Secondary employment

What Is Secondary Employment?

Secondary employment refers to any work or occupation undertaken by an individual in addition to their primary job or main source of income stream. This practice falls under the broader categories of labor economics and personal finance, as it directly impacts an individual's earnings, time allocation, and financial stability. Secondary employment can take various forms, including part-time jobs, freelance work, consulting, or operating a small business. The motivation for engaging in secondary employment often ranges from supplementing income to pursuing personal interests or developing new skills.

History and Origin

The concept of individuals holding more than one job has been present throughout economic history, often driven by necessity during periods of economic hardship or to achieve specific financial goals. Historically, formal distinctions between primary and secondary employment were less defined, with many agrarian or craft-based economies inherently requiring diverse income-generating activities.

In modern labor markets, the rise of industrialization and the establishment of formal employment structures led to clearer definitions. Data from the U.S. Bureau of Labor Statistics indicates that the multiple-jobholding rate in the United States has seen fluctuations over the past few decades. For instance, the rate rose to a high of 6.8% in the summer of 1995 before generally declining to 5.0% by the end of 2013.¹⁴ However, more recent trends suggest an increase, with the percentage of employed people with multiple jobs rising from 4.4% to 5.3% after the worst of the COVID-19 pandemic, marking the steepest increase in 30 years. This recent upturn is attributed to both economic necessity and the expanding opportunities presented by the gig economy and flexible work arrangements.¹³

Key Takeaways

• Secondary employment involves any work performed in addition to a primary job.
• Motivations range from increasing disposable income and building savings to pursuing passions or gaining experience.
• Tax implications of secondary employment can be complex, often requiring self-employment tax payments.
• Workers should be aware of potential conflicts of interest or employer policies regarding secondary work.
• The rise of the gig economy has significantly influenced the accessibility and prevalence of secondary employment.

Formula and Calculation

While there isn't a singular "formula" for secondary employment itself, its financial impact is often calculated by considering the additional gross income earned and the associated expenses and taxes.

To determine the net income from secondary employment, the following general calculation applies:

Where:

• (\text{Gross Revenue}) represents all income received from the secondary job before any deductions.
• (\text{Allowable Expenses}) are legitimate business costs incurred in earning that revenue (e.g., supplies, mileage, professional development).
• (\text{Applicable Taxes}) include income tax, and for self-employment, Social Security and Medicare taxes (FICA).

This calculation is crucial for accurate tax compliance and understanding the true financial benefit of secondary employment.

Interpreting Secondary Employment

Interpreting secondary employment often involves evaluating its contribution to an individual's overall financial stability and personal objectives. For some, it might be a temporary measure to cover unexpected expenses or pay off debt. For others, it could be a long-term strategy for wealth accumulation, diversification of skills, or a pathway to a career change.

When assessing secondary employment, it's important to consider:

• Time Commitment: How does the secondary role impact free time, family life, and the primary job?
• Financial Impact: Is the additional income significant enough to justify the effort, especially after taxes and expenses?
• Skill Development: Does the secondary work offer opportunities to learn new skills or expand professional networks, potentially leading to future career advancements or new investment opportunities?
• Job Security: Does having multiple sources of income reduce reliance on a single employer, potentially increasing overall job security?

Effective budgeting and cash flow management are essential to properly integrate secondary employment income into one's financial plan.

Hypothetical Example

Consider Sarah, a marketing specialist who works full-time for a company, earning a steady salary. To save money for a down payment on a house, Sarah decides to take on secondary employment as a freelance graphic designer in the evenings and on weekends.

In a typical month, Sarah earns an additional $1,500 from her freelance design work. Her expenses related to this work include $100 for software subscriptions and $50 for online portfolio hosting. Her net earnings before self-employment taxes would be:

As a self-employed individual, Sarah is responsible for paying self-employment taxes (Social Security and Medicare) on her net earnings, in addition to her regular income tax obligations. She diligently tracks her income and expenses, ensuring she sets aside a portion of her freelance earnings for quarterly estimated tax payments. This approach allows Sarah to leverage secondary employment effectively towards her goal of homeownership, illustrating how supplementary income can accelerate financial goals.

Practical Applications

Secondary employment shows up in various aspects of personal finance, labor markets, and even regulatory considerations:

• Income Supplementation: Many individuals engage in secondary employment to supplement their primary income, cover living expenses, pay off debt, or build savings.
• Skill Diversification: It can be a way for individuals to develop new skills, explore different career paths, or gain experience in a field they are passionate about without leaving their main job.
• Economic Impact: The prevalence of secondary employment, particularly through the gig economy, has significant implications for overall labor market statistics and economic productivity. The Bureau of Labor Statistics (BLS) tracks "multiple jobholding" as a key indicator of labor market activity.¹¹, ¹²
• Taxation: Income from secondary employment is generally taxable. If an individual is an independent contractor or operates a side business, they are often considered self-employed and must report their income to the IRS on Schedule C (Profit or Loss from Business) and pay self-employment taxes (Social Security and Medicare taxes) on net earnings above $400.⁸, ⁹, ¹⁰ The Internal Revenue Service (IRS) provides detailed guidance on self-employment tax.

Limitations and Criticisms

While secondary employment offers numerous benefits, it also comes with potential drawbacks and criticisms:

• Burnout and Work-Life Balance: Juggling a primary job and secondary employment can lead to long hours, stress, and a diminished work-life balance, potentially impacting health and overall well-being.
• Employer Conflicts: Some primary employers have policies restricting secondary employment, especially if it creates a conflict of interest, involves a competitor, or impacts the employee's performance. Employees may need to seek approval from their primary employer before engaging in secondary work.⁷
• Tax Complexity: Managing taxes for secondary income can be more complex than for traditional employment. Individuals must track all gross income and expenses and may need to make estimated quarterly tax payments to avoid penalties.⁵, ⁶ Overpaying FICA taxes can occur if an individual has multiple employers who each withhold up to the Social Security wage base, requiring a refund claim on their tax return.², ³, ⁴
• Lack of Benefits: Unlike traditional employment, many forms of secondary employment, particularly freelance work or gig work, typically do not offer benefits such as health insurance, paid time off, or retirement plans, leaving the individual responsible for these provisions.
• Misclassification Risk: There is a risk of misclassification, where a worker is wrongly categorized as an independent contractor instead of an employee, which can lead to issues with labor laws, payroll taxes, and benefits. The U.S. Department of Labor provides guidance on joint employment relationships, clarifying responsibilities under acts like the Family and Medical Leave Act (FMLA).¹

Secondary Employment vs. Dual Employment

While often used interchangeably, "secondary employment" and "dual employment" can have distinct meanings, particularly in a regulatory or institutional context.

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