Going It Solo: The Complicated Financial Lives Of Freelancers For a growing population of independent workers, the flexibility of contract work comes with the headache of dealing with taxes and other issues that employers would normally handle.
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Going It Solo: The Complicated Financial Lives Of Freelancers

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Going It Solo: The Complicated Financial Lives Of Freelancers

Going It Solo: The Complicated Financial Lives Of Freelancers

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ARI SHAPIRO, HOST:

There's a sharp debate in this country over the growth of the freelance or contract workforce, whether it's a good thing or not. Supporters say freelance workers have more control over when and where they put in their hours. Critics say companies are simply looking to avoid paying benefits and are creating a second-class workforce. However you look at it, being an independent worker does come with some unique challenges and headaches, as NPR's Yuki Noguchi reports.

YUKI NOGUCHI, BYLINE: Kim Bui has been a freelance consultant off and on for two years and has learned this from the experience.

KIM BUI: It's just excruciatingly difficult to manage our finances.

NOGUCHI: In addition to the web design and social media work she's hired to do, Bui must also manage all her own office functions.

BUI: No one really explains to you taxes and contracts and how to chase a client for that bill that they owe you, like, the nitty-gritty.

NOGUCHI: Bui lives in Los Angeles with her husband who also works freelance as a graphic designer. They are among the rapidly expanding population of contingent workers that make up, by some estimates, a third of the U.S. workforce. They, like others, enjoy the flexibility of that work arrangement. On the other hand, neither of them has an employer contributing towards Social Security, health insurance, retirement or paid vacations.

BUI: There's no such thing as maternity leave for freelancers. So we've put off the kids conversation for a tiny bit.

NOGUCHI: She is also her own sales department, trying to keep clients in the pipeline. She says figuring out what to charge for her time is a challenge in and of itself.

BUI: I actually just found out the other day I'm still undercharging people.

NOGUCHI: Alastair Fitzpayne is executive director of The Aspen Institute's Future of Work Initiative. He says simply charging more isn't an option for many freelancers, especially if they work in low wage or very competitive fields.

ALASTAIR FITZPAYNE: Freelancers are, you know, competing not just within their town, not just within their state but competing globally, and there's just huge global pressures on the amount that they can earn.

NOGUCHI: As the independent workforce grows and employers create fewer full-time positions, financial security is likely to become a bigger concern. Caitlin Pearce is executive director of the Freelancers Union. She says income unpredictability and a lack of benefits make it hard for solo workers to save.

CAITLIN PEARCE: Two-thirds of them are dipping into their savings every month to make ends meet. We see that freelancers as a result are really lagging behind employees when it comes to saving for retirement.

NOGUCHI: Traditional employers contribute toward their workers' payroll taxes. That's not the case for the self-employed, who must pay both sides. And because taxes aren't automatically deducted from their paychecks, many must figure out what they owe on their own. Duke Chang founded bSolo in part to ease that burden. bSolo's service automatically estimates and pays taxes. Without that, Chang says, it's hard for freelancers to know how much they can save.

DUKE CHANG: They are hesitant to lock anything in because they need the free cash flow in order to deal with taxes.

NOGUCHI: That's certainly true for Alex Patton. Last year, the 24-year-old contract chef and freelance writer discovered he was short on his tax bill by several hundred dollars.

ALEX PATTON: I wasn't really prepared to fill out all the different paperwork, and I ended up owing money because my freelance work didn't have taxes taken out of it.

NOGUCHI: Patton borrowed money from his parents and is trying to avoid falling into the same trap again.

PATTON: I almost can't have fun anymore because there's always something I should be doing, you know, writing an article or finding a pitch.

NOGUCHI: He says, for him, the strain outweighs freelancing's benefits. Now he's looking for full-time employment. Yuki Noguchi, NPR News, Washington.

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