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Funding Paid Leave for Independent Workers

Updated: Jun 19, 2019

One of the most noted downsides of working under a non-employee classification is the lack of reliable options for paid family and medical leave. Time and time again, independent workers have had to make the painful choice between caring for themselves or a loved one and earning an income. Encouragingly, the policy world is waking up to the issue and a number of states are adopting innovative programs to help self-employed workers receive the benefits they deserve.


Last year, the legal advocacy group A Better Balance (ABB) produced the report “Paid Family Leave and the Self-Employed” as part of their policy brief series on evolving labor practices. While the report goes into detail about the implementation and outcome of its various policies, the main findings can be summed up in 3 parts.


1.Paid Family Leave Has Passed in Six States and D.C. (So Far)

Courtesy of A Better Balance

Several states have provided universal temporary disability insurance (TDI) to all private workers for several decades now. Some have recently taken steps to provide a stronger safety net for independent workers. Today, only workers in two states, California and New York, are able to receive a month or more of paid leave weeks to recover from illness, care for a new child, or tend to a sick loved one.

Meanwhile, Washington State, Massachusetts, Rhode Island, and Washington D.C. have adopted their own leave policies set to kick in for independents between January 2019 and July 2020. Check out the differing policies and their coverage on this handy chart:


Courtesy of A Better Balance

2. States Just Want to Have Fun(ds)


You are likely wondering: How do states raise funds to pay for this benefit without employer participation? Where is the money for this coming from? While the answer to that varies from state to state, ABB’s report explains states rely on old and new practices to raise the money necessary to fund leave programs for all residents.


Essentially, it comes down to choosing a system for benefit distribution and enrollment. Most states are choosing between: the automatic model, in which all workers are required to pay into the state’s fund, and the voluntary model, in which the self-employed can opt-in to join a pool of workers by abiding by the standards of their state’s fund.


Automatic coverage has major advantages such as ensuring a continuous pool of funding and ensuring that all workers are covered in the event of unforeseen life events. Voluntary coverage can become costly, if workers opt in simply when they know they need the program. However, in comparison to lack of access to social safety nets for the self-employed, voluntary coverage is a good first step. It also provides options to opt-out from this structure to those who have chosen to work outside of the employer/employee system for personal or financial reasons.



3. Covering Workers With Multiple Sources of Income


ABB recommends that program design account for each worker’s reality where the categories of ‘employee’ and ‘self-employed’ often overlap. Workers across the income spectrum, may be picking up freelance assignments or app-based work while being employed at full or part-time jobs. While others’ income may be entirely cobbled together from multiple sources of platform based and freelance work.


Keeping this is mind states should ensure, workers who are covered under both employment and self-employment programs are able to receive benefits reflecting their total income. ABB notes that several states have eligibility criteria for paid family leave include reaching a minimum earnings threshold. They suggest, workers should be able to use their self-employment income to meet their requirements.


In some instances when workers receive income from multiple sources for work, they may need to take leave from one job while continuing to do some work. Flexible program design is important to help programs meet worker needs, especially those who may be combining income from multiple jobs or transitioning between jobs or careers.


The report also touches on a question confronting the modern workforce about the misclassification of a growing segment of workers as independent contractors. While building a system that covers non-W2 workers is beneficial, the choice to receive benefits as self-employed worker should not affect benefits provision for a future employee positions for similar work.


ABB also points out the need for better worker education about their rights including (a) awareness of deadlines to opt-in to benefits program and (b) understanding the requirements of their state’s program, and (c) differentiating between self-employed who consider themselves “workers” and those who see themselves as “business owners.”



Let’s end with this principle from the brief to help us innovate policies that fit our workforce

“Innovative policies should give workers more options, not fewer, and make it safe to exercise those options.”




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Was this summary helpful? Want to hear more about benefits in the twenty-first century? Let us know at andrew@idgbenefits.org!


2018-19 intern Eliza Bayroff contributed to writing this post.

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