Things Engineers Should Consider Before Becoming Freelancers: Criteria and Preparation to Avoid Regrets After Going Independent
Many engineers are considering going independent after seeing information on social media and blogs claiming that "becoming a freelance engineer will increase your annual income" or "you can work more freely."
It is true that the unit price often exceeds the annual salary of a full-time employee, and the freedom regarding time and location also increases. However, there are risks and burdens that were not visible when you were a full-time employee. If you go independent without knowing these, you may end up thinking, "This is not what I expected."
In this article, we will organize the points you should consider before turning freelance from four perspectives: income, skills, lifestyle, and career.
We also have an article summarizing agents and services useful for an engineer's career, so please take a look at it as well if you want to consider a wide range of options.
Correctly understanding the merits of freelancing
The important thing is to calmly look at how much those merits are worth to you.
Merit 1: Income ceiling increases
The monthly unit price for freelance engineers ranges from 600,000 yen to over 1.2 million yen depending on skills and experience. When converted to an annual salary for a full-time employee, it is often 1.3 to 1.5 times higher for the same skill level. This is because the social insurance premiums, welfare benefits, and indirect costs that the company bears for full-time employees are returned as compensation.
However, it is too early to judge that "freelancing is more profitable" based on this figure alone. You will have to pay the full amount of social insurance premiums yourself, and your income will be zero if your projects are interrupted.
Merit 2: You can choose projects and technologies
As a full-time employee, the technologies and projects you work on are determined by company policy and personnel transfers. As a freelancer, you can choose your own projects, allowing you to specialize in technology areas you are interested in and improve your skills.
Merit 3: High freedom in where and when you work
If you choose a fully remote project, you can work without being tied to a location. If you choose projects that are 3 to 4 days a week instead of 5 full-time days, it becomes easier to secure your own time.
Risks of freelancing and costs often overlooked
Many people who regret going independent are those who took this lightly.
Risk 1: Income becomes unstable
Full-time employees receive a fixed salary every month, but for freelancers, income is zero if projects are interrupted. Contract periods are often around 3 to 6 months, and there is always a risk that they will not be renewed. Demand for specific skills can also drop suddenly due to economic fluctuations or changes in technology trends.
Save at least 3 to 6 months' worth of living expenses. This is a prerequisite for going independent.
Risk 2: Social security becomes thinner
As a full-time employee, health insurance premiums are split with the company, you can join the Employees' Pension Insurance, and you can receive unemployment benefits through employment insurance. Once you become a freelancer, all of these disappear.
Switching to National Health Insurance, changing to the National Pension, and preparing through iDeCo or Small Enterprise Mutual Relief. You need to understand the procedures and additional costs in advance. In many cases, social insurance premiums alone can increase your annual burden by several hundred thousand yen.
Risk 3: The Burden of Tax Returns and Administrative Work
You will need to file a tax return every year. Managing expenses, issuing invoices, confirming payments, and recording books. Whether you do it yourself or hire a tax accountant, the time spent on things other than engineering will definitely increase. It is work that quietly brings your progress to a halt.
Risk 4: The Risk of Creating a "Gap" in Your Career
If you try to return to being a full-time employee after working as a freelancer for a long time, you may be viewed as having lost your ability to work in an organization. The longer the period, the higher the hurdle for returning tends to be. If there is a possibility that you might return to being a full-time employee in the future, you should consider this.
5 Criteria to Check Before Going Independent
There are people who are suited for freelancing and those who are not. Please look at yourself objectively using the following five criteria.
Criterion 1: Do you have at least 3 years of practical experience?
Freelance projects require immediate results. Three or more years of practical experience is the minimum line for winning projects. If you go independent with shallow experience, you will only be able to accept low-paying projects, and it will be difficult to improve your skills.
Criterion 2: Is your area of expertise clear?
Rather than being "decent at everything," do you have expertise that allows you to say, "I am confident in this technical area"? Freelancers are chosen for their expertise. Backend development, infrastructure construction, frontend design. The clearer your strengths, the easier it is to land high-paying projects.
Criterion 3: Can you manage yourself?
There are no bosses and no set office hours. Schedule management, task management, health management. Everything is your own responsibility. If you felt like you "couldn't move unless someone managed you" during your time as a full-time employee, there is a high possibility that you will struggle.
Criterion 4: Are you comfortable with sales activities?
You need to find projects yourself. Even if you go through an agent, interviews where you promote your skills are unavoidable. For those who "only want to focus on technology," this sales aspect will be a source of stress.
Criterion 5: Do you have enough savings?
You need living expenses to get through the period immediately after going independent when you haven't found a project, or the gap period when switching between projects. You need at least 3 months' worth, ideally 6 months' worth.
