How To Protect Yourself As A Sole Trader
When you’re self-employed, you’ll often feel like one of the lucky ones. You don’t have a boss that you hate, you don’t have to do work that you don’t want to do, and you get to control your income. But, it’s safe to say that all of that freedom comes at a price. When you’re employed by a company, you have a level of protection that you may not even know that you have. Because companies tend to look after their employees both to be in-keeping with the law, and to keep them happy. But when you go it alone, you lose that protection. And that can be a really scary reality to face.
But it doesn’t have to be. Being self-employed can often by far outweigh the benefits you get by being employed. However, it does mean that you have to be quite smart about your life as a sole trader. It’s not enough just to go it alone and hope for the best. You have to learn to protect yourself – because nobody else is going to do it for you. But when you’re new to entrepreneurship, it’s not always easy to know exactly what you need to do – let alone put it in place. And don’t worry, this is much easier to do than you think. So that’s where we come in. If you’re self-employed and you’re yet to do anything about your protection as a trader, here’s what you need to do.
Hire An Accountant
When you work for a company, they take care of your payments and taxes for you. But now that you’re a lone ranger, nobody is going to do it for you. Well, unless you pay them too! Sometimes, taking on your own taxes can be too much of a big job. So hiring an accountant can be a great way to make sure that you’re protected financially and that all of your taxation and HMRC affairs are in order.
Take Out Insurance
Next, you need insurance. No buts! Insurance may seem like a big step, but remember you need to make sure that you’re protected. Both business insurance and income protection are good for sole traders. The business insurance can cover your work, anything that you might be liable for, and even your equipment. The income protection is going to cover you if you get sick and can’t work. Yes, there’s statutory, but you don’t have any employers benefits so if you can’t live of this, you need a backup.
Know Your Rights
Another key point is to know your rights as a worker. Sometimes, you’ll work for other companies, and you need to make sure that you’re protected. Whether that’s to protect yourself after a construction injury or looking after your own reputation. It’s good to know what right you have upfront before you go into these deals, just to make sure that they’re right for you.
Create A Financial Safety Net
Money is a big issue when you’re self-employed. Well, it can be. Because if your work suddenly dries up, you don’t get a paycheck at the end of the month! So, having a financial safety net in place is always a good idea. This is going to help you to stay stable when payments are late (as they often are) and give you peace of mind.
It’s also a really great idea to create contracts for any work that you do. Depending on what it is that you do and the industry that you’re in, creating your own contracts can be a good source of protection for you. Not that you will often have to enforce them, but if you’re worried about being on the end of a bad deal or not being paid, contracts can protect you and help you to take legal action should you need to.
Start Your Own Pension Fund
Realistically, this is something that you should already have set up. It’s so important to be thinking about your financial future, as well as what you’re earning today. Even when you got a pension from your employer, it may not have been enough. So it’s always smart to take out your own personal pension, whether you’re self-employed or not. But as a sole trader, nobody has set that pension up for you – you have to do it yourself. So start today and make the contributions necessary to make sure that you have some kind of financing in place for your future.
Account For Holiday Time
This might not be something that every sole trade wants to do, but it can be useful. Holiday time is something that we get used to as an employee. But as a self-employed person, it’s a luxury. Yes, you can take time off whenever you want, but you’re not getting paid for it. So you’re going to want to make sure that you account for this is your earnings or forecasting. It may even be helpful to plan your holiday time in advance so that you know can finish a project or earn extra on the run up to it.
Get Some Rest
But at the same time, you’re just one person. You can’t be expected to work seven days a week with no break. You’ll burnout. This is something that employers police by setting working hours. So if you want to stay protected (and in good health), you should set your own working hours too and be sure to get enough rest.
Keep Your Head In The Game
Above all else, you have to be business savvy. When you’re an employee, you’re just doing your job. You do the work that is expected of you, you stick to your company rules and you complete the work that your boss sets you. But when you’re self-employed, it’s just you. So it’s much easier for you to lose track of things, miss important dates or even get taken advantage of. And these are all things that you’re going to want to avoid by just being a bit more vigilant and keeping your head in the game.