Financial planning for gig workers, Freelance News, Freelance Tips, Freelance Advice

Financial planning for independent contractors and gig workers

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Image: Shutterstock Rising unemployment in the wake of the coronavirus pandemic combined with more and more people working from home has increased the size of what is referred to as the ‘gig economy’ which is made up of independent contractors, online platform workers, contract workers and on-call workers. Generally speaking, gig workers are heavily dependent on online platforms in order to generate an income and, as such, are required to be flexible and agile in their functioning. However, in the absence of permanent employment, gig workers and independent contractors have little in the way of employee protection and employee benefits, making financial planning an imperative for them. Here’s what to consider if you’re a gig worker. Choose the right business entity To ensure the smooth running of your gig or freelance work, consider the best entity for your business. Choosing the right entity will depend largely on the nature of your work, your expected earnings, your projected business growth, and plans for expansion and/or diversification. Each type of business entity has distinct advantages and disadvantages in respect of ownership, personal risk, tax and administrative complexity, so seek advice if necessary. Keep business and personal finances separate Regardless of which business entity you choose, it is advisable from the outset to keep your personal and business finances separate by creating a firewall between the two. For your own personal protection, ensure that you pay yourself first and retain a good credit score as this will affect your ability to obtain financing or borrow money later on. Work hard towards drawing enough from your business account to cover your basic expenses and to ensure that all your financial obligations are met, and then plough the rest into growing your business, building up reserves and keeping yourself ahead of the game. Ensure that you stay on the right side of Sars by declaring all income and keeping up to date with your tax returns. Business costs and overheads With their high reliance on connectivity, gig workers and independent contractors will need to prioritise high-quality wifi and data to ensure that they have uninterrupted access to the platforms they depend on, bearing in mind that South Africa’s data is still very expensive compared to the rest of the world and these costs should be factored into their business plan. As such, remember to factor your business costs and overheads into your planning, keeping in mind that if you have multiple gigs or offerings, you may have a range of varying costs and overheads. Short-term insurance on vehicles and equipment required to generate an income should be prioritised, specifically when it comes to high-cost items such as hi-tech equipment, cameras, film equipment, vehicles, gaming devices, drones and other expensive items. Pricing The traditional vertical structure of businesses is changing, with more and more companies choosing to retain core employees while outsourcing specialised functions to skilled contractors. According to the Southern African Freelancers’ Association, almost 80% of freelancers are female being predominantly based in Gauteng […]

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