Tuesday, 8 October 2013

What is a Portfolio Career?


We hear a lot about portfolio careers these days, as the old model of a job for life becomes something that fewer and fewer graduates can rely on. Outside of the public sector, it has virtually disappeared, replaced by a much looser and more fluid relationship between employee and employer.  But what is it, really? Is "Portfolio Career" just a fancy new way of saying freelancer? After all, freelancers have been around for years, haven't they?

Well, yes. A portfolio career essentially involves doing lots of different stuff, working for many different clients, just like freelancers do. Hopefully you will be doing work which is interconnected in a useful way, so that you are developing a portfolio of skills - hence the term portfolio career. As our latest graduates forge their way in the brave new digital world, we thought we should take some time to explore what, exactly, a portfolio career really is, and how to manage one.
Ancient Egyptian freelancer

Q: So what is a freelancer?

A: A freelancer, or freelance worker, is a person who is self-employed and is not committed to a particular employer long term. Some have payroll jobs as well, but many are completely independent. The terms Independent contractor and sole trader mean more or less the same thing.

Q: But in the media world, isn’t everyone kind of a freelancer?

A: In a way, yes. Even media folk who have full-time or part jobs will almost always be under contract, typically for the length of a production, or perhaps a year or two. There are very few jobs for life in the arts. Also, even while working full time for an employer, lots of digital artists take on freelance work. And why not? Even if you work full-time, your evenings and weekends are free.

Q: So can I have a day job and freelance as well?

A: Definitely. Lots of people do it. There is no reason why you cannot be an employee of a company, but still take one freelance work.

Q: How does it all work legally?

A: In the UK, a self-employed person in the United Kingdom can operate as a sole trader. You can do this in addition to having a day job.

A sole trader.
Q: What is a sole trader?

A: It’s very simple. It’s just you personally doing business. People selling fruit and veg on the street are sole traders. A man running a whelk stall is a sole trader. General handymen are sole traders. Barristers are sole traders. It is the simplest and least complex way of doing business. You don’t need to set up a company. You just send out an invoice when you do some work for a client, and the client pays you.
Even m'learned friend is a sole trader
Q: What’s an invoice? And what should go in one?

A: An invoice is a bill. It has your name and address at the top, the client's name and address below, the invoice number (your first invoice will be No.1), the date of the invoice, a description of the work done, the amount charged, the payment terms (eg, “payment due within 14 days”) and your bank details. Find a template online and stick your logo at the top.

Source: Wikipedia
Q: Do I need to set up a company?

A: No. It is not necessary. But, at some point, if your business grows to the point where you need to start hiring people, you will probably want to incorporate.

You too can have a dark satanic mill
Q: What does “incorporate” mean?

A: It's a posh word for setting up a company.

Q: That sounds complicated.

A: It really isn’t. At least, not very. You can buy a company “off the shelf” for a couple of hundred pounds and register it at Companies House. You will need to file annual accounts though. And you will most likely need to pay an accountant to do your taxes.
Everyone needs a good accountant

Q: An accountant! That sounds expensive.

A: In can be, but a good accountant should save you money. There are in fact many tax advantages to being self-employed, as against being an employee.

Q: What are they?

A: In the UK, you can offset costs and expenses against your business income. For example, if you work from home, you can claim part of the expenses of heating and lighting your home. You might be able to claim part of the cost of your mobile phone, or your car, and any digital hardware or business software that you buy. A good accountant can advise you what expenses are legitimate, and what you can reasonably claim.
Unavoidable, sadly. But a good accountant can help.
Q: What does “offset costs” mean?

A: It means you write off your business expenses against your business income. What is left over is your profit, and you only pay tax on your profit. So, if you have lots of legitimate business expenses, you will pay less tax.

Q: What are the legal liabilities of being freelance and working from home?

A: There are quite a few.

When working from home, clearance may sometimes be required from the local authority to use part of the home as business premises.This will depend on where you live. In the USA, local City authorities will often levy taxes on your business.

Also, in the UK, should your business hold records of customers or suppliers in any electronic form (which it almost certainly will) you must register with the Information Commissioner's Office. http://www.ico.org.uk/for_organisations

Other legal responsibilities may include statutory public liability insurance cover, modifying premises to be disabled-friendly, and the proper recording and accounting of financial transactions. Free advice on the range of responsibilities is available from government operated Business Link centres.

Q: What about VAT? How does that work?

A: VAT stands for Value Added Tax. It is a tax on sales in the UK. VAT applies to most businesses which turn over more than £79,000 per year. Up to that amount, you don’t need to worry about it. Once you cross that threshold, you will have to add 20% to all your bills, so either your customers will have to pay 20% more, or you will have to absorb the cost yourself. VAT can be complex and the VAT man is notoriously unfriendly towards violations. For more information on VAT see this link.

Finally, don't forget that financial advice is a highly technical field and you should never base your business decisions on what you read in a blog (especially this one). Take financial advice, get yourself a good accountant, and put your commercial and financial future on a sound footing.

---Alex





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