The financial costs of Self-Employment versus Employment

I have had a few conversations in the past week about financial costs of self-employment versus employment. It has got me really thinking about the things that you miss out on as a self-employed person.

Until now I have been very much focused on the turnover of my business reaching and surpassing my salary as an employed person. I wasn’t thinking about all the benefits I had but am now missing and having to pay for. These had a considerable value, potentially an extra 25% on top of my salary.

These are all optional thing to pay for now being self-employed. But I am really feeling the pain of missing out at the moment.


Probably the biggest benefit of employment is a pension that not only you contribute to but also your employer. The minimum contribution is 5% from you and your employer will top this up by 3%. Many employers offer more than this and will rise their contribution if you do as well.

This is free money, free money for people in employed work, Money that is not available to the self-employed.

Also employed people are auto enrolled and almost forced into having this pension. The majority of self-employed folk do not have a pension.

I really miss this benefit. I have a pension pot from my employed days of 50k when I took all of my different pots and consolidated them with PensionBee. This gives me flexibility and I can add to my pension whenever I choose but am yet to add much since becoming self-employed. I had the best intentions at the beginning of 2019, but then other priorities took over like repayment of debt and the building of an emergency fund.

Death in Service Benefit

Many companies offer an insurance policy that pays out an amount if you die whilst working for that company. I used to have a policy worth four times my basic salary. This can be used instead of life insurance.

Instead now I have a couple of life insurance policies that I pay a premium for every month. You might not need so much cover when you have the death in service benefit from your employer. I have written about life insurance here, take a read to see if you should take out a policy.

Holiday and Sick Pay

Holidays are different now that I am self-employed. I have had three holidays this year and have worked on all of them. Maybe for 2-3 hours each day during the holiday. The wonders of an internet business make this possible, but not so great for a break from the business. Because if I don’t work, I don’t get paid.

I have tried hard to build up the passive side of my business, so it continues to earn money when I am not working, but its really not my area of expertise and certainly not enough to pay the monthly bills.

The same goes with sick time as with holiday time, the work still needs to be maintained, deadlines hit. With employed work you can take the time off and earn exactly the same as if you were at work.

An Amazing Mark Warner Holiday to Corsica

Private Health Cover

A benefit that I have really missed this year is private health cover. I have had access to private medical cover for all my working career and totally took it for granted. It was well used over the years for physio, investigations, blood treatments.

This year I have had a few medical issues investigated and have had to wait months for hospital appointments, tests and then follow up appointments with specialists. It all would have been quickly resolved if I had private health cover. Of course, these are non-urgent issues and I know that I would be treated straight away if anything was an emergency, but I have missed the benefit.

I have been looking into the cost of private health cover and it is not cheap but is a benefit well worth having as an employed person.

mental health awareness week

The positives of Self-employment

Of course, there are so many benefits of being self-employment that far outweigh these financial benefit considerations. But it is worth considering the loss of these financial benefits when considering self employment.

The biggest positive for me as a self-employed person is the control I have and the impact that has on my mental health. I decide on the work I chose to do and the hours I work. This allows me to have more flexibility with the children and be there for all the school runs, nativities and sports days. I can work at 10pm at night or I can work during school hours.

What do you find the hardest about being self-employed?


More to explore


Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

Get the latest…subscribe to the newsletter for hundreds of money saving tips.

I wish to receive emails & promotions.

follow Mrs MummyPenny

2 Responses

  1. Thank you for a very interesting and informative article! I wrote an essay on this topic together with the service specialists – Self-employment does offer many benefits that far outweigh the considerations of financial gain.

Leave a Reply

Your email address will not be published.