Many Americans, especially women, are freelancers, self-employed, or independent contractors. These workers want policies that enable them to maintain flexibility while securing benefits. How much do you know about portable benefits? Play this “Two Truths and a Lie” game to find out!
A. Many benefits are off-limits to self-employed or independent workers.
B. Millions of workers don’t have employer-provided benefits and would benefit from portable options.
C. Portable benefits should become a new entitlement program.
A. Truth! Federal labor law supports the traditional employer-employee model even though some 64 million Americans engage in freelance work with about half of freelancers being women.
Federal labor law supports the traditional employer-employee model. Over the decades, tax incentives and mandates were created to encourage employers to provide benefits to their workers. However, the federal and state regulatory regime is now outdated in light of new models of work The federal Fair Labor Standards Act (FLSA) prevents employers from offering benefits to independent contractors (i.e., non-employees) or those employers risk having to reclassify those workers as employees and may face hefty fines for “misclassifying” them.
B. Truth! While it is true that the vast majority of independent contractors or gig workers use this work option as a “side hustle,” an estimated 40% of independent contractors do not have alternative employment. That means that potentially millions of these workers don’t have employer-provided benefits and would benefit from portable options.
Potentially millions of workers currently lack access to employer-provided employment benefits such as health insurance, workers’ compensation, and retirement benefits, because they are part-time employees or because they are independent contractors.
About 80% of self-employed workers liked the idea of creating a portable benefits fund to help self-employed workers obtain health insurance and retirement savings. Eighty-five percent of Massachusetts app-based drivers support adding benefits without changing their status and believe it will improve their lives. Ninety-two percent of female workers who shifted from full-time employment to independent contract work said they did so to prioritize flexibility over stability.
C. Lie! There are generally two approaches to portable benefits: creating new portable benefits or expanding eligibility for existing benefits to independent contractors. Approaches that expand the scope and size of government undermine fiscal responsibility and freedom for employers. States should reform their laws to permit portable benefits plans. The plans should be voluntary to provide states and employers the greatest flexibility in determining whether and which benefits to provide to independent contractors in their workforce.
If the government can’t devise a voluntary portable benefits model, the private sector is fully capable of innovating here. Nonprofits and companies, such as the Freelancers Union and Stride, are actively testing this model.
Bottom line:
Freelancing and self-employment are long-standing work arrangements of the U.S. workforce, but innovation has also created new opportunities for independent work through apps and websites. Voluntary portable benefits offer a path forward and untether access to benefits from traditional employment. States and the federal government should embrace labor law reforms that allow employers to offer benefits to independent contractors without changing the employment status of workers and other policies that encourage the creation of private portable benefit options. Smart reforms can ensure that independent workers, especially women, can enjoy freedom, flexibility, and economic security from benefits.
To learn more, read the Policy Focus on Portable Benefits.