With the presidential election only a few months away, politics has taken center stage in everyday conversation, particularly when discussing the American worker and workplace. With this in mind, we’ll be taking a look at the issues that matter most to the lifestyle and environment of the self-employed worker.
2016 is proving to be a more divisive election year than many, and now constant media and social media attention has upped the ante. Statistically, however, it’s a negative meets more negative field. According to the Pew Research Center in Washington, DC, fewer than half of registered voters in both parties – 43% of Democrats and 40% of Republicans – say they are satisfied with their choices for president. In fact, many (55% for Trump supporters, 41% for Clinton supporters) view their vote as one not so much for a candidate, but against the other.
But in order to make an informed vote, one must know a candidate’s policies. In this blog, we’ve done the homework for you, outlining what Hillary Clinton and Donald Trump have proposed, written, and said about issues concerning the self-employed workforce and clients engaging independent workers.
Portable benefits are a proposed system that would involve the ability for workers to take benefits from client to client easily. The issues surrounding portable benefits are many (look for a new blog about this subject coming soon) but political leaders, including Senator Mark Warner and former DoL Secretary Robert Reich, champion the idea of companies paying into a “fund” or setting up a government system by which workers could take and retain benefits from client to client, much like traditional employees that gain benefits access with each employer.
Clinton shares this sentiment of protecting gig economy workers, stating, “the government must do all that it can to ensure that benefits are flexible, portable, and comprehensive.” She has not issued specific guidance about how portable benefits could be funded or structured.
Trump argues that reducing tax rates on business income for independent professionals will better position them to operate in a way that allows them to afford/budget for their own protections without a need to rely on pooled resources from client or portable benefits.
As the independent population continues to grow, the ability to properly distinguish between employee and independent worker has become an area of great difficulty for workers, employers, and lawmakers alike.
Additionally, a common misconception has been that all independent workers wish to be classified as employees, but this is simply not the case. The government is now receiving more pressure than ever to remove the risks of utilizing independent talent.
Last summer, Clinton brought the misclassification issue to the forefront, vowing to “crack down on employers who misclassify employees as independent contractors,” going so far as to call it “wage theft.” While she agrees the gig economy has created new opportunities and innovation, her concerns lie with protections for these workers and how it will shape the view of what will qualify as a “good job” in the future.
Trump himself has promised to take a longer, more scrutinous look at the practices of the American corporation. For the companies shipping jobs abroad, Trump intends to be tough in analyzing and understanding the company’s employee/contractor needs. This could potentially result in a shake-up altering the employee and contractor engagement status quo.
One of the most notable sources of frustration and confusion for the American independent contractor is getting a firm grasp and understanding of their tax obligations. To that point, many are challenged by this financial and front office burden, and seek to support a candidate who can either lessen this burden or provide more value from the money taken out of their earnings for federal, state, and local operations.
Clinton aims to create policies and initiatives that would provide tax relief to the middle class, while closing corporate loopholes. A specific focus of her campaign has been on the “working family,” with proposed programs that would aid in college and healthcare costs. Successful corporate and independent businesses may pay the price, however, as Clinton has vowed to make sure the wealthy pay their fair share, which, in her opinion, they have not been doing. Clinton’s plans have been crafted to “promote strong, fair, long-term growth.”
Trump’s proposal reduces top rates on business income for C Corps and S Corps, as well as partnerships and LLCs, the latter of which pay no corporate taxes, but report all income and losses on their individual tax returns. The reduction would be to 15% of business income for every business, which also includes the freelance community. The proposal would shift the worker dynamic – proposing higher income tax rates for full-time employees, creating more incentive (and “breaks”) for workers seeking independence.
As the MBO Partners State of Independence report has shown, with each passing year, the contingent workforce continues to grow. The non-employee labor force, consisting of the “traditional” consultant or part-time worker, and now including on-demand service providers, has created what is commonly referred to as the “gig economy.”
Political pundits debate its benefits and drawbacks, as well as approaches to best utilize the growing technologies in this arena, and the presidential candidates have their take.
Clinton, as noted, is a fan of the innovations and opportunities created by the gig economy, but some publications have their concerns over Clinton’s approach. Clinton has expressed a need to “crack down” on independent contractors because they are all being exploited, and sees all gig workers as “employees” entitled to aforementioned portable benefits. Many independents, however, wish to stay freed of such regulation.
Outside of the tax policies he has proposed, Trump has been less direct on his thoughts on the gig economy overall. While the proposed tax plans show favor to independent contractors, his website and campaign videos claim he will create policies that will make him “the greatest jobs producing president” in history. He is unclear as to whether these jobs would be full-time or available to self-employed workers.
As the debates, both presidential and political, continue in the coming months before the presidential election, more insights and opinions are certain to grab headlines in independent contractor circles. We’ll keep our eyes open, and be sure to provide updates in our Weekly Independent as they come to light in our best efforts to help further educate you on the choices available this November.
Follow these best practices for managing your independent contractor workforce to avoid costly reclassification issues.
A strategy for overcoming the consulting challenges of working with an enterprise organization.