What is an entrepreneur?

An entrepreneur is somebody who conceives, launches and runs their own business venture, usually with the aim to scale it. Entrepreneurs often identify a gap in the market, develop a product or service to meet that need, and then plan and execute their vision. These ventures often require significant capital or outside investment up front.

Entrepreneurs may work independently, with a partner or hire employees, especially as the business grows. Their income is usually tied to the performance of the business. Common traits of entrepreneurs include innovation and creativity, self-motivation, resilience, confidence and the ability to take risks.  

What is an employee?

An employee is somebody who works for an organisation in exchange for a salary or wage. Employees typically have defined roles, with set responsibilities and tasks assigned to them. Their salary is usually a fixed amount, though some positions may include a commission-based system. Employees are entitled to many rights under UK law, such as a set number of annual leave days, employer pension contributions and various statutory leaves.

Unlike entrepreneurs, employees are not financially liable for the business, nor are they solely responsible for its success. They generally enjoy a predictable income, as well as a high degree of job security, including protection from unfair dismissal and the right to statutory redundancy pay after two years of service.

Entrepreneur vs employee: 11 key differences

Below, we break down the key differences between an entrepreneur and an employee.

1. Salaries and wages

Entrepreneurs have no guaranteed income. Their earnings depend on the profitability of the business, which can fluctuate. In the early stages, they may reinvest income back into the business and pay themselves a minimal amount, if anything at all. While some types of businesses, particularly online ventures, may have low or zero start-up costs, the majority of new ventures require significant upfront capital. Entrepreneurs often use personal savings or loans to launch their businesses. They may also seek capital from investors, often in exchange for a share of any future profits.

Employees typically receive a consistent annual salary or hourly wage, paid weekly or monthly. Legally, they must be paid at least the National Minimum Wage for the hours they work. Most salaries come with incremental pay rises, and employees may also be incentivised by commission structures or performance-based bonuses.

2. Earning potential

The earning potential of entrepreneurs is essentially unlimited, but building wealth in this way depends on the success of the business, which in turn rests on many factors, some of which may be outside the business owner’s control.  

While employees benefit from stable salaries, their earning potential may be limited by the structure of the organisation or set salary bands. Progression usually comes through promotions, lateral moves or annual pay rises, with the final decision resting with their employer. Some employees can increase their salaries by moving to a new organisation, but they may still be limited by market rates for their particular job position.

3. Work schedule

Entrepreneurs can, in theory, set their own hours and create a schedule that suits them, giving them significant flexibility. However, they often end up working irregular or extended hours, particularly in the early stages of their business, which can be very hands-on. Core responsibilities usually fall to them, and they may need to deal with issues at short notice. This can make it challenging for entrepreneurs to maintain a healthy work-life balance.

Although remote, hybrid and flexible working patterns have become more common in recent years, employees still often follow set hours. While many employees are required to work overtime occasionally, some employers pay extra for these hours. Having a fixed schedule allows employees to maintain a consistent work-life balance, with predictable periods of downtime.

4. Freedom and independence

Entrepreneurship is known for offering a high level of autonomy. Business owners set the vision, define the company’s values and direction, and usually make key strategic decisions themselves. While some launch their ventures with a partner, many work independently and only begin hiring once the business grows and capital becomes more readily available.

In contrast, employees operate within the structures and policies of the organisation they work for. Their roles are usually defined by someone else, and they’re expected to follow specific guidance, meet targets and align with company objectives. However, employees often benefit from collaborative and supportive work environments, which for some, can be preferable to a high level of autonomy.

5. Responsibility and accountability

An entrepreneur is generally responsible for every aspect of a new business, from branding to technical tasks like tax compliance. They wear many hats, at least until the business is stable enough to allow for hiring at scale. They are also accountable: the successes are theirs to enjoy, but the failures fall on them, too. If something goes wrong – for example, if a customer is harmed by a product purchased from the company – the business owner will need to navigate any ensuing legal or reputational fallout.

Employees, while accountable for their own performance, are not responsible for the overall success or failure of the company. Their responsibilities are less broad and usually well-defined, and in most roles, they report to a manager or supervisor who oversees their work and can step in if necessary. If the company makes a misstep, while employees might be affected by the consequences, they are not directly liable.

6. Risk, investment and job security

Entrepreneurship typically involves significant risk. Business owners may invest their own money or take out loans to fund their ventures. If the business fails, they risk losing not just their income but also savings or personal assets. If they’ve received investment from others, a failed venture may also damage their reputation and make it harder to secure future support.

Employees in the UK generally enjoy strong job security and cannot be dismissed without just cause once they’ve passed their probationary period. Their earnings are their own, and they can choose to invest their money personally, rather than reinvesting in the company. While some positions carry physical or operational risk, employees rarely face major financial exposure in their day-to-day work.

7. Benefits

Entrepreneurs don’t receive built-in benefits and need to plan their finances carefully in order to take leave or fund a private pension. If they have registered their own limited company, they may be able to pay themselves statutory sick pay or statutory maternity pay and deduct the sums from their taxes. Entrepreneurs in financial difficulty or those who have recently had a child may be eligible for some government-funded benefits, such as Universal Credit or Maternity Allowance.

Taking leave can be challenging for small-business owners if the venture is not able to run without them. They may need to hire temporary staff to cover their absence, which can be costly. They also might not be able to ‘switch off’ entirely, even while on holiday, often feeling the need to check in.

