Self-employment is the state of working for yourself — as an independent contractor, freelancer, or small business owner — rather than as an employee of an organization. Self-employed individuals are responsible for their own business development, client acquisition, project delivery, invoicing, and taxes. Unlike employees whose income tax is withheld at source, self-employed people must pay estimated quarterly taxes and are subject to self-employment tax (15.3% on the first $168,600 of net self-employment income as of 2024 in the United States), which covers the employee and employer shares of Social Security and Medicare — a common financial shock for new freelancers. Benefits of self-employment include schedule autonomy, potential for higher hourly rates than equivalent employment, location independence, and the ability to specialize narrowly in high-value work. Risks include income variability, no employer-paid benefits (health insurance, paid leave, retirement matching), and the non-billable time cost of running the business itself.
Glossary entry