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Thursday, May 29, 2014

Is Self-Employment Riskier Than the Traditional 9 to 5?

12:38 AM

Getting a job as an employee in a company with organized health and retirement benefits is the default and safe position in the working world. Anything outside of the safe, steady, in-house job environment—be that contracting or self employment—is seen as high-risk, high-stakes poker. But, is this assumption still correct? Is self-employment riskier than the traditional 9 to 5?

For example, one massive risk with full-time, permanent employment is that all your eggs are in one basket. If a recession hits and you are laid off, or you get fired for performance, it can be a catastrophic event; your income can drop to zero immediately, as you have no other income channels. You haven’t spread your risk, like you might do when you are self-employed (having several clients), and in this sense, having one in-house job is riskier than being self-employed where the loss of one client for whatever reason is not so catastrophic as you have other clients providing income to tide you over until you can replace the lost client.
Another risk with full-time, permanent employment is that the sands are shifting beneath employees’ feet. Reported in the HBR suggests that the rate of growth of contingent workers (freelance, contractors, part-time) is four times the growth rate of traditional workforces and that contingent workers will eventually make up 25 percent of the workforce. 

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