Choosing between employment or freelancing isn’t just a career decision – it affects income stability, benefits, lifestyle, and long-term financial security. And I can speak from personal experience.
More than 20 years ago when I was still in college, I began my career as a freelancer long before I ever entered full-time employment. The freedom and creativity were exciting, but the income instability was real. I eventually decided to become a full-time employee because the lack of predictable pay made planning for life more challenging.
About five years later, after building enough skills, network, and confidence, I made the transition back into full-time freelancing – this time with clearer goals, better pricing, and more financial planning. That decision eventually paved the way for me to build and launch multiple companies.
Because I’ve experienced both sides, I understand the mindset and fears of people standing at this crossroad today. Freelancing can unlock independence and higher earnings, but it also comes with major financial trade-offs that many don’t calculate.
If you’re thinking about making the same transition – from employee to freelancer – this guide is designed to help you clearly evaluate what you gain and what you lose, especially from a payroll and benefits perspective.
Understand the Difference: Employee vs Freelancer
When you are employed, your company handles payroll, government contributions, and compliance. When you become a freelancer, you are no longer covered by the Labor Code – you are treated as a self-employed professional or contractor.
That shift changes who pays, who files, and who carries the risk.
What You Lose When You Leave Employment
1. 13th Month Pay
As an employee, you are legally entitled to 13th month pay under PD 851.
Once you shift to freelancing there is no mandatory 13th month pay
Even if your freelance rate is higher, losing an entire extra month of pay every year is something many people forget to factor in.
2. Employer Share in Government Contributions
One of the biggest hidden costs of freelancing is losing the employer’s share of contributions.
As an employee:
- Your employer pays a large portion of your SSS, PhilHealth, and Pag-IBIG
- You only see the employee share deducted from your payslip
As a freelancer:
- You pay 100% of contributions on your own
- No employer counterpart
- Contributions become voluntary, which some freelancers delay or skip
This directly affects:
- SSS loans and benefits
- Maternity and sickness benefits
- Future retirement pension
3. Retirement Benefits and Long-Term Security
Employees benefit from:
- Regular, consistent SSS contributions
- Possible company retirement pay (RA 7641) if eligible
Freelancers must:
- Self-fund their retirement
- Maintain consistent voluntary SSS contributions
- Rely on personal savings or investments
If contributions are missed or minimized, retirement benefits will also be reduced – or not available at all.
4. Security of Tenure
Employment comes with legal protection.
As an employee:
- You cannot be dismissed without valid cause and due process
- You may be entitled to separation pay in certain cases
As a freelancer:
- ❌ No security of tenure
- ❌ Contracts can be terminated anytime
- ❌ No separation pay, no reinstatement rights
Income stability becomes your responsibility, not the client’s.
5. Paid Leaves, Holidays, and Time Off
Employees enjoy paid benefits such as:
- Service Incentive Leave
- Maternity, paternity, and solo parent leave
- Paid regular holidays and special non-working days
Freelancers:
- ❌ Do not get paid leaves
- ❌ Do not get holiday pay
- ❌ Do not get leave conversion to cash
Every day you don’t work is a day you don’t earn.
6. Taxes and Compliance Become Your Responsibility
As an employee:
- Taxes are automatically computed and withheld
- Employer handles BIR compliance
- You receive BIR Form 2316
As a freelancer, you must:
- Register with the BIR
- Issue invoices
- File monthly, quarterly, and annual tax returns
- Maintain books of accounts
- Pay penalties for late or missed filings
Many first-time freelancers underestimate the time, cost, and stress of self-managed tax compliance.
So… Is Freelancing Still Worth It?
Freelancing can be worth it – but only if you:
- Price your services correctly
- Account for lost benefits
- Pay your full government contributions
- Manage taxes properly
- Build emergency savings for income gaps
If you compare only gross income, freelancing looks better.
If you compare net income plus lost benefits, the decision becomes more nuanced.
A Practical Rule of Thumb
Before switching to freelancing, ask yourself:
“Is my freelance income high enough to replace my salary plus 13th month pay, employer contributions, paid leaves, and job security?”
If the answer is no, the move may not be financially sustainable – at least not yet.
Final Thoughts
My personal journey taught me this:
Employment offers structure, security, and ready-made benefits.
Freelancing offers freedom, flexibility, growth, and unlimited potential – if you approach it with strategy, planning, and realistic expectations.
Your choice shouldn’t be emotional – it should be informed.
If freelancing is the path you choose, don’t let tax compliance hold you back.
You can outsource your tax filing to us, or you can use MPM Accounting software to confidently manage it yourself. Whichever route fits your style, we’ll guide you every step of the way so you stay compliant and focused on earning.
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