Employers know that strong compensation plans go beyond the salaries or wages they pay employees. Benefits such as health insurance, retirement accounts, and paid time off are essential to ensuring that employees feel valued and appreciated.
When it comes to offering benefits to 1099 and global contractors, the situation is less clear. Is it worthwhile to add contractors to your company’s benefits plan? Is it even possible? As more companies look to attract and retain top freelancers and contractors to grow their businesses, offering them benefits is gaining traction.
Can you offer benefits to independent contractors?
When people think about the differences between employees and independent contractors, they often assume a crucial distinction is that employees receive benefits while contractors don’t. Indeed, many contractors don’t receive benefits—employers aren’t required to provide them—but that doesn’t mean companies can’t offer benefits to the independent contractors they hire.
U.S. regulations do not prohibit employers from offering benefits to independent contractors if they so choose. However, it’s worth keeping in mind that contractors are not eligible for tax-free benefits from employers. Any employer offering benefits to independent contractors must tread carefully to avoid misclassifying workers or losing the tax-exempt status of their benefits plan.
What benefits can you offer?
You can offer many types of benefits to independent contractors, just as you can to employees. Some of the top benefits for 1099 contractors include:
Employer-sponsored medical coverage is a highly sought-after, valued benefit for employees and contractors, particularly in the U.S. Companies looking to set themselves apart during the hiring process should consider offering health insurance for independent consultants or contractors as a benefit.
Paid time off (PTO)
Like anyone else, contractors need time off to deal with illness, self-care, and personal matters. They have greater flexibility to create and change their schedules, but this time off is still necessary. Employers can account for this need by offering contractors paid time off. That way, the independent contractors won’t have to worry about their income while they’re sick or otherwise need time off.
Strong workers—whether employees or contractors—acknowledge they always have room to grow and learn more about their field. Employers can aid contractors in their ongoing learning by offering them educational benefits. These benefits may include in-house training and courses, tuition assistance or reimbursement, or continuing education courses.
The following are some of the other benefits employers may choose to offer independent contractors:
- Retirement plans
- Wellness benefits
- Health stipends
- Remote work stipend
Employers can pick and choose the benefits (if any) they want to provide their independent contractors.
What about independent contractors in different countries?
If you have a global team that includes contractors, you’ll have to consider the laws and standards for independent contractor benefits in each of those locations.
In general, benefits are specific to each location. Workers in different parts of the world need different things, and companies with global teams strive to meet those varied needs. For example, workers in countries with publicly funded healthcare systems will likely not put as much value on employer-sponsored health plans as those in countries without such systems.
A one-size-fits-all plan probably won’t work well for providing benefits to global independent contractors. Instead, opt for a more personalized approach tailored to each location if you’re offering your contractors benefits.
Why offer benefits to independent contractors?
Offering benefits to independent contractors often works in an employer’s favor. Some advantages of this include:
- Attracting top talent: Competition for workers is fierce at the moment, and that includes independent contractors. Benefits for contractors will increase your chances of bringing in a solid group of people.
- Building stronger relationships: Sometimes companies hire contractors for one-off jobs, but increasingly businesses want to work with them over longer periods. Offering benefits is a great way to strengthen that employer-contractor relationship and keep your contractors around.
- Bolstering company culture: It’s easy for independent contractors to feel separate from an organization compared to employees. The benefits disparity plays a central role in this divide, so providing contractors with benefits can put everyone on a more equal footing. With everyone receiving benefits, your company culture will be more welcoming and harmonious.
Put simply, the “gig economy” of independent contractors is growing significantly, and offering benefits is a way for employers to stay competitive in this landscape. You’ll find the advantages of providing these benefits to contractors are much the same as the advantages of providing competitive benefits to employees.
Are there any risks to consider?
Employers deciding whether to offer their independent contractors benefits should be aware of some risks and drawbacks.
The biggest concern for many employers is the associated cost. Generally, businesses hire contractors over employees to save money, and offering them benefits would reduce the effectiveness of that cost-saving measure.
Another significant risk of offering contractors benefits is worker misclassification. Worker misclassification occurs when an employer wrongly classifies an employee as an independent contractor and is punishable by fines and other penalties. Offering contractors benefits makes it more likely that regulators will view those workers as employees—putting you at risk of penalties.
If you plan to provide contractor benefits, work with an expert to ensure that you stay compliant with federal, state, and local laws regarding worker classification.
How can Oyster help add global independent contractors to your benefits plan?
As an employer interested in adding independent contractors to your benefits plan, you may not know where to start. Oyster’s global employment platform makes it easy to manage your team of global contractors, including offering them competitive benefits.
Through the platform, you can provide global contractors localized benefits in over 180 countries without breaking your budget. The whole process is so streamlined that it only takes minutes to complete. See the Oyster platform in action by scheduling a personalized demo today.
Oyster is a global employment platform designed to enable visionary HR leaders to find, hire, pay, manage, develop, and take care of a thriving distributed workforce. Oyster lets growing companies give valued international team members the experience they deserve, without the usual headaches and expense.
Oyster enables hiring anywhere in the world—with reliable, compliant payroll, and great local benefits and perks.