One key factor that prevents people from freelancing—particularly full-time freelancing—is that they feel like it’s too risky to leave the benefits that come with a full-time job. The assumption—frankly, myth—is that if you freelance, you can’t possibly have the same benefits as an employee at a company.
That’s simply untrue. As a freelancer, all you need to do is build your benefits into your rates.
Sound overwhelming? It’s not. Plus, it gives you way more control over your income and the perks of your job.
What your employer isn’t telling you—and what most people don’t know—is that companies factor the cost of benefits into your salary or hourly rate. This is exactly why on-staff workers typically make less per hour than their freelance counterparts.
Plus, you’re able to build your benefits package the way you want. Maybe you don’t need healthcare because you’re on your spouse’s plan. Or you walk to work, so the commuting benefit your company offers isn’t really a benefit at all.
Keep reading to learn some of the most common benefits and the best way to build them into your freelancing price.
Healthcare for Freelancers
In the US, healthcare tends to be the most important and overwhelming part of building your own benefits package. It makes sense: it’s one of the bigger “expenses” that freelancers have to factor in.
The easiest place to start is by choosing your state on healthcare.gov. From there, you’ll then be able to explore plans and costs in your state. Most states have a tool that lets you estimate your cost and see if you qualify for any additional savings.
Be thorough in your research and see what coverage is best for you and your situation. You can, and should!, explore your options before you actually decide to go full-time freelance. Checking out all of the options and prices will start to make you feel more comfortable about building your own package.
Most of the time, you can deduct healthcare expenses from your taxes when the time comes. Check with a tax professional to make sure that you qualify and can secure this deduction.
Building in Vacation Time as a Freelancer
Contrary to popular belief, taking time off as a freelancer does not mean taking time off from earning money.
PTO (paid time off) is created by a company by factoring in your salary or hourly rate. So, that means you’ll do the same thing when figuring out your freelance rates.
Freelance Success Framework students know that there’s an entire course on setting your rates. But here are the basics:
- Do some research on salaries for freelancers in your field, in your area with the same experience. This will show you a range of annual numbers that you can use as a target. It’s up to you if you want to be on the higher or lower end of these ranges.
- With this number in mind, divide it by the number of weeks each year you want to work. Give yourself at least two weeks vacation. The benefit of being freelance is you can build in your vacation time when and how you want. If you want four weeks, great! Then divide that number by the number of hours in a week you want to work.
- So, once you settle on a number, divide it by the number of weeks you plan on working. Make sure that you at least two weeks of vacation. The best part of freelance is you get the final say over your vacation and when you take it. Want 5 weeks? Great! Just make sure to factor it into your prices.
Play around with these numbers! See what happens with more or less time off and decide what’s best for you. Of course, be sure to base your numbers in reality. If you want to make six figures, it’s absolutely possible…but not if you’re working two hours per week with 50 weeks of vacation.
How Freelancers Can Plan for Retirement
Some employers offer to match a 401(k) contribution. And, if you’re participating in these plans, it can feel like you’re getting “free” money. While it is a no-brainer to contribute to the plan, let us repeat: they’re factoring this cost into your salary.
As a freelancer, you can still save for retirement. And, in fact, you have a few key advantages over full-time employees.
If you’re running your own freelance business (and you don’t have employees), you can open up a self 401(k). These plans are sometimes called a solo 401(k), self-employed 401(k), or one-participant 401(k).
As a freelancer, you can contribute to the plan as both the employee and the employer. On the employee side of things, it’s like any other 401(k): there’s a maximum limit you can put towards it each year ($22,500 for most plans in 2023, but double check as this number can change year to year). Contributions are due by the end of the calendar year.
As the employer, you typically have until you file your annual taxes to make the employer contribution. This part involves a bit more math, so check with your tax professional. They can help you better understand the employer contribution and what you’re able to add to your account. This amount is based on your “earned income,” which is defined as your net minus one-half of the self-employment tax and contributions for yourself. (The IRS explains how to do the math here and gives examples here.)
So, why is this so awesome?
Well, if you make a lot of money in a given year, you can decide to contribute more to your retirement accounts and lower your overall taxable income.
Educational Benefits for Freelancers
Although some employers contribute (or cover completely) the cost of degrees for their employees, freelancers do have the benefit of being able to deduct educational costs from their taxes.
Things like books and other materials that are related to running your business may be tax deductible. As always, check with your tax preparation professional if you are unsure.
Additional Freelance Benefits
Here are just a few additional benefits that freelancers have over their on-staff counterparts:
- Rates. Employees don’t get to set their salary. You may get a raise or cost of living adjustment, but overall you have little control. Freelancers can raise their rates project to project if they want; there’s no need to wait for a yearly evaluation!
- Vacation days. Freelancers can build in as many weeks of vacation as they want and take it when they want. There’s no two-week vacation cap or need to clear it with your boss. (Of course, you do want to give any clients a heads up and wrap up any deliverables before you leave.)
- Location. While companies are more flexibly post 2020, freelancers can work when and where they want. That includes being able to work abroad as a digital nomad if you want to.
- Schedule. Freelancers are always in control of their working hours, period. No more needing to tell your boss about appointments or work within their timelines.
Your Turn!
What perks and benefits did we miss? What additional benefits have you built into your own copywriting business? Tell us in the comments!
Note: As with anything regarding taxes, consult a tax professional. We are not CPAs or tax professionals, so use this as a starting point to ask your tax professional questions about your specific situation.
Last Updated on March 23, 2023.
