Self-employment: what is it, why do it and how has the pandemic affected it?
I describe self-employment quite simply as working for yourself so that you get to make major decisions and you get to take most of the money made by the organisation.
But within that there's different types of self-employment that are often important to think about. So are you a sole trader, that is you work on your own, or do you employ others or are you in a partnership? Other important ways of thinking about self-employment are about, are you independent self-employed? So that is you really do get to make the decisions about what you do and keep most of the money made by the organisation.
Or are you one of the dependent self-employed? And for that you may be working most of the time for a single employer. That was quite common for things in the past, like IT contractors, but it's now very much the way that many people work in the gig economy. And actually they have a lot less autonomy than the traditional self-employed. So I'd say that there are different types of self-employment within that simple label of working for yourself.
Why do people choose to be self-employed?
The classic reasons why people choose to be self-employed - the most common reason if you ask people is to be independent is what they tell you, which is often shorthanded to say to be your own boss.
Research has shown other reasons are people will say that it fitted with the job they have. So for example, IT I've mentioned before. People in IT often work as contractors. They can do quite a long project with one organisation and then move on to another. So it fits the type of work they do. And there's other professional work that would fit into that sort of category.
Other people would say it to make a lot of money. I think that might be debatable. Most self-employed end up earning less than equivalent people with equivalent qualifications who are employed. But of course you can do very well but on average that doesn't work out.
And other reasons might be that people say an opportunity arose and that might be about time or space or finance, some capital they came into. So those are the common reasons that people say. And by far the most common is independence or be your own boss.
But what's interesting is some research about women citing 'I became self-employed to be my own boss'. When you dig into that more deeply the reason isn't quite as positive as that sounds. The research showed that actually that they were concerned that at work being a parent they felt that was blocking their progress. They were sometimes not taken as seriously. Or they couldn't parent in the way they wanted to. They didn't either have the time or they couldn't be flexible with their time. So they became self-employed to allow them to do those two things: the work they wanted to do or parent. So they were pushed into self-employment a bit more than actually it was absolutely their choice.
How has the pandemic impacted self-employment?
Well, the most shocking finding from the work we've been doing is that actually that there are about half a million less self-employed now compared to before the pandemic. So there really has been a loss of the self-employed. And that very much reverses the growth that's been seen over probably a decade. Self-employment was becoming very popular, a choice for many at all stages of life, but the pandemic has had a big hit on the sector.
And it's hit in different ways and at different times, obviously the pandemic being so extended. So, for example across sectors, things like the construction sector was hit immediately back in the start of the lockdowns because all sites closed and a lot of contractors on site are self-employed. But over time they opened again and things like obviously we've all seen that the leisure and entertainment sectors have been hit for much longer. So self-employment there has had a much longer impact.
There's also been a difference across regions. London lost a lot of their self-employed almost immediately the first lockdowns happened. But that was often because there were other employment opportunities for people. But actually the longer term impacts have been in places like the Midlands and Northern Ireland who still are showing the biggest impacts, the biggest decreases in self-employment.
And there's been impacts across genders. It's not quite obvious that more women have left self-employment but they have definitely had to reduce their hours more than male self-employed. Particularly we've looked at things like undertaking extra housework and childcare that was necessary due to school closures. And it's very much women who have shouldered that and self-employed women who've taken that on have had to reduce their hours, for example, to provide childcare.
Impact on women: mental load
Despite taking part in the workplace much more than in the past, women still carry on shouldering the burden of housework, childcare and an interesting concept called 'mental load' that not only do they spend the hours doing those activities, that they spend their time thinking about them and worrying about them as well. So there's different reasons this is often explained. It might be about women's pay; it might be about the time they have. But also it's gendered practice - how society operates and how people expect society to operate. So the changes in those expectations are very slow to happen. So although women will carry on making a vital contribution to the workplace, and self-employment in particular, it will be slower to change I expect but it should change and the best way of doing this is to bring it out and talk about it.
