Glossary Terms

self-employment

Self-employment is working for yourself, as a contractor, freelancer, or small business owner, rather than as someone's employee. It means you own the whole job: finding clients, doing the work, invoicing, and handling your own taxes. Unlike an employee whose tax is taken off each paycheck, you pay estimated taxes through the year and owe self-employment tax that covers both the employee and employer share of social programs, which is a common nasty surprise in year one. The upside is autonomy, the chance at higher rates than the salaried equivalent, location freedom, and room to specialize in high-value work; the downside is uneven income, no employer-paid benefits, and the unpaid time it takes to run the business itself.