As the American independent workforce continues to grow, the discussions surrounding non-employee and self-employed benefits and protections continue to gain steam.
A potential solution to this issue, portable benefits, has been receiving significant attention for the last few years.
What are portable benefits?
Portable benefits are a proposed system that would allow an independent contractor, or their clients, to pay into a pooled resource that would provide independents with access to benefits guaranteed to traditional full-time employees. Such benefits would include health insurance and retirement plan options.
Former DoL Secretary Robert Reich believes a portable benefits system is easily attainable. Citing Obamacare’s success for providing independents health insurance options and opportunities, Reich believes similar options for “income insurance” should be made available as well. Such a proposal suggests tax advantages normally given to employers would be instead applied to the individual worker.
Research efforts in this endeavor have already received DoL funding, and lawmakers in Congress have already looked to receive additional funding for establishing these portable benefits systems.
The discussed implementation of portable benefits has two potential paths:
- Companies hiring independents pay into a fund for each independent (depending on the hours/deliverables to which they are committed). This process creates an obligation for enterprises engaging independents to help provide the entitlements these independents forego by declaring themselves non-employees.
- The government sets up a system by which workers could take and retain benefits from client to client. This process would create a seamless option, very similar to how traditional employees gain benefit access with each employer.
MBO Partners has been a contributor to the portable benefits conversation since 2008. As part of our suite of services, we have provided the aforementioned entitlements to independents for over a decade (generally referred to as portable employer benefits).
We have looked at the heart of the matter, giving these independent workers the ability to create an employment capability for themselves that can be taken from project to project. Specifically, MBO offers these workers access to the power of their group purchasing to access healthcare, disability and business insurance, as well as 401(k) options for retirement saving. Their “accounts” afford them the ability to secure benefits regardless of type of or number of clients and projects.
It is clear that these benefits can be packaged up properly for the high-earning independents, however, there is a need to focus on those working across working groups that may not have the pricing power to incorporate benefit costs to their bill rates. For example, a ride-share driver or a dog walker may still encounter difficulty in factoring benefits like health care into their own bill rates.
For the independents engaging via a platform (e.g., Uber, Lyft, Handy), the debate lies with whether that marketplace or platform has the “employer” responsibilities. That may depend on how many of the platform workers are truly dependent on this “gig” work as a primary income source. While sharing economy data shows most are supplementing their incomes via these platforms, there remains a portion of individuals fully dependent on the gig economy and thus need protections. Lyft has already created a portable program for retirement benefits, proving that establishing such benefit systems is an achievable endeavor.
In the new gig economy, all parties in a contract must proceed carefully; when independents provide commoditized services, there is a risk that the market will drive the pay of these services, creating a race to the bottom and thus a dangerous environment for those looking to afford certain benefits and entitlements. It is for this market segment where a solution is obviously needed.
As a result, issue at hand for lawmakers is not so much how an independent can obtain or retain benefits – companies like MBO have proven this can already be done – but how much education must be given to show independents at all ends of the spectrum how to properly source and finance these costs. Education – and to some extent, client participation or assistance – may be needed in greater quantities at the lower end of the spectrum.
As the debates and conversations continue, portable benefits remains a topic people are hard-pressed to better understand. While intimidating, implementing such a nationwide program does not need heavy lifting or legislation from lawmakers – just the knowledge and technology to successfully execute such programs.
The nuances of worker benefits and protections, however, do present some interesting decisions our government will be pressed to make as the independent contractor population continues to grow. We dive into alternative solutions ourselves, which is detailed in our Certified Self-Employed proposal.
We welcome your thoughts and comments on the situation as well. For more information, or to continue the conversation with our thought leaders, contact us directly.
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