What business risks do I need to be aware of if I am self-employed?
Posted on 30th September 2021 by Phil Ainley MCIM, CMktr, Dip DigM - Marketing Manager
To many, the lure of working for yourself is too great to ignore but before you take the plunge and go self-employed, it’s important to ensure you are fully aware of the risks you will be exposing yourself to and how you can protect yourself against them to ensure your self-employed career is a success.
What risks do I face and how can I mitigate them?
Theft or loss of your property
When you start-out as self-employed, it is likely that you will use the same laptop for your work as you do for your personal use. Imagine the situation you’d find yourself in if your laptop was stolen?
Working in an internet café is common practice for the self-employed. It takes you out of your home and away from home-life distractions. But if you need to run an errand or go shopping, then it is a good idea to carry your laptop with you (but that’s heavy and bulky) or drop it off at home first.
Many times, people have left valuables in their car while just nipping into a shop, then when they have returned to their vehicle, they find that they’ve been broken into and their laptop and other valuables have been taken.
If this happened to you, how would you cope knowing that you’d not only lost your work but also potentially compromised your access to your bank account and social profiles as a result?
You can mitigate this risk by having two devices, one for your personal life and the other for your work. If you purchase a laptop specifically for your work, it can be declared in your accounts as an expense.
You can also insure against this type of occurrence with portable equipment insurance, which offers protection to people who work on the move and carry their office in their laptop bag.
Identity theft and cyber crime take their place in the news on a regular basis. If you’re self-employed and you work on-site for a client or you work in an internet café, then you might be exposing your sensitive data (and your client’s data) to cyber theft.
Typically, public Wi-Fi connections aren’t secure and sophisticated cyber criminals can use them to piggy-back into unsuspecting people’s lives, compromising data and cloning identities for their own gain. Wherever possible you should try to use a secure network or simply work offline if you are working in a public place.
You can insure yourself against the impact of identity theft with legal expenses insurance (LEI). The LEI policy will respond to cover (up to £100,000 in any one claim) unauthorised use of your personal data by a third-party and will pay costs to reinstate or correct your personal information. It will also cover an incident where a third party has entered a contract in your name or on your behalf without your permission and will pay costs to help you withdraw from that contract.
Prevention is always better then cure to avoiding the stress that can be caused by identity theft and the fallout from it. It is important to be as vigilant as possible when you are working online.
Accidents on your property or on clients’ premises
When you are self-employed, whether that be as a marketer, designer, copywriter, café or shop owner, if you meet people face-to-face as part of your work then you risk a potential public liability claim.
You might meet a client at your home office or you may work for a client on their premises.
If you meet clients on your property and they fall and hurt themselves, then you could face a claim for the injury if you are not covered.
If you work on a clients’ premises and you damage property of theirs or if you work on a laptop and a member of staff trips on your laptop cable, then you could also face a public liability claim.
As a self-employed professional it is important to ensure you are covered with public liability insurance because the alternative, should a claim be made against you, could run into thousands of pounds that you’d have to pay out of your own pocket.
Projects that don’t quite go according to plan
Many self-employed professionals offer one of three main services: professional services, advice and/or designs to their clients. All three of these services are open to misinterpretation and human error, which can lead to a claim of negligence on your part if you’re not careful.
If you are subject to a claim of negligence that is alleged to have cost your client money, then settling the claim could cost thousands of pounds in compensation and in costs to put the job right again. This is why professional indemnity insurance (PI) is the most popular type of business insurance for freelancers and contractors.
If a claim is made, then the PI policy will respond to protect the person carrying the policy. The PI policy works on a ‘claims made’ basis, which means it must be live at the time the claim is made.
Self-employed professionals who benefit from carrying professional indemnity insurance includes but is not limited to:
- Management consultants
- IT contractors and consultants
- Graphic designers and web designers
- Technical and mechanical engineers
- Social workers
- Teachers and tutors
Outsourcing your workload
As a self-employed professional you are likely to encounter times when you are extremely busy. Feast and famine can be common in certain freelance sectors. It’s important to learn how to manage workflows and output.
Outsourcing is a great way of ensuring projects are completed on time and hiring freelance contractors to help you with projects is a great way of creating reciprocal working relationships. However, outsourcing comes with its own risks.
If you hired a contractor online or even if it was someone you knew and trusted, you could be exposing yourself to the risk of them not completing the work for you on time or not completing it at all. Therefore, it is important to ensure the contractor you hire is also carrying professional indemnity insurance, just in-case you need to make a claim against them.
You can mitigate this by insisting on no payment until the work is delivered or by working to staged payments. Many freelance contractors will insist on a deposit upfront, it is important to ensure you have a rock-solid contract in place with them before making the deposit payment.
When your work poses a health risk to others
Sometimes it is a good idea to think our work activities and ask if they pose a health risk to others. As a self-employed professional, you might look to employ staff. If so, then you will be required by law to carry employers’ liability insurance (EL) to ensure the welfare of your staff.
Even if you do not employ staff, you might legally still have to follow the Health and Safety at Work Act 1974 (General Duties of Self-Employed Persons) (Prescribed Undertakings) Regulations 2015.
Example scenarios of when the law applies to self-employed professionals includes:
- Accountant – I am a self-employed accountant and I am proposing to take on a work placement student, will the law apply to me?
Yes, you will have duties as an employer and will need to take steps to ensure the health, safety and welfare at work of your employees. (1)
- Employer – I am an employer, will this affect the way in which I manage sub-contractors?
No, as an employer you have duties under health and safety law to satisfy yourself that the contractor you choose can do the job safely and without risks to health. The proposed changes will not alter the duties you as an employer have to contractors. (1)
- Hairdresser – I’m a self-employed hairdresser, does the law apply to me?
If you use bleaching agents or similar chemicals then yes, the law will apply to you. If you are simply washing and cutting hair, then health and safety law will no longer apply. (1)
- Office work – I work in an office at home, does the law apply to me?
It doesn’t depend on whether you’re at home, it is the work activity that matters. So, if you’re working on a client’s accounts, the law will no longer apply. If you’re writing a manual, which someone will use to operate machinery, then the law will still apply. (1)
- Advice – I am a health and safety consultant and visit clients to give advice, does the law apply to me?
Yes, your clients will act on your advice and this affects how other people do their job. (1)
- Landlords – I let rooms and properties to tenants, does the law apply to me?
Yes, you have specific responsibilities under the Gas Safety (Installation and Use) Regulations. (1)
For quotations for professional indemnity insurance, public liability insurance, employers’ liability, insurance, legal expenses insurance or portable equipment insurance, please call us on 0333 321 1403.
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