The state of the UK employment market is forever changing, and recent years have seen a significant shift in its make up. Back in 2011, there were 4.2 million people – 14.4% of the nation’s workforce – who were working as freelancers. This element of the economy was reporting revenues of £202 billion per year, a significant contribution to the UK’s overall economy.
The figures are reportedly even higher today, with more people choosing to enter the sole trader fray.
Recent research also reported that the average freelancer earned £52,820 per year or twice the average worker’s salary of £26,000. Freelancing has emerged from a trend to an important sector of the economy. Sole trading and freelancing is now entrenched in UK society and in the nation’s economic structure.
Many experts attribute the rise in freelancing to a number of factors, primarily the wretched unemployment figures after 2008 and to the perceived redundancy of workers seeking to return to the workforce. Furthermore, most freelancers would not return to the businesses that they mistrust. Depending upon their expertise, freelancers have found they can survive quite well on their own.
Below were typical earnings back in 2011 for freelancers in several categories:
- Freelancers with experience in the banking sector averaged £70,000 per year as of 2011.
- Freelancers in the Marketing and PR industry averaged £63,000.
- Freelancers with retail experience averaged £35,000.
Gavin Walsh of one report commissioner MarketStorm said that; ““The statistics show that many freelancers earn more than the average employee, but we should not forget the amount of hours and hard work they put in.”
It should be clear that to survive in the competitive freelance environment; it’s not about being relaxed, working in pyjamas and working your own hours. 40% of freelancers work more than 40 hours per week. 15% work more than 51 hours per week. Furthermore, 45% of freelancers work while they are on holiday.
An important point is that becoming a freelancer does not necessarily mean a natural business person. Being a freelancer equates to running a small business, and must be treat as such. Individuals must be accountable and not only provide outstanding work but must comply with all the recording and reporting data that businesses are required. The keys to the success of the freelancer are precisely the keys that determine the success of small businesses.
2012 Freelance Data from the Office for National Statistics
In late August 2012, data regarding freelancers, the employed and the unemployed was reviewed by many sources. The ONS data suggested that a vast number of self-employed were operating as a limited company and thus no longer described as freelancers.
Limited companies were created as a form of protection for the freelancer and as a path to future growth of an enterprise. Many freelancers realise that their new future requires more accountability and best practices that reduce their risk exposure. Of course, limited companies also require solid accounting and accountability practices. In many cases, accountants recommended the formation of a limited liability enterprise to offer these advantages.
The ONS report revealed more interesting data:
- 70% of freelancers earn more than the average salary in Britain.
- The lion’s share of self-employed are more than 50 years of age.
- Total employment in the UK has increased.
- The total number of persons classified as self-employed has increased dramatically.
- The number of limited liability companies has increased.
- The number of freelancers in the UK continues to rise.
In the first quarter of 2012, more persons were classified as self-employed than at any time since these records were originally recorded.
The Business of Being a Freelancer
Freelancers and limited liability enterprises are held to the same accounting scrutiny as many SMEs, and they should be. It is in the best interest of the self-employed to convert from being a self-employed individual to a smoothly operational enterprise with ingrained business practices as quickly as possible.
Preferably this structure should be in place prior to commencing operations. However, once the freelancer is serious, it is time to get advice on your reporting responsibilities and the best practices that can advance your earning potential.
Freelancers work long hours, and are focused on maintaining consistent revenue. To stay focused and preserve as much time as possible to complete assignments, there are basic accounting, marketing and business disciplines that should be in place.
One of the foremost disciplines is the creation of a highly functional business model. If the freelancer needs assistance in developing a workable model, there are a number of accountants and business consultants that can help. This model will provide structure to the freelancer’s activities and will define fair pricing and set forth plans for growth. Every enterprise should have a business model. Without a model, the freelancer is a ship at sea without a course.
The marketing plan will be detailed in the business model. In order to be more than a ‘hand to mouth’ freelancer and in order to build a career, the freelancer’s marketing must be structured and ongoing. Regardless of your specialty market, the freelancer has access to global markets where quality counts. How will this global marketplace know of your talent and capabilities if you are not marketing on a consistent basis?
Common Freelancer Mistakes
The biggest mistake freelancers make is not understanding the size of the marketplace in which they are operating. The potential for growth and success is enormous. The freelance marketplace knows no boundaries, and potential clients can come from any corner of the world – especially in this dynamic digital age.
To participate in the marketplace and realise your full earning potential, you must always be the consummate professional, even if the prospective client is not. You will learn that the higher your standards, the higher the quality of your client.
Every freelancer needs core clients and a continued effort to locate new markets and new clients. Freelancers who understand how a business should operate and who have the components for a successful business in place will attract the most sincere clients. A well planned business structure is an absolute necessity for the serious buyer and lends credibility to the freelancer.
As impressive as the growth of freelancing is in the UK, remember that competition can come from anywhere.
This is a guest article by Clark Howes Group, an established firm of business accountants with offices across the UK. Their clients include both early-stage and mature businesses, ranging from start-ups, sole traders and partnerships, through to limited companies and international groups.