What is a common financial implication for employees as compared to self-employed individuals?

Employees typically receive their pay net of tax, meaning that the employer deducts any applicable taxes and other deductions before the employee receives their earnings. This standard practice ensures that employees do not have to manage the complexities of tax payments on their own, making their financial situation simpler and often providing a sense of security.

In contrast, self-employed individuals are responsible for their own tax obligations. They often receive gross payments, meaning that they must set aside the appropriate amount for taxes and other contributions themselves. This can lead to a more complex financial scenario for self-employed individuals, who need to be diligent about managing funds for tax payments, potentially affecting cash flow.

The aspects of higher wage flexibility and more financial risk associated with self-employment do not apply to employees in the same way. Employees typically have fixed salaries or hourly wages with less flexibility in adjusting their pay compared to self-employed individuals, who can adjust their rates and hours worked based on demand. Moreover, self-employed individuals inherently take on more financial risk due to the uncertainty of income and lack of employee benefits that mitigate risk, such as health insurance or retirement contributions.