Perhaps you're tired of dealing with significant fluctuations in income. Or maybe you've been offered a salary that's too good to pass up. No matter the circumstances, going from self-employed to permanent employee means facing a number of changes to your work life, both for better and for worse. Here are a few things to be aware of.
1. Your earnings will be taxed immediately
Although self-employed workers must pay both the employer and employee share of Social Security taxes up front, the upside of that arrangement is that as an independent contractor or freelancer, you're only required to pay taxes once every quarter. This means you have more flexibility with your earnings, at least in the near term.
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Say you encounter a month with an unplanned expense, and don't have the savings to pay for it (not a good situation to be in, of course, but possible nonetheless). If you spend your earnings in their entirety to cover that cost, and hustle the following month to make up for what you should've set aside in taxes, you'll be just fine when the time comes to make your quarterly payment, and you'll have enjoyed a (very) short-term loan from the government.
As a permanent employee, though, you have no say as to how much tax you'll lose, other than the extent to which you claim allowances on your W-4. On the other hand, you won't have to worry about estimating your own taxes, which takes much of the burden off you. And, you won't risk running into a scenario where you overspend your income and come up short on your tax payment as a result.
2. You'll be stuck on more of a schedule
Though some companies offer flexible working hours, most require employees to show up at a specific time and remain available until a certain hour later in the day. This might throw you for a loop initially as you adjust to a more rigid schedule and lifestyle.
The good news, though, is that working preset hours might help you make better use of your time, and even achieve a better work-life balance. One problem with being self-employed is not knowing when to call it quits, since the more time you put in, the more money you stand to make. However, this can be both a blessing and a curse. By sticking to a schedule, you may come to find that you're forced to slow down and take time away from the office, which could end up making you a happier person overall.
3. You may need to get used to commuting
Unless your company offers you a work-from-home arrangement, you'll need to learn to embrace one aspect of permanent employment that countless workers come to loathe: commuting. If you happen to live pretty close to your office, or are able to bike or walk to work, you may not find that commute bothersome. But if you're among the numerous workers who are forced to endure traffic, bus delays, and rail problems on a regular basis, you may soon come to regret your decision to accept that permanent job offer in the first place.
In fact, nearly 50% of workers say that their commute significantly affects how they feel about their jobs, so if yours turns out to be terrible, you'll need to find ways to make the most of it, whether it's calling old friends on your drive home, catching some extra sleep on the bus, or tackling a side project on the train. Commuting is often unavoidable, but if you come up with a plan for how you'll use that time, it'll be less likely to bring you down.
4. You'll lose certain tax benefits
One final thing to remember about abandoning the world of self-employment in favor of a permanent job is that although you'll start getting workplace benefits, you'll also lose certain write-offs that may have otherwise helped your tax situation. For example, if you're used to taking a home office deduction or writing off your vehicle expenses, you won't be able to do that as a salaried employee. Be sure to keep this in mind when you review your salary offer, and make sure the number still works out in your favor. Also realize that even if you earn the same amount as you previously did as a freelancer, without those deductions, you may get pushed into a higher tax bracket -- and that's something that could hurt you if you're not careful.
There are plenty of good reasons to go from being self-employed to taking a permanent role. Just be sure to know what you're getting into so that you don't come to bemoan the decision down the line.
