Employment vs. Entrepreneurship: Similarities and Differences
By Indeed Editorial Team
Published April 8, 2022
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Traditional employment and entrepreneurship are two ways to generate income throughout your career. The subject of your work as an employee may compare to that of an entrepreneur, while your work environment, independence and schedule flexibility may differ. Learning how employees and entrepreneurs compare and contrast can help you identify which type of job is most ideal for you. In this article, we define employment and entrepreneurship and list the similarities and differences between them.
What is employment?
Employment is the act of working for a company to receive compensation in return. Companies build a workforce by hiring professionals to fill certain roles and complete tasks that can benefit the business. Employees may participate in training programs to learn how to fit into their employer's corporate culture. They may also receive payment on a consistent basis, such as weekly, biweekly or monthly.
What is entrepreneurship?
Entrepreneurship is the act of starting a business to make it profitable. The business owner makes the proper investment to control the operations, and they spearhead the services the business provides. Entrepreneurs may work by themselves or hire staff members to work alongside them in the company. They use their expertise to attract clients and participate in projects that contribute to their industries. Their pay structure may depend on the structure of the businesses they've built.
Employment vs. entrepreneurship
Here are 15 key differences between being an employee and being an entrepreneur:
1. Compensation plan
Compensation for employees depends on their employment type. If they have a salary, then their paychecks contain a fixed amount. If they receive an hourly wage, then the employer processes payments based on the number of hours the associates worked. Employees can also receive income bonuses, such as commission and overtime pay. The compensation for entrepreneurs depends on the rates they charge for their services and the number of clients they're servicing. Their incomes may fluctuate based on the busyness of their work schedules.
2. Work schedule
Since entrepreneurs work for themselves, they often have the freedom to design their own work schedules. For example, they may prefer working during the evening over the morning, or they may be available three days a week. Employees work on a schedule that their employers provide, which can be during the company's standard business hours. They may also have shifts that their immediate supervisors create.
3. Job security
The role of a traditional employee may be more secure than an entrepreneur. Employees can enjoy a fixed income and stable work schedule, and their position may require them to fulfill the same tasks. For instance, a customer service representative may work for the same department store for 30 years. Entrepreneurs operate their own businesses, and their client management can influence the stability of their roles. For example, a professional who completes fewer projects can cause the trajectory of their careers to change. It's also possible for entrepreneurs to find stability once their businesses become more established.
As business owners, entrepreneurs may make all the decisions regarding their careers. For example, they may decide when to expand their clientele or create a new work schedule. The decision-making role for employees depends on their rank in the organizational hierarchy. A professional in an executive position may make more choices than an entry-level coworker. Employees may also consult with their colleagues for their decision-making and justify their conclusions to their teams. Entrepreneurs may not explain their choices to anyone if they work by themselves or have founded their own workforce.
Entrepreneurs may have more independence in their roles than employees. As their own immediate supervisors, entrepreneurs can work how they want to and can hold themselves accountable for their work conduct. Employees may undergo performance reviews, where they receive feedback from managers on how they can improve. Their workflow may rely on the employer's standards.
Another difference between employment and entrepreneurship is the benefits package. When professionals receive a job offer, the company may agree to provide a health insurance plan, a retirement plan and a signing bonus, for example. Benefits can persuade a professional to accept the offer. When entrepreneurs find new clients, they may not receive perks outside of their normal compensation. For example, a business owner may pay for private health insurance because they don't have a traditional employer.
Entrepreneurs may have greater responsibilities than traditional employees. Along with administering the services they provide to clients, business owners may meet with potential investors and perform maintenance at their office meetings, for example. They may also spearhead promotional efforts to raise awareness of the business to the public. Employees, especially those who work at the entry level, may only be responsible for the tasks that apply to their specific job titles.
8. Financial investment
Being an entrepreneur can require a hefty financial investment. The expenses may include equipment, paid promotional campaigns and rent and maintenance fees for office space. It's often the entrepreneur's responsibility to provide the materials that keep their business functioning. An employee may have no financial responsibility since the company they work for provides everything for them to meet the employer's expectations.
