Employment Versus Self-Employment Essay

Introduction

Employment is a situation where an individual (employee) is in a relationship, with another party (employer) usually in the form of a contract, and expects pay for the work done. The second party may either be an individual, institution, which can be profitable or non-profit making corporation, cooperatives, or any other entity that is willing to pay for the work done. The employee works under the rules and regularities as provided by the company's framework. The guidelines and instructions issued by the employer to the employee are expected to be followed and executed to later (Stewart, 2004). In case of violation of the organization's rules, the employee faces the consequences as listed in the employment agreement contract at the time of employment.

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Advantages of Employment

Employment comes with a package of benefits to the employee. The employee benefits from paid sick leaves, health insurance, unemployment and worker's compensation and retirement pension schemes. When an employee falls ill in the course of performing their duties, the employer permits them to leave and seek treatment. No deductions are made for the time the employee was on sick leaves. The employee still receives the usual salary as indicated on the company's payroll. The employer also benefits from health insurance covered by the company. When an employee is insured, treatment becomes more manageable especially if the therapy involves enormous bills. Worker's compensation is one among so many other measures undertaken by companies to enhance safety in the working environment (Stewart, 2004).

Employees working in stations such as industries are exposed to accidents such as cuts and electrical shocks. In case of an accident on any of the employees, the employer compensates the worker accordingly. The act of compensation encourages and motivates the workers to perform even in the hazardous working environment. Once individuals secure employment, they automatically get enrolled into pension schemes. For example, the retirement pension scheme significantly assists the employee to save funds for future after retirement. Also, the employee has an opportunity to proceed with further education (Stewart, 2004). Most companies support and encourage their employees to further their training under the company's expense. Additionally, the workers freely interact with one another. It is through this mingling that gives them a chance to share ideas and seek advice. Innovation and invention and concrete decisions are outcomes of social interactions with colleagues at the place of work.

The Disadvantage of Employment

Employment does not guarantee a direct income to the employee. The employee receives salary indirectly after a given period at a specified date. A regular job is associated with the daily commute. The employee is expected to report to the place of work on a daily basis on all working days and must be committed in matters to do with time and productivity. The employee lacks enough time with family, and this gives rise to childcare issues among other problems. The parent-child relationship is essential to ensuring a happy family and proper upbringing of children and creation of a strong bond among family members (Stewart, 2004). Tight commitment to work diminishes the relationship. Additionally, the employees of a company are unlikely to feel the effects of the company's success since they are not directly attached to it. Also, pay rise are minimal and infrequent. Low earnings are what results to industrial strikes demanding a pay rise and promotion.

Self-Employment

On the other hand, self-employment is where an individual operates his or her ventures, which acts as their source of income. According to Smeaton (1992), the earnings for an independent businessperson are usually direct from the operation as opposed to salaries that the employees receive for the services they render to a company.

Advantages of Self-Employment

People who are self-employed enjoy all the profit they make solely and direct. The sole proprietor makes their own rules which are suitable to them such as working hours, career objectives to focus on and can easily evade taxes. In short, self-employed people are their bosses. A sole trader has the freedom to fit work around their family life by involving them in their operations. This provides cheap and readily available labor to the business. A self-employed individual has the advantage to work on a multitude of different projects, work with various companies and meet with a wide range of clients for the different projects. Hence the individual invests a lot and optimizes profit. A self-employed person has the full responsibility for the company's success and growth.

The Disadvantages of Self-Employment

In the beginning, the self-employed individual may experience some difficulties in management, and also the business does not pay much. A sole businessperson does not enjoy paid sick leaves or holidays, and in case they take a holiday, they reduce their earnings especially for the labor-intensive ventures. Also, the individual suffers from loneliness which maybe as a result of isolation and lack of continuity in case of death. Additionally, the sole trader lacks employment security and thus does not have an assurance for business continuity. Self-employed persons usually convert their homes to workstations due to lack of distinction between work and home time. They get obsessed with work to the extent of working for more extended hours, thus reducing the periods spent with their families.

Tax Avoidance and Tax Evasion

Tax avoidance is a legal action undertaken by an individual to minimize tax. Companies and individual taxpayers avoid taxes through legitimate deductions such as tax deductions which reduce the amount of tax to be remitted, and this helps in reducing the business expenses and also tax deferral plans which push or delays payment for such fees to a future date. On the other hand, tax evasion is illegal. It occurs when someone fails to pay tax. This issue majorly affects income taxes primarily for persons who are self-employed. According to Wanjialin (2004), businesses evade taxes by providing false information on their income and deliberately making lower tax payments.

