In the UK, why are freelance fees higher than salaries?

If you are an employee, the company you work for will be paying the employers National Insurance contribution. That’s 13.8% of the salary. So, if you work for a company and are on £50K, it’s costing the company £56,900 to employ you. If you’re freelance, you have to pay that portion of NI yourself (as well as the employees NI contribution, which everyone pays).

They will almost certainly be contributing to your pension scheme. I can’t find numbers for how much some big companies are contributing at the moment, but from memory I think the last company I worked for in the UK contributed 6% of my salary to the scheme. So, now employing me is costing £59,900.

There’s a good chance they are also contributing to a private health plan for me.

They’re probably providing a subsidized gym membership for me (and maybe my family).

They probably pay for some life insurance for me.

So you can quickly see how the cost of employing someone is significantly higher than just the headline salary number.

But here’s the other thing, that can add up very quickly. As an employee, I almost certainly get 25 days a year paid vacation. If you are freelance, you can take a vacation, but you won’t get paid during it. As an employee, if I fall sick, I’ll keep being paid. If you are freelance and you have to take a sick day, you won’t get paid.

Freelance rates seem very generous, until you see what you don’t get.

Leave a Comment

Your email address will not be published. Required fields are marked *