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Lack of benefits can leave part-time W-2 and 1099 contract workers vulnerable
About one-quarter of working Americans are employed in part-time, independent contractor or contingent positions rather than full-time, permanent jobs, and most of them lack employee benefits, a new study shows. Employers that are anticipating an increase in part-time and long-term contract workers can better compete for talent by providing their entire workforce with employer-sponsored benefit options, including access to employee-paid voluntary benefits.
Part-Time Nation, a report on the latest findings from Guardian Life Insurance Co.'s annual workplace benefits study, reveals that the lack of employee benefits for part-time workers makes them financially vulnerable. For instance:
The study draws on a survey conducted in spring 2016 with responses from representative samples of 1,439 full-time and 277 part-time permanent and contract workers.
"More Americans are seeking greater autonomy and flexibility in their career than they can find in the traditional 9-to-5 model," said Peggy Maher, senior vice president and head of Guardian's direct-to-consumer business in New York City. "While pursuing a passion and achieving greater work/life balance are major advantages of alternative work arrangements, the lack of important insurance and retirement benefits can negatively impact financial security for [part-time workers] and their families."
Under a voluntary benefit program, the employer offers workers a menu of benefits; employees pay for the ones they want through payroll deductions. The employee pays the cost, and the benefits provider handles all administration and provides all needed education materials, Maher explained. Usually employees are responsible for paying 100 percent of the premiums. However, voluntary benefits sometimes are niche offerings, such as pet insurance, that might appeal to a subset of workers, and employers may pay part of the cost.
Providing access to voluntary benefits can ease part-time workers' financial stress, reduce turnover and differentiate employers from competitors in the talent market, Maher noted.
"They also will have more satisfied employees overall," said Paul Fronstin, director of the nonprofit Employee Benefit Research Institute's (EBRI's) health research and education program, in Washington, D.C.
[SHRM members-only how-to guide:
How to Design an Employee Benefits Program]
Voluntary Benefits Fill a Gap
Last year, an EBRI
study on voluntary workplace benefits, with responses from 1,500 workers throughout the U.S., showed that workers identify lower cost, choice, and the convenience of paying for benefits through pretax and payroll deductions as strong advantages of voluntary benefits.
"Many voluntary benefit programs can be offered to part-time employees on a payroll or direct bill basis," explained Peter Marcia, CEO of YouDecide, a Richmond, Va.-based web-based benefits platform provider.
"Although part-time employees may not have the same access to a full suite of core benefits, voluntary benefits can allow part-time workers to take advantage of special pricing and underwriting concessions offered to other employees," Marcia noted. "Examples can include auto and home insurance, employee purchase program, identity theft, or worksite programs such as critical illness and accident insurance."
Worksite benefits "may be especially important to part-time employees to help cover out-of-pocket costs if they have a high deductible health care plan," Marcia added. "Communicate to part-time employees directly by outlining programs they are eligible for."
Putting the Components in Place
"By 2020, research indicates, as much as 50 percent of the U.S. workforce will be working on some sort of freelance, gig or on-demand basis. That suggests a seismic reshaping of the composition of the American workforce," said Joseph L. Murgo, a Charlotte, N.C.-based independent benefits consultant with more than 30 years experience.
As part-time or other intermittent workers are a larger portion of the workforce, "the competition for talent is really no different. You still want attract and keep high quality workers who will be good performers," said Murgo, formerly executive director of Aetna Voluntary Plans and currently on long-term assignment as an executive consultant with another major health insurer. "The difference is how many hours they work and which benefit plans they may be offered. But you still want to bring good talent into your company."
For the most part, benefits for part-time, freelance and other intermittent workers would be employee-pay-all, he said, but "there are some occasions where more generous employers may choose to make a premium subsidy for their non-full-time workforce."
An employer might have 10,000 active, full-time core employees entitled to the full benefits and another 30,000 intermittent workers that could be a mix of part-time variable-hour workers and independent contractors, Murgo explained. The employer could create a separate program for these workers, "perhaps more limited, lower-premium benefits to take account that segment of the workforce that earns less than those working on a full-time active basis."
These workers would go through open enrollment just like active workers, picking and choosing benefits that meet their lifestyle and family needs, and paying for them through payroll deduction. "The big difference would be that virtually all those benefits would be paid for out of the employee's pocket, usually 100 percent, versus having the employer subsidize them," Murgo said.
Employers could construct a portfolio of benefits, anchored with a medical plan such as a lower-premium minimum essential coverage type plan which offers limited benefits with no deductibles or co-insurance that is both Affordable Care Act compliant and less expensive than the subsided plan offered to full-time workers. Surrounding the health plan could be supplemental offerings—mixing pretax and post-tax benefits—such as dental and a vision plan, term-life insurance, hospital indemnity and critical illness/accident plans.
"You could layer into that pet insurance and identity theft protection in keeping with the employer's decision to include a narrow or broad range of products," Murgo explained.
For 1099 contract workers, employers can sponsor benefits and make them available for the same reasons they would with their W-2 workforce, to be able to recruit as an "employer of choice" and to retain high-value workers. "For the 1099 workforce, however, employers have to be careful of making contributions because of IRS issues," he noted.
Part-Time Benefit Challenges
One challenge involved with part-time or independent contractor benefits is "getting employees engaged in the offering and to understand how they can add value to someone's life depending on their needs and whatever stage of life they're in," Murgo said. "You don't want to go through the trouble of building a voluntary benefits program tailored for intermittent workers and not have it used."
Worksite marketing and communications can persuade intermittent workers "to at least log on to the web portal and read about the benefits, or contact the call center agent and ask questions. Then they can make decisions as to whether any of the benefits make sense for them or not."
While some carriers allow employees to pay voluntary benefit premiums through a direct-pay program using credit-card deduction rather than through payroll deduction, "direct-pay is typically more common for individual insurance products rather than for employer-sponsored group plans. The group market is almost always funded through payroll deduction," Murgo said.
For that to work, employees typically would need to work at least 20 to 25 hours per week on average so they have a large enough paycheck to make a payroll deduction. "There has to be a certain minimum level of hours for this to make sense, and so employers will set eligibility guidelines," he noted.
Related SHRM Articles:
Phased Retirement Gets a Second Look, SHRM Online Benefits, July 2017
What Benefits Can Companies Offer Gig Workers?,
SHRM Online Benefits, March 2017
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