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Category: Job Change by Occupation, Work Styles, Side Jobs
Authors: Shusaku Yosa
"I'm interested in freelancing, but can I really make it after leaving a stable job?" "Where do I even start preparing to go independent?" If these concerns sound familiar, you're far from alone. Freelancing offers the freedom to leverage your skills and work on your own terms, but it also comes with challenges you never faced as an employee—unstable income, complex administrative tasks, and more.
This article is a comprehensive guide for anyone considering the transition from full-time employment to freelancing. We cover the preparations you need before quitting, the administrative procedures after resignation, the real numbers behind freelance income, and a step-by-step approach to transitioning through side work rather than making a sudden leap.
A freelancer is someone who provides deliverables or services to clients through contracts such as commission agreements, without being employed by any specific company. Understanding the differences between freelancing and employment is the first step to avoiding post-independence shock.
The biggest difference is the employment relationship. Employees sign employment contracts and are protected by labor laws. Freelancers, on the other hand, operate as sole proprietors who find work and earn fees on their own. Benefits like paid leave, employer contributions to social insurance, and retirement allowances do not apply.
On the income side, employees receive a fixed monthly salary, while freelance income fluctuates with the number and value of projects. Some months may far exceed your previous salary; others may see income drop to zero between contracts. How you manage this volatility is key to thriving as a freelancer long-term.
Flexibility is freelancing's greatest advantage. You choose your projects, your workspace, and your hours, allowing you to design a lifestyle that fits you. However, this freedom demands strong self-management skills—a point that shouldn't be overlooked.
A smooth start as a freelancer hinges on thorough preparation while you're still employed. Keep the following five points in mind.
Freelancers typically face a one-to-two-month lag between winning a project and receiving payment. Since stable income is unlikely right after going independent, aim to save at least six months—ideally a full year—of living expenses. This financial cushion prevents you from desperately accepting low-quality work and enables long-term career building.
Once you become a freelancer, it's harder to get approved for new credit cards or mortgages. Take advantage of your employee creditworthiness to handle any necessary applications before you resign. Creating a business credit card while employed will also make expense management smoother after independence.
Whether freelancing is viable depends on market demand for your skills. Check freelance platforms and agent job listings to see what kinds of projects you could land and what the going rates are. If the numbers make you uneasy, it may be wise to delay independence and invest time in upskilling first.
In freelancing, your network is one of your most valuable assets. Former colleagues, clients, and connections from industry events or communities can all become sources of work. Proactively expand your network while still employed and let trusted contacts know about your plans to go independent—it'll give you a head start.
Rather than quitting outright, we strongly recommend starting freelance work as a side gig first. Side projects let you test whether your skills generate income and whether the freelance lifestyle suits you—all at minimal risk. Going through the full cycle of landing a project, delivering, and getting paid dramatically reduces anxiety about independence. Once side income reaches a steady 50,000–100,000 yen per month, the transition to full-time freelancing becomes much more realistic.
Going from employee to freelancer involves several administrative steps. Let's organize the key procedures and their timelines so nothing slips through the cracks.
Submit a "Notification of Opening of Individual Business" to your local tax office. The deadline is generally within one month of starting operations. At the same time, file an "Application for Approval of Blue Return.” Choosing the blue return system entitles you to a deduction of up to 650,000 yen, resulting in significant tax savings.
After leaving your company, you'll exit the corporate health insurance plan. You can either join the National Health Insurance or opt for voluntary continuation of your previous plan (apply within 20 days, valid for up to two years). Premiums are based on the prior year's income, so compare both options and choose the more favorable one. Voluntary continuation is often cheaper, so be sure to get quotes for both.
Employees are enrolled in the Employees' Pension, but upon resignation you switch to the National Pension (Category 1 insured). Complete the procedure at your municipal office within 14 days. If reduced future pension payouts concern you, consider joining the National Pension Fund or iDeCo (individual defined-contribution pension). iDeCo contributions are fully tax-deductible, so you can save on taxes while building retirement funds.
Your resident tax payment method also changes. As an employee, taxes were withheld from your salary (special collection), but as a freelancer you'll pay them yourself (ordinary collection). Resident tax for the year after resignation is calculated based on your employee-era income, so it can be surprisingly high. Factor this in when building your first-year financial plan.
Freelance earnings vary dramatically by profession, skill level, and ability to win projects. Knowing realistic numbers—not just the dream scenarios—will help you make a decision you won't regret.