9. Project diversity
While it's possible for employees to multi-task with several projects, the diversity of their work relies on the companies that employ them. For instance, a professional's workday may only be as versatile as the number of clients the company seeks. They may also find it challenging to change their assignments if the company is steering the direction. Entrepreneurs are in control of their own projects, and their responsibilities may be so expansive that their schedules are more diverse than employees. They have the freedom to enforce changes and oversee new initiatives.
10. Work environment
To fulfill their roles, employees and entrepreneurs may work in different work environments. Employees may work in an office building that the employer owns, and they may have a designated area to complete their assignments. Some associates may telecommute, but their employers may require disclosure about the location of their workspaces. Entrepreneurs can control where they work, which means they can opt to work in an office that they rent or own, or they can work from home.
The career of an entrepreneur can have a higher risk than that of an employee. To own a successful business, owners invest time and resources on their own. It can be challenging to predict if the business runs well enough to yield a livable income and professional fulfillment. Employees may only devote time to their roles, and they can have the flexibility to pursue other job opportunities. With traditional employment, the company founder is taking the risk, not members of its workforce.
A company may encourage its employees to collaborate with their colleagues on work assignments. The manager may assign a task and require team members to share their perspectives with one another and work together to achieve a common goal. The employer may also have several divisions, such as human resources, marketing and finance, which align with one another to benefit the agency. Collaboration can ensure productivity and cohesion in a traditional workplace. Entrepreneurs may work alone, so collaboration may not be prevalent in their business.
Business owners may encounter more opportunities than associates who work for companies. For example, an entrepreneur may expand their business to a new market, which changes their responsibilities and affects their income. Employees may depend on their employers to offer opportunities for change in their workplace. If the company doesn't offer internal promotions or new activities, then the role of an employee may stay the same.
14. Company policies
Employers often require employees to adhere to company policies, such as dress codes and ethical standards and safety regulations. Employees may agree to follow the policies as a condition of their employment, and they can have access to the rules in a company handbook. Since entrepreneurs own their businesses, they may not have any regulations to obey. They can carry out their work tasks in ways they deem fit.
Traditional employees may work in competitive environments. For internal promotions, they may distinguish themselves from their coworkers who are pursuing the same positions. If a manager plans to select one person to spearhead a project, professionals may compete against their teammates to seize the opportunity. The internal work atmosphere for entrepreneurs is not competitive because they may work by themselves. They may aim to exceed other independent contractors in their field, but they may not compete with anyone inside their business.
Similarities between employment and entrepreneurship
Although they are different, employment and entrepreneurship are also comparable. Here's a list of five similarities:
The compensation plans may differ, but both employees and entrepreneurs receive payment for the work they produce. For example, a graphic designer who works for a marketing agency and one who works as a freelancer can generate income from their creative services. Regardless of the independence of their career, a professional can earn a living.
2. Professional growth
Professionals in traditional employment and entrepreneurial roles may have goals for their careers. Examples of goals include gaining more expertise about their industries and obtaining stronger soft and technical skills. Career growth can enable employees to secure higher-ranking positions in the companies they work for, and entrepreneurs can lead more successful businesses. Aiming to improve can benefit professionals irrespective of where and how they work.
3. Work-life balance
A work-life balance can be important for employees and entrepreneurs. They may aim to focus on their tasks and deliver high-quality work during their business hours. Then, they can participate in leisure activities, such as spending time with family and friends or practicing their favorite hobbies. A healthy work-life balance can allow professionals to feel satisfied with their roles in their industry.
4. Client management
Another similarity between employment and entrepreneurship is client management, which is the act of building meaningful relationships with individuals or organizations who compensate for certain services. Satisfying clients can enable professionals to continue earning money for their work. If an employee works in an agency, they may address the client's needs to ensure contracts for future campaigns. Entrepreneurs interact with clients to encourage them to refer their services to others.
Employees and entrepreneurs often strive to meet or exceed the expectations of others. For example, employees may want to impress immediate supervisors, while entrepreneurs may wish to satisfy clients. When they receive an assignment, they may ask questions about the vision for the final product, which can help them take the proper steps. Meeting expectations can build a professional's reputation that they're competent at their jobs.
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