If you work for a traditional employer, your compensation typically includes more than a salary.
Employees receive employer-sponsored group insurance benefits that can enhance their quality of life and provide protection. These benefits, including health insurance, disability insurance, and life insurance, are typically paid in part or in full by the employer, greatly reducing the cost to the employee.
But more workers are making money outside of traditional employment. With this trend comes greater calls for a portable benefits system, one in which benefits are connected to an individual, rather than a particular employer.
It’s estimated that around 57 million U.S. workers did some freelance work in 2018, which represents about one-third of the overall workforce. Furthermore, the Bureau of Labor Statistics estimates around 10.6 million workers cite contract work as their primary income source.
As the gig economy grows, there are calls for changing what many see as an antiquated benefits system that is tied to full-time employment. It has also prompted a few legislative actions.
Last year, California Governor Gavin Newsom signed a new state law that re-classifies workers that had been identified as independent contractors rather than employees. The bill was largely aimed at providing fair wages and benefits to drivers for Uber and Lyft.
The legislature in the state of Washington state is debating a bill that would create a “universal worker protections act” that would, among other things, establish procedures for creating portable benefits for workers in certain industries.
A similar bill in New Jersey would “establish a system for portable benefits for workers who provide services to consumers through contracting agents.”
Philadelphia recently enacted the Domestic Worker Bill of Rights, becoming the first city in the country to create a portable bank of paid time off for domestic workers. Among other things, it creates a portable benefits system for the city's estimated 16,000 domestic workers – such as housecleaners, home health aides, and nannies – to receive paid time off.
Federally, gig-worker legislation was introduced in 2017 by Sen. Mark Warner (D-VA) to build and evaluate a portable benefits system. Little has been accomplished on the proposal since.
There is precedence for portable benefits. Actors and writers guilds have long provided health care and other benefits to members. The same goes for construction industries where workers tend to move from project to project.
The Affordable Care Act (ACA), passed in 2010, provides reasonably priced health insurance for self-employed people through the Individual Health Insurance Marketplace.
More recently, Prudential launched Covered1099, a web-based tool that enables independent workers to, among other tasks, purchase insurance products.
In addition, Hyr, a mobile app that allows hourly-paid workers in the retail and hospitality industry to pick up shifts, offers users the ability to obtain portable benefits through the platform’s UPoints feature.
But these and other examples only help a small number of gig workers. Labor experts say a nationwide system needs to be put in place to help all freelancers and others not covered by traditional employer benefits. The question is whether this will be a government initiative or some kind of private enterprise.
Experts say the ideal portable benefits system would offer benefits to all workers, who can take them from gig to gig. There would be a universal approach to how benefits are applied across industries. Benefits should be granted on a prorated basis based on how much work is performed.
A portable benefits system should also ensure independence and choice for freelancers and gig economy workers. This could be accomplished through a regulated benefits exchange, including benefit offerings from established companies, start-ups, unions, and government.
Some of the benefits that proponents would like to include in this type of arrangement include public health care options and public long-term care insurance programs. They also envision portable benefits including paid family and medical leave and paid sick days. Other benefits may include retirement savings accounts and lifelong learning accounts to help pay for continuing education.
There’s little doubt that a new system of portable benefits could offer greater security for gig workers. In addition to insurance protection, a portable benefits system could include retirement plans and paid time off. It would also spur those hesitant to give up traditional employment for fear of losing benefits to become more economically mobile.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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