Looking forward, 15 percent of employers that do not already extendbenefits to independent contractors are interested in doing so inthe future, while a similar number are “somewhat” interested.(Photo: Shutterstock)

Many Americans are now participating in the “gig” economy.According to LIMRA, 16 percent of U.S. workers are earningincome exclusively from gig work, while an additional10 percent  are using these jobs as a secondary source of income. While some of theseworkers have stereotypical gigs, such as driving for Uber, themajority are actually filling contract, temporary or contingentpositions at traditional companies.

Although nontraditional workers generally do not receiveinsurance or retirement benefits from their employers, more thanhalf say that they wish their jobs provided them with benefits. Theworkplace is also one of the top channels gig workers would preferfor purchasing financial products.

Related: App brings portable benefits to gigworkers

Are employers willing to provide benefits to contract workers?To examine this issue, LIMRA recently surveyed employers who offerbenefits about their views of extending those benefits tonontraditional workers, including “1099” contract workers.

What's holding them back?

Currently, access to benefits tends to be limited for independent contractors. There are a number ofbarriers holding employers back from providing benefits to theseworkers.

First, employers tend to view benefits as substantially lessimportant for recruiting and retaining independent contractorscompared with full-time, permanent employees. Fewer than 1 in 4employers who offer benefits think they are important forrecruiting contract workers. Also, only 14 percent ofemployers feel it is becoming more difficult to recruitcontractors, reducing the need to offer them additionalincentives.

Businesses are also apprehensive about the cost of providingbenefits to gig workers. A majority of employers rate controllingthe cost of employee benefits as one of the most importantchallenges facing their companies, and expanding benefits tonontraditional workers is likely to increase these costs.

In addition, employers are concerned about high turnover amongcontract workers and tend to assume these individuals can obtaininsurance coverages elsewhere. Some also worry that offeringbenefits to independent contractors might create pressure for themto reclassify those workers as employees, triggering a host ofadditional obligations.

Top reasons for not offering benefits to contract workers

Signs of growth

Despite these concerns, some businesses are already taking theleap of offering benefits to gig workers. Among employers thatoffer benefits to their full-time employees, 16 percent currently extend those benefits to contract workers. This practicevaries considerably by company size, with 30 percent  ofmidsize and 43 percent  of large businesses offering atleast some benefits to independent contractors. Medical and dentalinsurance are the coverages most likely to be offered to theseworkers.

There are some signs that contractors' access to benefits mayexpand in future years. Looking forward, 15 percent of employersthat do not already extend benefits to independent contractors areinterested in doing so in the future, while a similar number are“somewhat” interested. Also, more than one quarter think theirbusiness is at least somewhat likely to start offering benefits tothese workers within the next five years. (Again, larger businessesare the most interested in introducing benefits for nontraditionalworkers.)

Moreover, those employers that already offer benefits tocontract workers show considerable interest in adding more. Almosthalf of these employers want to add additional benefits forcontractors in the near future, which suggests that they are seeinga positive return on their investment.

Future outlook

There are reasons to think gig workers' access to benefits maygradually expand. Although employers are not currently havingtrouble recruiting these workers, this may change in the future asthe labor market continues to tighten.

Also, employers' outlook on gig workers suggests that they willremain an important part of the economy going forward. One third ofemployers with contract workers say these workers are “veryimportant” to their business operations, while almost all considerthem at least “somewhat” important. In addition, one quarter ofbusinesses expect to hire more independent contractors in the nextfive years. Unsurprisingly, businesses that hold these views arethe most likely to show interest in offering benefits tocontractors.

If gig workers continue to play a critical role in businessfunctions, and these workers become more vocal about their desirefor benefits, more organizations may eventually see the need tomake insurance and retirement offerings available to them in orderto attract the right talent.

KimberlyLandry is assistant research director ofWorkplace Benefits Research at LIMRA.

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