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Can You Provide Employee Benefits To Freelancers You Work With?

By April 14, 2022No Comments

Freelancers are usually self-employed professionals who work under a contract for an organization. How are they different from regular employees? Do they get similar benefits? The answer is not simple and requires detailed discussion. First, you have to understand the crucial aspects related to freelance employment. Based on that, you can determine whether you can provide them with employer benefits or not.  

Freelance employment – The concept in details

According to a report on Freelancing in 2020 and 2021, India is the world’s second-fastest-growing freelance sector, with tremendous growth in the number of freelancers this year. With an estimated 15 million freelancers, India’s freelance economy is ranked as the world’s second-fastest-growing freelance market, according to the research. 

Many companies connect to freelancers to share the workload without making it heavy on the company’s budget. Freelancers receive payments based on the assigned projects, and there is no fixed wage structure. They are not part of the direct payroll; thus, the company does not bear the responsibility of annual or monthly payments. On the other hand, an employee working in an organization gets their salary based on a proper payment structure. They are entitled to enjoy paid leaves, compulsory day-offs, bonuses and other benefits. 

A freelancer can also work under the organization under a mutual contract that defines their pay rates and work assignment regulations. They usually have the liberty to work remotely and regulate their working schedule. Also, a freelancer can work with multiple companies and set their rates, making their job convenient in various aspects. Besides direct payment for the assignment, freelancers do not receive significant service benefits. No companies provide freelancers with pension plans, retirement benefits, paid leaves, etc. But there can be a few employee benefits that the freelancers working under a company can enjoy. It entirely depends on the organization and employer if they want to provide the service benefits to the freelancer or gig-worker. 

Typical Employee benefits offered:

An employer offers employee benefits or service perks to the employee working in their company against their service. The service can be part-time or full-time, and the employees are part of the company’s payroll. There are statutory benefits like EPF, ESI, pension scheme, etc., that a company agrees to offer their employees. These service perks act as a token of gratitude from the employer’s side because the employees dedicatedly serve the company. But what about a freelancer? They are not direct employees and have the liberty to work with more than one company simultaneously. Should an employer offer them similar service benefits? A freelancer cannot demand service benefits, but an employer can offer them the perks as a token of gratitude. 

Employee Benefits for Freelancers

As a freelancer, you as well as your family are exposed to financial risk of high cost of treatment for healthcare benefits. In such a scenario, you have to understand your own health requirements as far as the insurance cover is concerned. Unfortunately, freelancers usually do not get the benefits of the employer sponsored Group Health Insurance plan. The Group plans are typically offered by employers to full-time employees only. Contractual employees and freelancers automatically do not become eligible for this coverage. 

An employer must consider multiple aspects before offering any service benefits scheme to a freelancer working for their company. 

  • Firstly, there has to be a legal contract. You cannot provide any service benefit if there is no valid legal evidence of the mutual service contract. The service benefits you offer, pay rate, assignment regulations, and project details should be present on the contract. 
  • The decision to provide full or limited employee benefit plans to freelancers depends on their quality of service. Suppose an employer is satisfied with the service quality of the freelancer and decides to work long-term with them. In that case, they can offer full employee benefits. Otherwise, for short-term projects, you can offer them limited offerings. 

Options available for Freelancers

Health insurance is one of the most important employee benefits an employer provides their employees. 

  • In some cases, an employer decides to offer health insurance for contractual employees to signify their loyalty and intent towards providing benefits. The  company needs to negotiate with the insurer in advance to consider providing cover for freelancers as the terms and conditions are determined by the insurer.
  • Freelancers can join a spouse’s health insurance – If you’re married, you may be able to join your spouse’s plan. Many employers allow employees to add a spouse to their health insurance plan. However, you should look at the details of the employer’s plan to understand how much this would cost.

Regardless of how you get health insurance, a good way for freelancers to start their search is just to review the basics of health insurance. Irrespective of whether the group health insurance plan is available or not, freelancers should start considering buying health insurance for themselves and their families separately. 

How will offering benefits help? 

The impact of employee benefit is always positive on the employee’s productivity. But does that hold for freelancers? Certainly! Any freelancer receiving a service benefit against the contractual service is grateful to the employer. It impacts their dedication to service and increases loyalty toward the company. 

Are there any positive consequences of offering employee benefits to a freelancer from an employer’s perspective? You can uplift the motivation and productivity of the freelancer with your offerings. They can work diligently and dedicatedly to ensure long-term projects. As an employer, you can get high-quality work done from a freelancer without paying them annually or monthly. It is advantageous for the company’s operational budget. You can reduce the pay rates by offering employee benefits to them. In fact, with employee service benefits, you can also get a chance to reduce the annual tax amount. 

An employee benefit you can offer 

Suppose the freelancer is working under a mutual contract. In that case, you can sponsor a group health insurance as a part of their service benefit. Considering the eligibility rules of the group healthcare policy, a freelancer working under a service contract can avail of the insurance benefits. Any employer can provide the group healthcare insurance and pay the annual renewal charges on behalf of the employee or freelancer under a service contract. 

The service perks are highly beneficial for a freelancer serving on a long-term project. Why? Because under this policy, they can get monetary support from the insurer in case of medical emergencies without paying for the premium charges. A freelancer would not want to discontinue the project in such a case because leaving the project means losing the insurance benefits. 

Even if the employee discontinues the project and breaks the contract, the employer can get a refund of the amount spent on the premium charges. The employer can recover the expenditure through a refund on a pro-rata basis. 

Things to consider before offering the benefits

An employer has to be careful about the legal aspects of the service contract signed by the freelancer. Without a mutual service assurance, you cannot provide any service benefit to the freelancer against their offerings. Even after signing an agreement with the freelancer, check a few things before promising any service perk – 

  • Check if the employee benefit you are providing is beneficial for the freelancer. Offer something that they value so it can impact their productivity.
  • Whether the service benefit is cost-effective on your part or not is a crucial aspect worth considering. Tax exemptions are an added advantage for an employer, so you must look for them. 

Take a calculated step with PlanCover.

Always consult with an expert before offering a service benefit to a freelancer. For group healthcare, you can find reliable advisory services from PlanCover, the trustworthy insurance broker for small to mid-scale businesses. 

Source: https://www.thehindubusinessline.com/news/india-is-second-fastest-growing-freelance-market-in-the-world-says-report/article32578886.ece 

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