If you start your working life as an employee and then strike out on your own – either as a freelancer, contractor or entrepreneur – you will have to give up all the benefits that come with having a job.
A regular and secure income is just one of the things you will give up. You will need to try and recreate this for yourself. Read more: How can I survive on an irregular income as a freelancer, contractor or business owner?
Here are some other benefits you will lose and how you can set alternatives up for yourself:
Sick leave
When you work as an employee, you enjoy the benefit of paid sick leave that covers you for up to six weeks over any three-year period.
But if you are self-employed you need to provide for any periods in which you may be unable to work. If your business can run without you, you may be less vulnerable. But if, for example, you are providing a service or are a key person in your business and won’t earn if you are unable to work, you should cover yourself against a potential loss of income, especially if you are the breadwinner.
Income protection policies which include cover for temporary disability are useful products for protecting yourself. Read more: What is an income protection policy?
Check the waiting periods on the policy as these can be set to cover you from the first day you are ill or after a certain number of days – for example, seven or 14 days. If even seven days will seriously impact your earnings, consider a short waiting period. Read more: Why are waiting periods important on income protection policies?)
This can make your cover more expensive. The alternative is to build up some savings in a separate account or the account you create to supplement your income when you are sick.
Group life disability benefits
Employees typically also enjoy cover against longer periods of disability through their group life cover.
Make sure you provide the same for yourself.
Income protection can provide you with ongoing cover that best matches your needs, but it can be difficult to prove your income when you first go solo.
Lump sum disability cover is not as good a match, but it is a lot better than not having any cover should you become disabled and unable to continue working.
Lump sum disability cover will, however, only cover you if you are permanently disabled. Ideally you need income protection with temporary disability cover as insurers’ statistics show you a far more likely to suffer from an injury or illness that puts you out of work for a temporary period, rather than one that leaves you disabled for the rest of your life.
Group life cover
As an employee you may have enjoyed group life cover that protects your family in the event of your death, 
disability and even possible severe illness. If you have dependants, it is important to continue, or replace, this cover with life cover in your own name.
Some group life policies offer the option to convert the cover you enjoy through the group scheme into cover in your own name as long as you pay the premiums. This can provide a cost-effective way to continue your group life benefits when you become self-employed. Read more: What does it mean if there are conversion benefits?
Paid leave
When you are self-employed, you no longer enjoy any paid leave.
If your small business is big enough you should be able to take drawings during periods when you need to take leave, but if you are working in the gig economy or working as a contractor, you need to set aside money during the year to ensure you can take a break. Not taking a break can lead to burnout.
Work out how much you need to set aside to pay yourself leave and save it in a separate account to draw on when you take leave. For example, if you want to take two weeks twice a year, you will need to set aside from the income you earn in the other 11 months of the year, enough to fund a month of earnings – so divide you monthly income by 11 and set that aside each month to cover your leave.
Medical cover
When you are employed, belonging to a medical scheme may be a condition of employment.
If you are very fortunate, your employer may subsidise all or some of your contributions to the scheme.
When you leave an employer you will have to pay the contributions in full yourself.
It is not a good idea to give up your membership when you go solo, as your medical scheme membership protects you against catastrophic medical expenses. If you do not belong to a medical scheme you will have to use state facilities or pay large amounts of money for private healthcare. Private healthcare costs for a serious illness or injury can run into many thousands of rands and hospitals may not even admit you if you can’t pay upfront.
Not being able to book appointments can cost you more in working days lost and state hospitals may even bill you if your annual household income is above a certain level.
If the cost of the contributions is onerous, consider carefully downgrading to a cheaper medical scheme option that restricts your choice of providers or offers hospital cover only.
If you were a member of a restricted medical scheme open only to employees of your employer, you may have to move schemes, but if you are a member of an open medical scheme, you should be able to continue as a member of that scheme as long as you pay the contributions.
You may also have been offered gap cover as an employee. You may have been a member of a group scheme and if you leave your employer, you will have to take out cover as an individual. This may cost you a little more and you may have to change policies.
The contributions your employer pays on your behalf are taxed in your hands as a fringe benefit, but when you are paying the contributions yourself in your own name (not through a company you own) this tax will not be applied. You will, however, enjoy the same medical tax credits for your membership and that of any dependants. Read more: What is a medical tax credit?
Retirement savings
It is often a condition of employment that you contribute to a retirement fund – this may be an employer-sponsored retirement fund set up for the employees of an employer or an umbrella retirement fund that caters for employees from a number of employers.
If you opt for self-employment or to run your own business, you should not neglect your retirement savings.
As long as you are working alone or with just a partner, you can set up your own retirement savings fund using a retirement annuity (RA). If you are setting up your own business, you can when your business is established enough consider a group RA or an umbrella retirement fund for yourself and your employees. Read more: How do retirement annuities allow me to create my own retirement savings?
You should attempt to save what you were saving before and what your employer was contributing – probably between 12 and 15% of your income – in order to ensure your retirement savings remain on track to provide you with the income you are accustomed to in retirement. Read more: How much do I need to save for retirement?