Employees are in a very different position. By law, they must receive benefits like paid annual leave, statutory sick leave, primary caregiver leave, along with automatic enrolment in a pension scheme. Many companies offer additional perks, such as private healthcare, supplementary annual leave or season-ticket loans.

8. Workplace

Entrepreneurs, particularly in the early stages, often work from home, a co-working space or temporary premises. This gives them greater control over their environment, but they’re also responsible for sourcing and funding a workspace, along with any necessary office supplies or equipment. As the business grows and staff are hired, they may establish more formal premises, which they can design and fit out according to their vision.

Most employees work in a defined location, such as an office, retail outlet, hospital, construction site or other workplace. Fully remote workers may be provided with specific equipment by their employer, such as a laptop, monitors or an ergonomic chair.

9. Variety

Entrepreneurs often have the freedom to design work projects and tasks from scratch. They can pursue ideas that align with their skills, interests or the company’s long-term goals and decline work that doesn’t suit their vision. This flexibility allows for a high degree of creativity, innovation and strategic thinking. It can also mean they may need to juggle many different roles – unless they have established staff to support them. While this brings variety to the workday, it can also be demanding.

Employees don’t usually get to choose what they work on, especially at more junior levels, though they might sometimes be able to express a preference or propose ideas. However, employees can experience variety in different ways. For example, they’re more likely to work on cross-functional teams and collaborate with coworkers, something that may be less common in an entrepreneur’s setup.

10. Conduct

Business owners have the freedom to shape the company culture and create a working environment tailored to their needs. If they want a workplace where it’s acceptable to walk around barefoot, use colourful language, hold animated meetings over cocktails at the office’s rooftop bar or bring a pet into the office, they largely have free rein to do so. However, they still need to comply with UK employment law. Problematic behaviour – such as discrimination or harassment – can lead to serious legal consequences and put the future of the company at risk.

Employees are expected to follow a set code of conduct. This may include rules on dress (or wearing a uniform), workplace etiquette or specific language to use in professional correspondence. Breaches of conduct can result in warnings or disciplinary action. Typically, employees are made aware of company policies during onboarding or even earlier in the recruitment process, enabling them to assess whether the working environment is right for them.

11. Opportunities for growth

If their company is successful, business owners can enjoy almost unlimited opportunities for growth. They may expand into new markets, launch products in different sectors, collaborate with other entrepreneurs or even take the company public. If they choose to retire from the business or start a different venture, they can usually sell a thriving company for a significant sum.

An employee’s growth is often limited by structured progression pathways. Ideally, employers offer opportunities for promotion, professional development and upskilling, but this isn’t guaranteed. Some positions have limited scope, and employees seeking career growth may need to explore new companies or career paths, which can involve retraining or gaining new qualifications at their own expense.

Entrepreneurship vs employment: the pros and cons

Now that we’ve explored the main differences between these working structures, let’s summarise the pros and cons of each.

Entrepreneurship pros

• Unlimited earning potential
• Flexibility to create a personalised work schedule
• High levels of independence and autonomy
• Freedom to build a business aligned with personal values and vision
• Opportunities to innovate and pursue varied, creative work
• Potential to grow, expand or sell a successful business

Entrepreneurship cons

• No guaranteed income
• High financial risk
• Heavy workload and challenges in maintaining work-life balance
• Responsible and accountable for every aspect of the business
• Potential legal liability if issues arise
• No built-in benefits or leave entitlements
• Need to fund and manage workspace and equipment
• May need to juggle many roles

Employment pros

• Stable and predictable income
• Opportunities for pay rises, promotions, commission or bonuses
• Potential for a healthier work-life balance due to fixed hours
• Defined roles and responsibilities with support structures
• Access to statutory leaves, pension schemes and other benefits
• Opportunities for teamwork and collaboration
• Job security and legal protections

Employment cons

• Limited earning potential
• Less flexibility around hours and workload
• Reduced autonomy and the need to follow company policies
• Work tasks may be assigned rather than chosen
• Required to work in a specific space
• Potential for minimal variety in the workday, depending on the position
• Professional conduct subject to strict rules and oversight
• Growth opportunities may be limited, unclear or non-existent

Entrepreneurship and employment each bring distinct rewards, challenges and risks. These models tend to suit different personalities, ambitions and life stages. Both can be highly fulfilling paths when aligned with the right mindset and goals. Understanding the core differences between entrepreneurs and employees can help you better support the people you work with – whether you’re hiring staff or partnering with founders.

Entrepreneur and employee differences FAQs

What’s the difference between an entrepreneur and a self-employed person?

Self-employed people, who may also be freelancers, differ from entrepreneurs primarily in scale and intent. While both work independently, self-employed people usually provide services directly and often work alone. Entrepreneurs tend to focus on building and scaling a business that can ultimately operate independently.

Can someone be both an entrepreneur and an employee?

Yes, many people work full-time or part-time jobs while building their business on the side. These ‘side hustles’ can eventually grow into full-time ventures, allowing them to shift from employee to entrepreneur over time. This model can provide financial stability during an uncertain period in a new venture.

Can an employee have an entrepreneurial mindset?

Yes, even if someone is employed, they may still have the traits of an entrepreneur, such as innovation, creativity and adaptability. These traits may be viewed as an asset by the organisation and help the employee progress in their career.