And I think particularly this concept of mental load I'm very interested in because they say men are changing slightly their attitudes to housework and childcare but it's often about joining in rather than actually taking absolute responsibility for something. They may look after their children but they're not worrying about what the childminder's day off is going to be or what happens if the childminder is unwell or something like that. So I think that's really interesting.
And when one talks to women about this, they often say, yeah, I never knew that was a thing. Yes, that's exactly what I do, I worry about things, I'm always planning ahead. So I think this is quite interesting. One of the first things is to recognise it, talk about it and then work out how it can be addressed.
What is the lasting legacy of the pandemic?
I think one of the lasting legacies of the pandemic will be the acceptance of working from home, which obviously fits well with portfolio working. If employers want to actually have the best employees they're going to have to be prepared to have people working from home. I've heard from many that they'll only now look at jobs where they can work from home. And of course this fits with many people having changed their lifestyle by either moving from where they previously lived or taking on pets or things like that. People want to balance their work and home life much more and that works very well working from home.
I think particularly for the self-employed I've been looking at home-based businesses for many years and in the past many people would tell me if they were running a business from home that they would slightly hide that they were running a business from home. There's obviously a lot of urban myths about changing the name of your house to Global House or something like that to make your address see more impressive. But I don't think that will be necessary in the future.
Working from home, running a business from home will be quite acceptable now. And employing people whilst they're based in their homes will also be acceptable. So I think that will really fit with ideas of portfolio working and perhaps being able to work for a couple of employers. So I think that will be one of the lasting impacts of the pandemic.
The area with passionpreneurs is very exciting and fits obviously with their portfolio career idea, actually, perhaps if you can do something that you really love alongside something else you can make the thing you love still fun. I think that really works well with what I've been talking about, either working from home or running a business from home.
One of the benefits of running a business from home is actually you're not across a set of fixed costs that you have to worry about. So that you can then spend your time growing your business slowly and experimenting and that can allow you to keep it fun, keep it fresh, let it do for you what you want it to do.
Research quite a long way before the pandemic has shown that home-based businesses are associated with novelty and experimentation. And actually, if you think about it, some of the biggest tech giants that we now know - Microsoft, Hewlett Packard, Facebook - all started either in bedrooms or garages. So it really gives people the opportunity to just experiment, to do something very different.
So I think this really fits with the passionpreneur idea of let's see what I can do with this thing I like. No one else might have tried it before but how can I experiment? And as I say it is a low cost and therefore lower risk way.
Three steps for starting a business
So if you start thinking of starting a business, I think the first three steps I would advise are obviously think about your business idea and I'd say make some notes about what you're trying to achieve, what your major steps you need to do are. And I'd also encourage you to write down what do you think some of your costs are going to be. Not detailed, just rough something out. And what income do you think you're going to make?
I know these are the basis of the business plan but that can often seem a bit scary and a rather large document. I'd just literally note some things down and once you get noting, I think you'll note some more things down. And if you find yourself saying, I don't want to do that or I don't need to do that, I'd question why. You think it's so obvious? Write it down. I think you will find something a bit surprising or it will cause you to think of the next set of questions.
A second thing I would suggest is talk to other people about your idea. So friends, family members. I wouldn't worry too much about secrecy. I probably wouldn't go around talking to lots of people I didn't know. Talk to trusted people and then if there's something that you feel is quite sensitive, I think they will deal with that sensitively as well.
And my third tip was I'd say, go and visit some other businesses that might look like yours or that you can draw from in some way. So a coffee shop, go and visit some other coffee shops. Or if you're planning to do something online, visit some other online stores, and I'd also look around the area. So for example, if it's an online, if you think you're selling online, are intermediaries really important in that area? Look at some of the price comparison sites. There's virtually a price comparison site for everything now - and they can have a lot of power. So it would be worth looking a little bit there. What are they doing to prices in the area? If they're pushing them down and down, what's that going to mean to what you thought you could sell things at? So I'd have it as a bit of fun, like say visiting coffee shops or stores or online retailers to give yourself some ideas.
This interview is part of the Great Work Reset series produced by The People Space in partnership with The Open University Business School