Are independent contractor benefits a thing? When you hire freelance talent, you get quick time to value, and don’t have to invest the long time that it takes to hire a full-time employee.
Just because you’re not hiring your freelance talent as an employee does not mean you shouldn’t build a long-term relationship. Freelancers also need to be provided some benefits in some cases too.
This article explains your obligations when you hire independent contractors, as well as some tips to show your non-traditional workers some non-traditional love, and keep freelancers loyal for the long-run!
This article is part of our guide on independent contractors.
Traditional employee benefits for independent contractors?
The short answer is a big, fat no.
When you hire independent contractors you don’t need to offer any of the benefits that are obligatory for full-time or part-time employees, such as health insurance, pension contributions, or even vacation or sick days.
One of the reasons why freelance talent often comes at a premium cost is because freelancer’s need to create their own benefits packages. They will spend a significant portion of their salaries on:
- Healthcare coverage so that they are covered in case of illness or an accident. A health savings account can be a smart suggestion for your freelancers, which will provide tax benefits as well as support them in saving for a potential health issue.
- A retirement fund to prepare for old age, such as a Simplified Employee Pension which is available for self-employed workers, or a solo 401k, also known as a uni-k.
- Extra funds to allow for sick days and vacation days, which will otherwise need to be taken unpaid. Freelancers need beach-time too, y’know?
- Side hustles that bring in some extra income, such as investment in real-estate, as especially while independent contractors are growing their businesses — freelancing often doesn’t have the same stability as full-time employment.
Can I offer my independent contractors benefits?
If you’re feeling guilty about not offering freelancers benefits, you might be treating them in other ways as if they were employees.
This may lead to employee classification issues, as you are required by law to treat your employees and freelancers differently. Mainly, around the level of control you have over the way they do they work.
This could happen if your contractors work for your company only, with no other clients, or if you have a lot of control over their daily activities, such as choosing the location they work, the hours that they are available, or the specific tasks they take on.
If you are found to be misclassifying your employees as independent contractors, you may have steep fines to pay, especially if the government believes you have done this intentionally in order to avoid paying benefits.
However, if you are classifying your freelancers correctly, and they are truly independent contractors — you don’t need to worry about traditional benefits.
Your freelancers have likely chosen the freelance life for the flexibility, learning opportunities and freedom from traditional working norms. They will be setting their rates accordingly so that they can take care of their own benefits, so in many ways — you are contributing, just not directly!
What about non-traditional benefits? How can I show my independent contractors I value them?
When working with great freelancers, it is only natural that you want to show them your appreciation.
In this case, non-traditional benefits are the best way to show a worker that you value them. If you’re looking for benefits that work for independent contractors, here are some ideas:
The one thing that freelance life doesn’t have is a lot of stability. Offering your independent contractor a retainer, a set number of hours or amount of projects that you’re committing to each month can be a great way to show them you want a long-term relationship. In some cases, they might be happy to offer something in return, like a discount on their regular prices for a guarantee of a certain amount of work with an agreed notice period.
Just because they aren’t on payroll, doesn’t mean you can’t offer a bonus! If your freelancer has been killing it for you lately — let them know you’ve reserved some budget to allocate to them as a performance bonus, just because. While it’s not all about the money — there’s no clearer message that you’re happy with your workers than the green stuff which folds.
Show your independent contractor that they are more than just a one-off assignment hire by sending them some love all wrapped up in a bow! This could be company swag (a great way to make them feel like one of the team), or something totally random that you know that they would like.
The next time you have an office meet-up, why not invite freelancers, too? Make sure they know it isn’t mandatory by any means, but that you’d love to see them face to face. Building that personal relationship can help keep freelancers loyal to your company, and encourage better working patterns as well, as you get to know one another better. If your independent contractors are local to the office, why not set up a team lunch, or after work drinks?
This one might seem obvious, but make sure your freelancer is being given feedback. According to the Harvard Business Review, this is one of the hardest parts of working solo, and many independent contractors genuinely don’t know if they are nailing the work or not, until they’ve been told. Offer constructive criticism as well as praise, and if you really love them — offer a LinkedIn testimonial or a shout out to colleagues who might also need freelance talent in the same field.
Lastly, we forgot to mention the best way to thank a freelancer for their work. Simply say “Thank You”. It won’t cost you a dime to take advantage of this benefit and it will give you a lot of credit.