Independent Workers and Benefits: Who Will Level the Playing Field?
From multinational companies such as Uber Technologies Inc., built on the shoulders of contingent workers, to the huge numbers of SMEs using freelancers to access critical skills, it is clear that the independent workforce is both thriving and here for the long-term (1).
However, as this article reveals, there is still a considerable mismatch between the traditionally employed worker and the independent worker when it comes to benefits provisions.
The rise of the independent worker
Although freelancers and contingent workers have been around for decades, there is now significant evidence to back up the widespread belief that the independent workforce is on the rise.
Empowered by a combination of technology and cultural change, independent workers are now estimated to number around 52 million or 36% of the US workforce (2). If the current trend continues, some sources predict that more than half of the workforce will be working 'under alternative arrangements' by 2027 (3).
There are many advantages to joining this growing community of independent workers across the United States including flexible working hours, more autonomy and a better work-life balance. Studies have even found that most millennials who work within this sector feel they have greater job security than their traditionally employed peers (4).
However, there is one area where independent workers face a serious disadvantage and that is in the availability of benefits including labor protections and tax benefits.
How the United States needs to change its approach to benefits
Given the clear movement towards an empowered independent workforce, it is surprising that the United States lags behind other countries when it comes to adapting benefits provisions to freelance and contingent workers. In fact, the United States and Turkey are the only nations in the industrialized world that explicitly tie benefits to the form of employment a worker decides upon.
As our graphic shows, W2 employees have access to a host of benefits that so-called 'independent contractors' are frozen out from. These include employer-sponsored retirement plans, Workers' Compensation protection, and unemployment insurance. Even those benefits they do have access to (e.g. group-related health insurance, lobbying protection, and continuing education access) are provided on a limited basis. In essence, independent workers who, as already revealed, are likely to represent the majority of the workforce within a decade, are being discriminated against by the very society they are enriching.
This is an unacceptable snub to a sector which, according to the latest industry data provided by iPSE-US, contributed $1.56 trillion to the United States economy (5).
The under-reporting of self-employed workers and the need to look at tax and labor policies through understanding the nature of changing work patterns was even acknowledged in a paper released by the Treasury's own Office of Tax Analysis back in 2017 (6).
Yet, as 2020 approaches, independent workers still wait for the talk to be turned into meaningful action by policymakers.
The role of iWorker Innovations and iPSE-US in creating an equitable platform
iWorker Innovations powers iPSE-U.S., the Association of Independent Workers. iPSE has been a much-needed advocate for change on this issue, voraciously lobbying government on behalf of independent workers. iPSE provides their members access to portable benefits they would ordinarily be denied such as critical coverages, optional benefits, and discounts on everything from office supplies, to prescriptions to hotels and 24-hour medical care.
We at iWorker Innovations also work directly with companies looking to find ways to retain their independent workforce by delivering customized benefits packages for independent workers.
It is only a matter of time before the sheer size of the independent workforce forces the government and benefits providers to open the door to independent workers. In the meantime, iWorker Innovations will continue to fight to close the benefits gap and ensure that independent workers can receive opportunities to those who choose the path of traditional employment.
5. iPSE Factsheet on the Independent Workforce, 2019