Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.
Freelance work and the gig economy are on the rise in Australia. If you’re planning to follow the trend by starting your own business or joining Airtasker, here are some things to think about before saying goodbye to your salary.
The number of people taking to freelancing, whether as a self-employed sole trader offering a specific service or as an Airtasking entrepreneur, is also becoming a significant part of the Australian workforce. According to the Australian Bureau of Statistics, there are more than a million independent contractors in Australia. A recent study by freelance listings site, Upwork reckons there are actually 4.1 million Aussies embracing contract work as a way to earn a living, with another 746,000 earning a salary and freelancing on the side.
What’s the appeal?
Findings from Upwork support the argument that taking the plunge to become a freelancer pays off in more ways than one. More than half of those surveyed (51%) say they now earn more as a freelancer and an even greater number (57%) made an active choice to go solo in order to enjoy the flexibility and freedom of being their own boss.
Airtasker’s greatest success story also makes a good case for the financial benefits of swapping a 9-5 working week for the gig economy. Diz Jangra finished 2017 as Airtasker’s top earner, billing his painting and decorating clients a total of $171,000 for the year. That’s almost three times the average annual salary in Australia right now. Mr Jangra generally works around 40 hours a week and puts his success down to having received good reviews from clients and being prepared to work around the clock. “There are all types of jobs on Airtasker, but by only applying for painting work, I know I will get a good review from the client who posted the job,” he says. “Because there is now so much competition, a good review is needed to get the work.”
Founder of invoice2go Chris Strode, has built his own business to meet the administrative needs of those who work for themselves. And he’s a vocal supporter for flexible working patterns as a positive step for busy Australians and their families. “We’re all working harder now. Most households work two jobs, there are childcare costs to consider, and we’re all facing a higher cost of living as housing prices rise,” he says. “The ability to make more money and get ahead is constrained by our idea of only relying on a full-time job. Australians have so much more to offer than that. The gig economy is helping us showcase our skills, and live the flexible lives that we want.”
What’s the catch?
Unfortunately, not all casual workers are watching their bank balance rising exponentially as they happily fit in working hours around other commitments. If you’re one of 80,000 Uber drivers in Australia, you’ll be paid an average hourly rate that’s less than minimum wage and without the rights or protections most Australians can expect as an employee.
Pay and conditions for Uber drivers – who are classified by the Fair Work Commission as independent contractors, not employees – raises concerns about how the growing ranks of freelancers, Airtaskers and other casual workers are changing the employment market in Australia. Both economists and union leaders have been speaking out recently on how the gig economy is affecting both wages and working rights.
Finance industry leaders are also raising the alarm about the retirement benefits people give up with they make the move into freelancing and the gig economy. “The whole idea was that we needed a universal system,” says Tim Kennedy who chairs one of Australia’s oldest industry super funds, LUCRF super, and is the national secretary of the National Union of worker. “It’s not universal right now. Millions of workers are falling between the cracks of the superannuation system in this country.”
Make it work for your finances
Another, more immediate, danger for gig economy earners is failing to meet tax obligations on their income. Complete disclosure of income and expenses is going to matter just as much to the ATO, whether you’re earning as a sole trader through an ABN or as an Airtasker member.
This is just one reason why keeping tabs on what you’re earning through flexible working arrangements is so important. Here are 5 other ways to make sure you don’t fall behind financially when building a future as a freelancer or Airtasker member.
Clear your expensive personal debt – such as credit card balances – before giving up a regular salary. Meeting repayments when your income is going to be fluctuating from month to month can put you under a lot of pressure.
Start your flexible working journey with a decent emergency fund to fall back on, just in case. If work isn’t coming in or you’re unable to work due to illness, having a decent savings balance can tide you over until you’re earning again.
Your income is always going to be unpredictable. Some weeks or months the money will come easily, others it won’ Estimate an annual income for yourself and make it a conservative figure, based on an average across the whole year.
Pay yourself a monthly salary based on that conservative estimate. That way you won’t find yourself feeling the pinch in your during pocket during the months when income is lower.
Make sure there’s enough left from your personal “salary” to look after other financial obligations – loan payments, superannuation savings, plus any other savings goals that are important to you and the lifestyle you’re aiming for.
Are you self-employed and concerned about your savings for retirement? Get tips from a CERTIFIED FINANCIAL PLANNER professional to help you get ahead with your superannuation.