Implications of Tax Avoidance and Tax Evasion an A Client

When one does not contribute through payment of tax either through tax avoidance or tax evasion, there lack enough funds to finance activities and allocate resources equitably. An individual who evades tax may be prosecuted and charged in court for the offense. This may lead to the installation of heavy fines according to the policies outlined by the tax laws (Johnson 2014). Someone who avoids tax may not access public services and especially those that require one to hand in their tax compliance certificates before obtaining it. Also, a tax evader may lack an opportunity to secure a job in national institutions where a provision of a tax compliance certificate is a compulsory requirement.

Implications of Tax Avoidance and Tax Evasion on the Government

In a situation where the citizens of a state evade paying taxes, the government runs short of revenue projected by the tax-collecting agency. As a result, the government is unable to execute those expenditures that it is mandated to provide to the public. Government services to the public include social work programs, allocation of resources, and government spending and investment (Johnson 2014). Taxation is the primary source of government revenue, thus when citizens avoid and evade tax, the administration gets short of income and may result in external borrowing, which is disadvantageous due to the high interest rate accruing to such finances. If the capital borrowed is not utilized appropriately to yield optimal output, the burden does not only fall upon the government but also on the taxpayer.

Purpose of Taxation

The leading goal of the tax is to provide revenue to the government for its functioning. The UK government cannot run its activities without a regular source of income since it is not a profit making oriented business. Hence, the tax was incorporated to assist in the provision of cash to fuel the government activities which are social development projects that benefit the public (Short, 2001). Additionally, taxation assists in regulating the consumption of harmful products such as alcohol, cigarettes, and other commodities that cause harm to the health status of its citizens. This is achieved by imposing a high tax rate on those goods and services hence discouraging the users due to the high cost (McLaughlin, 2004). Also, the government introduced taxation as a means to protect its domestic and upcoming industries. In a case where people prefer imported goods to those produced locally, the government imposes a high tax on imported goods. The action helps in discouraging locals from consuming the imported products and buys the locally produced goods which are cheaper and hence increasing productivity of home industries (Onakoya, Afintinni and Ogundajo 2017)

Types of Taxation in the UK

The first type is the income tax, which is imposed on the population's gross salaries. Income tax can be proportional whereby the same rate of tax is charged in whatever size of income or progressive where one pays a fee according to the level of income one receives. The higher the income, the higher the proportion of taxes paid. It can also be progressive, where the rates increase with an increase in the level of income. This method charges more for the high salaried residents.

Secondly, we have the consumption tax which is the value added tax levied on the goods sold. The value-added fee is attached to all taxable commodities such as sugar, flour, and coffee. Moreover, excise duty is a tax imposed in the UK for the products during the manufacturing stage (McLaughlin, 2004). This is an alternative to the value-added tax paid at the sale, where the tax impact is felt by the producer, who may then transfer it to the buyer in the form of price increase.

Additionally, the UK administration operates a corporation tax, which is levied on the company profits. All registered companies in the UK have an obligation of paying taxes in proportion to the revenues they make per trading period (Giles and Johnson, 2004). Lastly, the administration installs stamp duties to its citizens. These are charges levied on legal documents such as land transactions, military commissions, receipts and marriage licenses. They are progressive meaning that higher the value of the property regarding money or wealth, the higher the proportion of taxes paid.

Tax Planning Issues for the Client

A client needs to be aware of several subjects pertaining taxation in the UK to adopt proper planning before making any commitment. First, the client needs to identify the accruing tax burden. This enables him or her to comply with it if it is favorable. However, in some instances, the clients tend to be reluctant to comply with tax laws especially if the cost of living is high and the tax burden is rising. Instead of paying taxes some opt to save the amount to purchase other items.

The second issue is that the client has to acquire adequate knowledge of tax laws. Lack of knowledge of tax laws may result in unintentional failure to comply with the tax laws put in place. The client experiences difficulty in keeping proper and accurate records and encounters challenges in obtaining information about compliance with the tax laws. Lastly, the client is obligated to understand the tax system to avoid tax evasion and to comply with tax laws fully.

Sources of Tax Law

Based on HMRC administrative system tax laws, rules are laid down in the Acts of Parliament but left to the court to give interpret...