Best Practices in Gig Economy Benefits
Stage work – project-based assignments performed by people operating as independent contractors – has become more prevalent as the COVID-19 pandemic has led to increasing numbers of employees leaving their traditional jobs on time full. But the shift to an economy dependent on concerts predates the public health crisis and is expected to continue after the pandemic.
Employers are taking advantage of pay-per-view work by accessing skilled talent at a time when hiring full-time employees has become more difficult. Construction workers, also known as temporary or contract workers, enjoy flexibility and access to new opportunities that may not have been available before.
While concert workers have traditionally not been able to participate in employee benefits, this is starting to change as employers realize that in order to attract talented concert workers in a tight labor market, they must revisit and possibly revise their benefit options.
Employers, however, need to remember one key fact: Gig workers are not employees, and there are important consequences of treating them as such, including when it comes to benefit offerings.
The benefits of concerts on the rise
Lacrecia Cade, the new president of Atlanta Life Insurance Co., said insurance companies and brokers have long offered benefit options to concert workers.
Today, however, she is seeing more and more companies offering “self-service menus for concert workers.” [to purchase] insurance products that include health coverage, life insurance and other complementary products for the self-employed, such as accident, cancer and hospital insurance policies. Companies are also giving these workers access to identity theft protection and pet insurance.
Roni Jernigan, director of the consumer products division of benefits software company BenefitMall, is also seeing more and more operators introduce or reintroduce benefits for concert workers. But, he noted, “it really depends on the industry, the employer, the workers and the transporter.” Some industries, such as the hospitality and construction industries, are more accustomed to using workers without providing benefits, he said.
Yet, Jernigan noted, the pandemic is sparking new interest in this area. In addition to medical coverage, concert workers “look for self-contained dental, vision and other plans that fill in the gaps. We have also seen an increase in non-traditional social benefits such as telemedicine, wellness benefits, virtual consultations, and holistic healing.
Attention: change of status to come
In an increasingly tight labor market and amid reports of a “turnover tsunami,” more and more employers may consider offering benefits to on-demand workers. While this can help employers stand out when looking to attract such talent, there are potential risks.
When determining the status of individuals as an employee or independent contractor, employers will need to take into account the length of the contract, whether individuals are self-sufficient and responsible for their hours worked, and whether they receive the same benefits as employees. employees.
“Misclassification is a key issue for businesses that use freelance labor, as the associated penalties can be extremely high,” Cade said.
One way to avoid this risk, she explained, is for employers to continue to do what many have done: to continue to provide “a set of products, or a platform, that the self-employed can access to. build the right insurance portfolio to protect themselves, their business and their families “- essentially a” centralized market for the purchase of benefits that are otherwise available in the open market “.
These won’t be the same benefits employees typically receive, with group-level pricing, she said, but concert workers will benefit from access to products that can help meet their needs.
There is a critical distinction between “having access” and “receiving benefits,” said David Klimaszewski, partner in the Dallas office of the law firm Culhane Meadows.
The mistake some employers make, warned Klimaszewski, is “to try to provide the same kinds of benefits that they offer employees to workers in concert, and they usually can’t.”
Reporting failures can be costly
In addition to properly classifying individuals as independent contractors, employers should ensure that they report the value of employer-provided benefits as income on 1099 returns of workers in concert.
A fundamental best practice for employers when it comes to the administration of benefits and contract workers is to know and follow the rules for IRS reporting requirements, as well as be careful with financial and legal advisers. Both companies and temporary workers bear a risk if something of value is received by temporary workers, operating as contractors, but not reported by them or the companies they work with.
There are significant penalties for those who break these rules. But, Klimaszewski said, the risks are greater for organizations, which are much more likely than individual entrepreneurs to be audited. Companies also tend to have much larger pockets for paying penalties than individuals, which can attract the interest of regulators.
Best practices to follow
Employers can play an important role in communicating to entrepreneurs what their tax responsibilities are, Klimaszewski said. The government has to collect income taxes from somewhere, either through an organizational withholding or a declaration from entrepreneurs.
“Basically, when you’re an independent contractor, anything you receive, whether it’s cash or other property, is taxable,” Klimaszewski said. “[As an employer, you] need to make it clear to entrepreneurs that they are required to report the income they receive from you; it includes the value of all the benefits you offer. ”
Jernigan noted that better communication around the benefits is important. “By not educating [gig workers] and by communicating the benefits properly, you run the risk of under-utilizing or over-exploiting the benefits, as well as gig workers not finding the benefits provided to them so valuable, ”he said.
Little things mean a lot
While organizations should exercise caution before giving site workers access to regular staff benefits, there are other ways to attract and retain casual talent. Even small tokens of appreciation can be welcome surprises. Some examples:
- Financial incentives recognize the considerable effort put into a project – in essence, paying more than what was originally agreed for the services provided.
- “Style” such as water bottles, coffee mugs and mousepads with the company logo on them.
- “Treatment packages” containing food and treats such as coffee, candy or cold meats.
- Access to in-company training to help concert workers learn existing skills and learn new ones.
- Discounts on the company’s products and services.
Keep in mind, however, that all of these types of benefits that would provide financial value to entrepreneurs may need to be reported on their 1099 forms; if in doubt, check with your financial and legal advisers.
Finally, simply involving concert workers on the team and including them in communications, meetings, and events can help them feel more appreciated and valued.
The growth of the odd-job economy may lead to changes in tax laws to allow more flexibility in offering benefits in the future. For now, however, employers should know and follow the laws and rules that govern the types of benefits they can provide and how they should report those benefits.
Lin Grensing-Pophal, SHRM-SCP, is a Wisconsin-based business journalist with HR consulting experience.
Article related to the SHRM:
Managing expectations: how to balance concert workers and regular employees,
SHRM online, February 2020