Is the “side job” even worth it?

The Australian Bureau of Statistics (ABS) recently announced that the number of Australians with multiple jobs has increased by 8%. This accounted for 6% of all employees – a whopping 900,000 people across all sectors in Australia looking for a side job to earn some extra money.

dr Evgenia Dechter, Senior Lecturer at the School of Economics at UNSW Business School, is an expert in labor economics. The increase in people taking on second jobs is not surprising, she said, as the pandemic is opening up several new opportunities for people looking to supplement or replace their jobs.

“While we saw a slowdown in job switching and business creation in 2020, 2022 was clearly followed by larger-than-average movements,” she explained.

Why are we seeing more second jobs right now?

dr Dechter pointed out that during the lockdown, people have had more free time to develop and implement their ideas, while also seeing an acceleration in technology adoption.

“In this way, it not only meant an increase in the number of part-time jobs, but also the creation of small businesses. In addition, household savings increased significantly during the lockdown due to precautionary savings and limited spending opportunities. This and the very low lending rates could have served as start-up capital for those with a good business idea,” said Dechter.

The willingness to work a few hours longer is also increasing due to higher insecurity and the cost of living.

dr Evgenia Dechter, UNSW Business School

But while rising costs of living and opportunities arising from the pandemic may have prompted Australians to take up second jobs, Associate Professor Dale Boccabella, an expert in personal taxation at UNSW Business School’s School of Accounting, Auditing and Taxation, pointed out point out that having a second job is nothing new.

“But today there may be more ways to do that, and more convenient choices of times to do the second job,” he said.

So is a side job just an easy way to see money pour into your bank account and meet your financial goals? Or is it more of a drain than a good way to counteract the rising cost of living?

What is a side job?

“A sideline is an activity that provides an additional source of income for the employee. This additional source of income could come from the person’s own business or from working as an employee of another business owner.’ explained Boccabella.

“This distinction can be very important as a number of beneficial rules for workers apply to the employment situation.”

Is a side hustle a good idea?

Improving your personal finances through a side job can be a worthwhile move, Dechter said.

“At different career stages, some people may not be completely satisfied with their work or career and want to try something different.

“Slowly transitioning into another profession or becoming self-employed while retaining your current job allows people to explore new opportunities and skills while minimizing the risk of losing income.”

But before you embark on a part-time job as a podcast host (or a side hustle as an influencer on your own YouTube channel), it’s important to realize that realizing your side hustle ideas also comes with challenges as well as side income.

Realizing your side hustle ideas comes with challenges. Photo: Brooke Lark/Unsplash

“The business is associated with higher risks, as are the start-up costs,” warned Dechter. ‘But there are also higher potential gains in the future.’

Boccabella also advises that before taking on any commitments beyond your main job, consider whether taking on the extra work fits into your lifestyle and existing commitments.

“Consider the amount of money you’re getting for the second job and the costs involved, which should include the time involved,” he said.

“You should also think about the value of time spent away from family and friends and the impact that second job has on your main job.”

Does that mean I pay more taxes?

While it’s often said that a good part-time job isn’t worth it because of over-taxation, in Australia they’re of little value, Boccabella explained.

“At the end of the year, all of your taxable income and all of your deductions are totaled. These add up to your taxable income.

“If you are employed, your employer has to withhold part of the wages payable and send it to the Australian Tax Office (ATO) as a tax contribution, in anticipation of the employee being taxable for the year,” Boccabella said.

It’s a process that applies to your first, second, or even third job — which means that if the IRS payments (aka Pay-As-You-Go Withholding, or PAYGW) add up to more than the tax bill ( AKA what you are supposed to pay to the ATO), the taxpayer gets the excess back as a refund.

“You can even request that the PAYGWs from your second job be reduced later in the year if you believe the amounts withheld will result in an excess over your tax liability,” Boccabella added.

“This means you don’t have to wait for tax returns to get the ‘overpaid tax’ back on the money you made from your side hustle or job.”

The impact of the gig economy on the rise of ancillary businesses

Gig economy companies using the “independent contractor” model, like grocery delivery services Uber, Doordash, and Lyft, or freelance platforms like Upwork or Airtasker, have opened up the seemingly easy route for individuals to a part-time job.

“Gig economy work shows examples of new business models and teaches consumers how to use and enjoy such services,” says Dechter. “It opens the door to new companies that can build on this knowledge.”

But, Boccabella added, the relationship between the worker and the party that wants to get the job done has been tenuous lately, with heated legal debates over workers’ rights and employers’ duties.

“There can be very different rates of pay depending on whether the relationship between the worker and the party he works for is an employment relationship or an independent contractual relationship,” he explained.

“For example, the payer may be required to pay pension contributions on behalf of the employee.”

Read: Yoga and Science Help Saxophonists Keep Calm and Move On

A side hustle may meet some legal obstacles

The Fair Work Commission, the Administrative Court of Appeals and the courts are currently overflowing with cases dealing with the classification of the relationship between a worker and the party he works for, Boccabella said.

“There have been a number of high-profile cases relating to the delivery drivers’ situation. A significant number of claims and payment obligations depend on the correct classification.

“When the relationship breaks up (e.g. when the party no longer wants the employee’s services), the employee often seeks legal advice and the advice is often that the employee may in fact have been an employee or be considered an employee under certain legislation (e.g. the pension contribution system).

“It’s a very complex area of ​​law, and sometimes it’s very difficult to predict how an arbitration panel or court will decide the case,” Boccabella said.

Gig Economy – an easy way to a sideline? Photo: MART Productions/Pexels

Does second job mean we’re becoming more like the US?

According to the US Bureau of Labor Statistics, 7,485,000 Americans have a second job as of August 2022. Commentators there have pointed to the cost of living, inflation and a strong labor market as some of the main causes.

Referring to Australia, Dechter pointed out that low-risk small businesses or a second stream of wages can bring much-needed extra income to a household. However, she added that having a second job might not bode well for Australia’s economy as a whole.

“In Australia, marginal tax rates are increasing more progressively than in the US, implying that it is less profitable to have a second job in Australia compared to there,” she explained.

“This means that if we see more Australians taking more than one job and working more hours, it could indicate that the cost of living and economic uncertainty have risen too much.”

“But as Australia’s tax rate flattens for a large number of taxpayers in 2024 (due to a statutory 30 per cent tax rate from $45,000 to $200,000), the argument about the lower profitability of a second job weakens.”

Sure, there’s a lot to consider.

Comments are closed.