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How Businesses Can Provide Benefits To Independent Workers

By News Creatives Authors , in Small Business , at August 27, 2021

CEO and cofounder of Abound, the independent benefits API for those serving independent workers.

For many employees, benefits are a deduction from their paycheck that happens automatically. They may only check it on their paystub once in a while or when open enrollment rolls around. But it’s not the same story for independent workers.

As the CEO of a company that works with independent workers, I have seen first-hand the problems these workers run into when it comes to benefits. There are 68 million individuals today who are moving away from traditional W-2 employment in order to make their income as gig workers, freelancers, independent consultants, on-call workers and more. 

But independent workers don’t get the privilege of just opening their paycheck and seeing that their deductions and payments have been taken out for them. And they not only have to calculate what they’re going to owe in taxes and make sure they have enough by year’s end, but they also have to search out, enroll in and pay out-of-pocket for these benefits as well. There’s very little support to show independent workers how to navigate this, and the stakes are high, for getting it wrong could mean not having health care coverage or getting audited.

The Benefits Problem 

The Covid-19 pandemic exposed a number of disparities in our society, and one of those was benefits. When businesses shut down and laid off their employees, millions of individuals were suddenly left without health insurance since, in America, benefits are typically tied to an employer. Independent workers, who are both their own employer and their own employee, have to seek out and enroll in independent health coverage, contribute to independent insurance plans and make sure they have enough to contribute to Social Security and Medicare. They also have to keep track of and pay for all of this. The problems with this setup are many.

Design: The default for benefits providers are large employers, not individuals. Neither government-provided benefits nor private sector plans have independent workers in mind. They’re not targeting independent workers, nor are they creating options and services for them. Despite so many independent workers in America needing coverage, the benefits system cuts them out. According to a benefits trends study by MetLife, only 5% of gig workers say they’re offered a retirement plan by their employer, and only 4% are offered medical coverage.

Complexity: Employers have entire HR departments dedicated to benefits management, including sourcing and establishing benefits offerings (like paid time off, health coverage, retirement, insurance and even career development) and overseeing their implementation (including paycheck deductions). Independent workers, who are already putting in time on their work, now must also perform the same functions as an HR department.

Affordability: Because benefits systems aren’t made for one-person employers, the costs can be unattainable for many who move to independent work (think of the astronomical costs of COBRA, for example). For independent workers who need coverage, costs may be higher and the benefits piecemeal. That’s adding more bills and added budgeting on independent workers.

It may seem like a massive thing to change — how do you revamp the benefits system? — but with the increasing number of independent workers both today and in the future, it’s a problem that can’t be ignored any longer. 

The Solution

Who can solve the benefits problem and step in to provide independent workers with the products and support they need? Businesses that employ them can.

Actually, providing access to individual benefits to the contractors, freelancers and gig workers they pay makes great business sense. Filling a known gap can lead to higher retention as businesses create more value and incentives for their best independent workers to stick around. Businesses can also monetize by offering benefits and other financial tools to their independent workers, and it can all easily be implemented at the point of payment. Offering benefits can also help with compliance and ensure that businesses are ready before new laws come about. These tools are already being rolled out by businesses who understand that this is the path forward. Here are some ways to get started.

Source benefits products for individuals. A population of 68 million independent workers and growing is no longer a niche segment, so benefits providers, whether public or private sector, would do well to create affordable offerings for individuals. Offering pre-tax plans reduces costs and concerns as well.

Automate benefits and other financial services at the point of payment. Businesses that already pay or serve independent workers have the opportunity to automate benefits contributions or other financial services right in the app through which contractors, freelancers and gig workers interact already. Automation tools can also help them set aside estimated taxes too. There are many different companies that now offer these types of solutions, and a simple Google search can find them all. Do your research and choose the best partner for your specific needs.

Become the HR department that doesn’t exist for independent workers. Trying to manage and pay benefits as well as estimate taxes can be a barrier for those wanting to move into or stay in the independent economy. Businesses can step up to be the HR department in an efficient and compliant way, and ensure that they keep their best talent around. The quickest and most effective way to make this happen is to partner with companies that offer easy plug-and-play solutions and APIs that can give you the functionality without adding too much additional overhead and complexity to your existing operation.

A More Accessible Independent Economy 

Independent workers want to choose how, when and where they make their income. But the current lack of benefits structure for independent workers is going to continue to be a hurdle. This will continue until businesses step in, facilitate and automate benefits contributions and eliminate that barrier to the future growth of the independent economy.


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