in their first year than they did previously, new research* from Workwell and IPSE reveals.
On average their earnings were more than £5,000 higher.
The study found 25% of contractors, freelancers and small business owners earned more in their first year out of full-time employment, with 11% saying they earned significantly more.
Workwell, a leading provider of services to flexible workers and recruiters in the UK and overseas, collaborated with IPSE, a not-for-profit association dedicated to the self-employed. The research found 26% earned around the same in their first year as a contractor, freelancer or running their own business while 41% earned less. Around 8% preferred not to answer.
The research found that 41% of flexible workers say they are generally better off than they were as an employee but nearly half (44%) say it took more than a year to earn more than as an employee with 17% saying it took more than three years.
However, just one in six (16%) women reported that they earned more in their first year contracting, freelancing or running a business compared with 31% of men. Only 29% of women say they are generally better off than as an employee compared with 49% of men.
The study found 41% of freelancers, contractors and small business owners earned less in their first year of working for themselves with 26% saying they earned about the same as in employment. Around 8% didn’t want to reveal their earnings. On average those who earned less were £4,500 worse off.
In the longer term 47% say they are generally earning less from contracting, freelancing or running their own business while 13% didn’t want to reveal their earnings.
Chris Mollan, Head of Accountancy Services at Workwell said:
“Leaving behind the security of a full-time employed job can be daunting and very few people will want to have to take a pay cut as a result.
“However the research shows that many are better off within a year and that figure increases the longer they work for themselves. In general there are roughly equal numbers better off or worse off as a result of working for themselves and of course working for yourself has other advantages such as having greater flexibility over working hours. Many find working for themselves provides greater satisfaction.”
“It is vital to get the best possible advice and support when you move from being an employee to working as a contractor, freelancer or running your own business and Workwell can help with a range of services.”
And Chamberlain, Director of Policy at IPSE said:
“We know that people choose self-employment for overwhelmingly positive reasons, whether it’s to work more flexibly, follow a passion, or to be your own boss. That these individuals have been rewarded with an increase in their income for taking the brave decision to strike out on their own is testament to the entrepreneurial spirit of this sector.
“Hopefully today’s findings will encourage more of those considering a switch from full-time employment to pursue their self-employed ambitions. A more flexible workforce is good news for both clients and the UK economy at a time when we’re crying out for skilled talent and expertise within our labour market.”