There probably aren't many people who can confidently say "yes" to all five. However, there are agents that can compensate for the areas you are lacking through their systems. It is faster to discuss your situation with someone rather than keeping it to yourself to see where you are falling short.
◆ Midworks
This is a project introduction agent for IT freelancers. It is characterized by providing benefits comparable to those of full-time employees to freelancers, and it has systems in place to ease anxieties when going independent, such as transportation expense coverage and support for joining social insurance groups. There are many high-paying projects, and it is suitable for those who want to secure a stable income. Even at a stage where you still have anxieties regarding criteria 2 or 5, being supported in terms of systems is significant.
Click here for a free consultation with Midworks (Official Website)
If you would like to know more about Midworks, please refer to this article as well.
Preparation for Stability as a Freelancer
Preparation 1: Start looking for projects while still employed
Looking for projects after resigning is a very risky gamble. Register with an agency while you are still employed to understand what kind of project rates are available for your skill set. If you can secure your first project before resigning, you can keep the gap in your income to almost zero.
Preparation 2: Register with multiple agencies
Relying on just one will limit your project options. Register with several to get a sense of the market rates and ensure you are in a position to choose the projects that suit you best.
◆ Freelance Career
This is a project introduction service for IT freelancers. They carefully match you with projects that meet your desired criteria. Keeping them as one of your multiple registrations will expand your project options. The support from the representatives is also thorough, making it easy to use even for those working as freelancers for the first time.
Just because you register doesn't mean you have to go independent immediately. Simply knowing the market rates can serve as a basis for your decision.
Click here for a free consultation with Freelance Career (official website)
Click here if you would like to know more about Freelance Career.
Preparation 3: Preparation for business commencement notification and blue tax return
Once you start your activities, submit a notification of business commencement to the tax office. If you apply for blue tax return approval at the same time, you can receive a deduction of up to 650,000 yen. Since the tax-saving effect is significant, this is something you should prepare for from your first day of independence.
Preparation 4: Keep the option of returning to full-time employment open
After trying it out, you might feel that being a full-time employee actually suits you better. To ensure you don't close that path, it is important to keep following industry trends and the job market even while freelancing.
◆ ONE CAREER Job Change
This is a job change site with extensive company reviews and interview experiences. You can use it to keep track of trends in the full-time employment market while working as a freelancer. There are many job openings for engineering positions, and the feeling that you can return at any time can also provide psychological support after going independent.
Even if you have no intention of returning, looking at the external market rates will help you judge whether your own rates are appropriate.
Click here for free registration with ONE CAREER Job Change (official website)
Common questions before going independent
Q. Is it okay to start as a side job while still employed?
It is actually a recommended route. You can experience how to acquire projects, the market rates, and the workload while maintaining your full-time salary. If you go independent after feeling confident that you can continuously handle projects as a side job, the risk is significantly reduced. Just make sure to check beforehand if your employment contract prohibits side jobs.
Q. When is the best time to go independent?
When you have leads on projects. Rather than setting a deadline based on age or years of experience, it is more practical to judge based on whether you can see your income for the next three months. The easiest time to make a move is when you have already interviewed with an agent while still employed and have been presented with specific project opportunities.
Q. How can I increase my unit price?
There are two ways: getting involved in upstream processes and deepening your expertise in a specific domain. People who can step into design and technology selection tend to see their unit prices rise more easily. Additionally, in areas where demand exceeds supply, such as cloud computing and security, unit prices tend to remain high. Negotiating to expand your scope of responsibility within your current project is also effective.
Q. When should I consider incorporating?
As a rule of thumb, it is said that once your annual income exceeds 8 to 9 million yen, the tax-saving benefits of incorporating outweigh those of being a sole proprietor. However, corporations have obligations such as social insurance enrollment and the hassle of closing accounts. It is safest to make a decision after consulting with a tax accountant.
Summary: Independence should be judged by 'strategy,' not 'aspiration'
Going independent as a freelancer can be a major career option if you prepare correctly. The higher income ceiling and the freedom to choose your own technology and projects are certainly attractive.
On the other hand, you must make your decision with an understanding of the income instability, lack of social security, administrative burden, and the risk of career gaps. It is not a matter of the aspiration to 'become a freelancer,' but a matter of strategy: 'Is it optimal to go independent now, given my skills, experience, and life situation?'
If you cannot decide, start by checking what kind of projects are available for your skill set. Once you know the actual market, you will have the materials you need.
An overview of services useful for an engineer's career is summarized in this article.
If you are considering transitioning from freelance to a full-time position, please also refer to this article.
If you wait until after you have decided to go independent to start moving, the gap in income will directly affect your life. Now, while you are still employed, is the time to act.
Click here for a free consultation with Midworks (official website)
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