IT engineers command some of the highest freelance rates. With three-plus years of experience, annual earnings of 6–9 million yen are typical; those with upstream or PM experience can readily exceed 10 million yen. Web and graphic designers generally earn 4–7 million yen, with UI/UX specialists at the higher end. Writers and editors typically see 3–5 million yen, though specialists or those handling editorial direction can surpass 6 million yen.
You can't simply compare freelance revenue to an employee salary. From your gross revenue, you must personally cover National Health Insurance, National Pension, income and resident taxes, and business expenses. As a rough guide, freelance revenue needs to be about 1.3–1.5 times your former salary to achieve the same take-home pay. For example, if you earned 5 million yen as an employee, aim for 6.5–7.5 million yen in freelance revenue as a baseline.
First, maintain multiple income sources. Relying on a single client means your income drops to zero if that contract ends. Keep ongoing relationships with two to three clients to spread risk.
Second, prioritize retainer contracts. One-off projects can be lucrative but create income volatility. Use steady retainer work as your base and fill remaining capacity with higher-paying spot projects.
Third, never stop updating your skills. As a freelancer, your skills are your product. Continuously refining them to match market trends sustains and grows your rates. Investing in learning new technologies and methods is the highest-ROI expenditure a freelancer can make.
For those who find a sudden leap into independence daunting, a gradual transition via side work is the approach we recommend most. Here's how to build a freelance foundation while minimizing risk.
Begin by taking on small projects through crowdsourcing platforms, social media, or referrals while keeping your day job. The goal at this stage isn't earning money but experiencing the freelance workflow: finding projects, writing estimates, communicating with clients, creating invoices, and understanding tax filing obligations. Be sure to confirm that your employer's rules permit side work before you begin.
As your track record grows, shift focus to stabilizing income. Build a base of repeat clients and aim for consistent monthly side earnings of 50,000–100,000 yen. At this stage, you'll start to see where your strengths intersect with market needs. Tax-filing experience will also give you practical knowledge of taxes and expenses.
Use these three benchmarks to decide when to make the leap: your side income consistently covers at least 50% of living expenses; you have multiple clients likely to continue after you go full-time; and you have at least six months of living expenses saved. Meeting these conditions dramatically lowers transition risk. You don't need a perfect score, but we recommend clearing at least two before handing in your resignation.
Know the common failure patterns so you can steer clear of them.
First, don't go independent just because you hate your current job. Freelancing requires you to handle sales, accounting, and admin all on your own. If dissatisfaction with your employer is the main driver, switching to another company may actually make you happier. Ask yourself whether you have a clear positive reason to freelance.
Second, watch out for cash-flow surprises from insurance and taxes. As noted above, you'll shoulder the full cost of health insurance and pension, and first-year resident taxes can be steep. It's not uncommon for freelancers to run out of cash in year one due to unexpected expenses. Build a detailed one-year spending simulation before you resign.
Third, don't underestimate isolation and the difficulty of self-management. Without the team collaboration, manager feedback, and casual watercooler chats you took for granted as an employee, loneliness can hit harder than expected. Joining freelance communities and using coworking spaces are practical ways to maintain human connection—essential for long-term success.
Freelancing has its fits and misfits. Making an honest assessment of your own aptitude leads to a decision you won't regret.
Freelancing tends to suit people who can manage their own schedule and tasks autonomously, who enjoy change and uncertainty, and who have specialized skills with strong market demand. Those comfortable working solo and willing to do their own business development also have the right profile.
On the other hand, if income stability is central to your mental well-being or if you thrive on team collaboration, company employment may let you perform at your best. That said, much of this is hard to know without trying. That's exactly why starting with a side gig—a low-risk trial run—is the smartest approach.
Transitioning from employment to freelancing succeeds far more often with thorough preparation and a gradual approach. There's a lot to cover: building savings, verifying your market value, handling post-resignation paperwork, and running realistic income simulations.
The single most effective step is to try freelancing as a side gig while still employed. Going through the full cycle—winning work, delivering, invoicing—and experiencing your market value firsthand will give you the confidence to make a well-informed decision about independence.
If "someday I want to go freelance" is on your mind, why not start small today? Otameshi Tenshoku lists a variety of positions that can be started as side work. As a first step toward freelancing, begin by gaining real-world experience through a side project.
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