Lesson 2

Self-Employment

Someone is self-employed if they meet one of these

conditions:

● Someone who carries on a trade or business as

a sole proprietor or independent contractor.
● A member of a partnership that carries on a trade or
business, or
● Someone who is otherwise in business for
themselves, including part-time business.

A self-employed individual does not work for a specific

employer who pays them a consistent salary or wage.
Self-employed individuals, or independent contractors,
earn income by contracting with a trade or business
directly. In most cases, the employer will not withhold
taxes, so, this becomes the responsibility of the self-
employed individual.

Self-employed persons may be involved in a variety of

occupations, but generally are highly skilled at a
particular kind of work. Writers, tradespeople,
freelancers, traders/investors, lawyers, sales people, and
insurance agents may all be self-employed persons.

A self-employed person refers to any person who earns

their living from any independent pursuit of economic
activity as opposed to earning a living working for a
company or another individual (an employer). A
freelancer or an independent contractor who performs all

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of their work for a single client may still be a self-
employed person.

A self-employed person is not often the same thing as

being a business owner. The owner of a business, for
instance, may hire employees and essentially become the
boss - an employee-owner who operates and manages the
business.

Alternatively, a business owner has an ownership stake

but may not be involved in the day-to-day operations of
the company. In contrast, a person who is self-employed
both owns the business, but they are also the primary or
sole operator.

Reasons why people choose self-employment may

also include:

 the desire to sell their skills and/or expertise;

 the desire to prove an idea;
 wanting to generate a second income stream;
 reaction to an ill-informed first career decision;
 peer or family pressure;
 a feeling that there are no other options.

Risks and Benefits of Self-employment

The benefits

 Freedom
 Being your own boss
 Earning more money (possibly becoming rich)
 Working fewer hours
 Independence
 Variety and choosing work you enjoy

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The risks

1. You do everything yourself and are responsible for

the day-to-day running of the business.

2. Large salaries or income are rare in the early days.

3. You may need to consider having a second job to

help provide a guaranteed source of income for day-
to-day living costs.

4. You need to offer a product or service for which

there is a demand.

5. You alone is accountable.

6. By not being employed, you risk losing a range of

benefits and a support infrastructure.

7. Setbacks may impact on your confidence and

profits. Be realistic and learn from your mistakes.

Self-Evaluation When Going Into Self-Employment

1. Have you got what it takes?

2. Could I be a (calculated) risk-taker

3. How do I respond to uncertainty?

4. Am I opportunity aware?

5. How hard can I work?

7. Can I see the consumer's point of view?

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8. How well organised am I?

10. Will I be able to network?

11. Am I computer literate and numerate?

12. Do I have commercial awareness?

13. How committed am I?

14. Am I self-motivated?

Characteristics Of Self-Employment
Following are the characteristics of self-employment:
1. Self-employment involves doing something on one’s
own to earn one’s livelihood.
2. It involves ownership and management of activities
by a person although he/she may take the help of
one or two persons to assist him/her.
3. The earning from self-employment is not fixed.
4. In self-employment, the owner alone has to take the
profit and bear the risk of loss. So, we find a direct
link between effort and reward in self-employment.
5. It requires some amount of capital investment,
although it may be small and may vary according to
the nature of the new venture.
6. In self-employment, a person is free to take
decisions in respect of running his business
profitably and avail of any opportunity that may
come up for expansion of his business.

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