Benefits on the Fringe: Portable Benefits

Welcome to Benefits on the Fringe, a new column from Recruiter.com writer Jason McDowell. Every month, McDowell will cover the most unique benefits that today’s employers are using to woo talent, as well as advances and innovations in the employee benefits realm.

With 50 percent of the workforce expected to be engaged in contract or freelance work by 2020, according to a study  jointly commissioned by Freelancers Union and Upwork (operating as Elance-oDesk at the time of the study), many professionals in the U.S. will have to face the difficult challenge of obtaining benefits  for themselves outside of the traditional employer-sponsored framework. The Affordable Care Act (ACA) has simplified healthcare access for independent workers, but what about retirement? What about sick days? Paid leave? Unemployment?

Taking Your Benefits With You

Historically, gig workers have needed to plan far ahead to overcome these kind of obstacles – or simply go without. But what if companies that employ freelancers could offer innovative ways to make sure their contract workers are taken care of? That’s the idea behind portable benefits, a fairly new concept being implemented by some in corporate America.

“The definition of portable benefits can be a bit murky, but essentially, portable benefits are just what they sound like – these are benefit programs such as healthcare and retirement that are portable from client to client and are linked to the contractor or consultant, not the client,” explains Gene Zaino, CEO of MBO Partners, a provider of business systems for independent workers that offers portable benefit plans to its contractors. “Examples include a Solo 401(k) program or the benefits available through the ACA.”

How a portable benefit system should be handled depends on how the worker is defined.

“The real issue is understanding how to allocate the cost of these benefits and who bears the burden,” says Zaino. “In a gig economy, if you consider the workers self-employed, then the cost should be carried by the worker. In this case, the worker should factor these costs in to the price of their services, and therefore, the customer of the service ultimately pays. On the other hand, if the workers are considered employees, then the cost should be covered by the employer and factored into its business model. If there are shared employers, then a portable employment structure would make sense.”

How It Works

On the surface, it seems like the idea behind portable benefits is for companies to give benefits to contract workers, but that isn’t quite the case. The idea instead is that various companies will offer their freelancers access to benefits the workers can purchase themselves, and those benefits will follow the workers from gig to gig.

“Portable benefits don’t need to be the responsibility of the client or employer – they can be obtained by the worker individually and outside of their client,” says Zaino. “Some clients, such as ride-sharing program Lyft, have established partnerships that give workers the opportunity and education to put away money for benefits. In Lyft’s case, [the company] partnered with investment firm Honest Dollar to create a limited type of portable benefits program. Here, Lyft is simply making the program available – it isn’t paying for or contributing to retirement for drivers or actively funneling drivers’ earnings into a retirement fund. The program earned significant media attention for making the education around retirement savings a priority and for making the cost to contribute so low, between $1 and $3 per month.”

But not all of the options out there are as well-explained as Lyft’s program. For gig workers looking to take advantage of these benefits programs in their early stages, it’s important to do proper research and know what you’re buying into.

“Self-employed contractors and freelancers who utilize any benefit program do so at their own risk,” Zaino says. “We encourage our associates to do their research, shop around, and ultimately choose the plans that best fit their needs and the needs of their families.”

The Politics of the Gig Economy

The topic has even gained the attention of presidential candidates. Democratic nominee Hillary Clinton said the “on-demand, or so-called ‘gig economy,’ is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future.”

Clinton and other politicians recognize that we live in a society that puts those without healthcare or retirement at great personal risk, and it’s an issue that should be addressed.

“Portable benefits have become a hot-button issue as discussion continues to increase around how to manage the growing gig economy, particularly for those independent workers at the lower end of the earnings spectrum,” Zaino says. “Neither candidate has issued a plan on how portable benefits should be funded or structured, and we believe the big issue that remains is how the costs of portable benefits are to be allocated.”

The real issue is not whether ensuring gig workers can obtain benefits is the right thing to do, but whether it is the right thing for a company’s bottom line. As the gig economy continues to grow, the issue will need to be addressed more thoroughly.