Meghna Dixit spent four years freelancing as a creator and digital strategist in Dubai before founding her own company. “The biggest misconception about freelancing? People confuse self-employed with ‘free’,” she tells The National. This, she says, is why so many professionals underestimate what independence actually costs – before they have a single client, let alone a stable income.
In the UAE, where the self-employment infrastructure has expanded considerably in recent years, the entry price for the necessary legal work starts at a few thousand dirhams for those already holding a valid residence visa and climbs past Dh40,000 for a first-year full set-up with a business licence.
Between those two points sits a layered landscape of free zone permits, visa fees, mandatory insurance and recurring platform charges that shape the economics of going it alone.
Visa and licence come first
For professionals already on a sponsored visa, licensed set-up provider Dynamic Freelancer, for example, prices a professional services permit at Dh6,500 plus VAT. For those requiring the complete package – permit (Dh11,500), municipality fee (Dh350), unemployment insurance (Dh350) and medical insurance (Dh1,500 plus VAT) – the total comes to Dh14,888. Then, if you’re invoicing via the company, they take a 2.49 per cent processing fee on top of that.
Across the broader market, options vary considerably. The Dubai Development Authority's GoFreelance permit carries a base fee of Dh7,500 – according to the authority's published fee schedule – although first-year totals including a residence visa typically land between Dh15,000 and Dh18,000.
There is also the option to start a licensed business as an individual, which carries more weight with financial institutions, which is important when factoring in loans and business bank accounts. For Sharjah Media City, that can start at Dh5,760 for the trade licence alone. DMCC's flexi-desk business package for start-ups and entrepreneurs runs to Dh43,780, according to its website.
Hidden expenses
The permit costs, though, are only the first column on the spreadsheet.
“One of the biggest misconceptions people have is that freelance income is all take-home pay,” says Shazia Bharuchi, a Dubai-based career coach. “That mindset has to change.”
Moving from employment to self-employment shifts a queue of costs previously covered by an employer to the individual: health insurance, marketing and branding, professional development, software subscriptions, equipment, workspace and accounting.
Keren Bobker, senior partner at Holborn Assets and an independent financial adviser, extends the cost inventory to include professional indemnity insurance, e-invoicing systems and vehicle insurance upgrades for business travel.
“Ideally, you should [also] factor in saving and investing for your future,” she adds. “Far too many freelancers and business owners don't do this and are simply storing up problems for the future.”
Self-employment significantly changes access to finance. “Once you are self-employed or a freelancer, it is harder to obtain credit,” Ms Bobker says. “You are seen as more of a risk as your income is not guaranteed each month and is likely to fluctuate.” For those hoping to buy property, the timeline extends considerably. “Mortgages are harder to obtain, and lenders will usually require three years of audited accounts,” she says.
Health insurance burden
One aspect of freelancing that many professionals do not factor in is health insurance. This ranges from Dh1,000 per year to more than Dh20,000. Most mid-tier individual plans are between Dh3,000 and Dh7,000 per year, says Toshita Chauhan, chief business officer of general insurance at Policybazaar.ae.
Factors determining cost include age, medical history, where you live, what family you have and which co-payments and deductibles you choose. “Try not to think only about year one,” says Ms Chauhan. “Healthcare costs and medical inflation push premiums up over time, so it helps to plan for increases at renewal rather than being surprised by them.”
Although, providers such as Policybazaar – which offers a Premium Lock add-on to protect eligible customers from standard age-related and medical inflation increases for up to five years – are becoming increasingly available.
Emotional cost
For Ms Dixit, the numbers simply do not always add up. “Freelancers are expected to operate like registered businesses, absorb compliance costs like registered businesses, and deliver commercial outcomes like registered businesses.”
Yet what you earn also varies wildly, depending on your industry. In the creator economy, for example, the compensation structure has yet to catch up with its commercial potential, Ms Dixit says.
“The only thing that does not match is the invoice … Exposure does not pay rent. And the GCC deserves a freelance economy built on fair exchange, not inherited assumptions about what creative work is worth.”
It is important to be clear-eyed about going freelance before taking the plunge, says Ms Bharuchi, because the costs are not only financial. “There's also like an emotional and a mental cost that people often underestimate because there's pressure of constantly needing to generate work, having the visibility, managing uncertainty,” she explains.
Ms Bobker says it is imperative to hold an emergency fund. “You never know if you will have delays with your clients settling invoices, a far too common occurrence.” A dedicated buffer held at a separate bank – and ideally complemented by an offshore account – is her preferred structure.
Ms Bharuchi's advice to clients preparing for the transition is similarly cautious. She advises saving “at least six months of essential living expenses” before resigning and to “budget based on your lowest-earning months … not your best ones”.
