If there’s one thing I miss about being traditionally employed, it’s the company-sponsored benefits package, and I know I’m not alone. In the 2017 Freelancing In America study, lack of benefits was listed as one of the biggest concerns or barriers to independent workers. Benefits for self-employed professionals are few and far between. Yes, insurance for freelancers and small-business owners is easier to access than in the past, but what about sick days or retirement plans with a company match? Those were the days, my friends.
You may think your days of enjoying a benefits package are over, but I’m here to tell you that you’re wrong.
Prior to starting my own business, I worked in the human resources industry for 12 years. In the end, I specialized in employee benefits and wellness plans, and I know how much they add to a salary package. But just because you’re no longer working for a company that can put together a mashup of benefits for you doesn’t mean you can’t create one for yourself.
Yes, you read that correctly. As a self-employed professional, you’re accustomed to wearing too many hats. You play the roles of the accounts receivable, customer service, and marketing departments, among others. Now it’s time to put on your HR hat and develop a benefits package for yourself.
Let’s start with the obvious—health insurance. Just a few years ago, I only knew a handful of freelancers, and all of them were insured by a spouse’s employer-sponsored plan or they were at an age that they were still able to be on their parents’ insurance.
Every year, the Freelancing in America study sees a rise in independent workers. I’d gamble that part of the reason people are leaving the traditional workforce and jumping into freelance careers or starting their own businesses is because they finally have access to health insurance, without requiring a parent or spouse to be traditionally employed and sponsor them. The Affordable Care Act revolutionized the way freelancers approach insuring themselves, and now it’s easier than ever to get insured, whether you like paying for the premiums or not.
Similar to when you were traditionally employed, self-employed professionals can get health insurance during the annual open enrollment period or if they qualify for a special enrollment period due to marriage, a birth, or loss of coverage. But here is why insurance for freelancers is even better than for traditionally employed workers (bet you haven’t heard that statement before): You have the opportunity to lightly personalize your insurance needs, while your nine-to-five counterparts enroll in one-size-fits-all coverage.
For example, if you enroll in the marketplace, you’ll have options for plans that are high deductible but have lower monthly premiums, or the opposite, with a higher monthly cost but less of a deductible.
Jennifer Fitzgerald, CEO and cofounder of Policygenius, says, “In order to choose a plan that gives them the coverage they need, gig workers should primarily look at the premium and deductible amount. The premium is the amount paid each month to have insurance, and the deductible is how much has to be paid out-of-pocket before the insurance company chips in. These are inverse costs, so the higher the premium, the lower the deductible, and vice versa. There are other insurance considerations gig workers should think about, like other out-of-pocket costs like a policy’s coinsurance and co-pay, if their doctor is in-network, and if needed prescription drugs are covered, but the premium/deductible tradeoff is a good place to start.”
Want to enjoy your retirement years? Have you even given any thought to what age you’d like that to happen, or taken steps to ensure you’ll have enough saved once that time arrives? Does the idea of even thinking about it stress you out?
Image attribution: O.C. Gonzalez
Don’t stick your head in the sand and hope you’ll one day be able to retire with enough money to live an enjoyable life. Freelancers can, and should, prep for their post-work goals as soon as possible, especially since the variable income independent workers receive will dictate the investment choices you’re able to make.
Consider opening up a SEP IRA and contributing up to $54,000 tax-deferred and tax-free annually. That isn’t your only option, either. A SIMPLE IRA or Solo 401(k) are other potential saving outlets, and the standard Traditional and Roth IRAs may work well for you, too.
Before you try to invest your hard-earned money, it’s best to team up with finance professionals who can guide you through saving, balancing your books, and investing for the short- and long-term. If you’re worried about how much to put aside, choose a percentage you’ll transfer into your retirement savings every time you get paid instead of allocating one lump sum from your monthly expenses.
Life or Disability Insurance
Let’s get morbid here. What happens when you die?
No, but seriously—what happens when you die? Who will pay for your end-of-life expenses? Who will assume your debt?
Often, traditional employers offer life insurance to their staff. When you’re building your own benefits package, make the decision that now is the right time to purchase life insurance. It doesn’t matter if you’re in your 20s or 50s, a life insurance policy is a benefit you need. Some will be easy to access, with a set amount of coverage that is accessible without evidence of insurability. The company you purchase from may request a visit to the doctor before granting you the full coverage.
And let’s not forget about disability insurance, either. Are you thinking of having a baby in the next year or so? Is there a possibility you could be in a car accident? Have you ever gotten injured completely out of the blue before? If you can answer yes to any of these questions, disability insurance is a smart addition. When searching for a provider that’s right for you, make sure to ask how long the waiting period is before coverage gets paid out (some policies have a seven-day waiting period, while others begin at 90 days). Also, check if any preexisting conditions (including pregnancy) will be covered, or if there are any limitations to the plan (some providers separate cancer insurance out of their disability coverage because they offer it as a separate plan).
Not sure where to start? Contact a local insurance broker, go straight to the insurance companies for a quote, or enroll as part of Freelancers Union, which offers benefits for self-employed professionals at discounted group rates.
Paid Time Off
Think you can’t take sick or vacation time anymore as you’re not traditionally employed? Think again. Now that you’re in charge of your payroll, you can make it work anyway you’d like it to. Remember how your paychecks once had a section that indicated how much paid leave time you had available? You’d either watch as it slowly grew throughout the year, or your rejoiced once you started a new benefit’s plan year and a year’s worth of leave time would be at your disposal.
You can enjoy that same thrill now, and there are a few ways to do it.
Image attribution: Abbie Bernet
For your first option, factor your salary goals based on work time, not 12 calendar months. If you plan for one month out of work (don’t think that figure is too high either—time off includes vacations, sick days, personal time, and traditional holidays), you’ll need to meet your income goals in 11 months, instead of 12. Were you hoping to hit $50,000 this year? That means you’ll need to earn $4,545.45 a month for eleven months, instead of $4,166.67.
But there’s an easier option that gives you access to your money in a more traditional method.
Bank your personal leave time with an automatic transfer to a separate and specific bank account every time you’re paid. Depending on how savvy your bank system is, you might be able to stock up a percentage of each check. If not, move a set amount of money every month into a leave time bank account. Then, when you use it, “bill” yourself based on your hourly rate. I have a few freelance friends who work on this system. One spends the money saved in her leave time bank every time she dips into it with a day off. She’ll celebrate the traditional holiday by taking herself out for froyo, or she’ll use the funds to cover co-pays for sick visits to urgent care. Another friend uses the leave time bank account as an emergency fund. You do what works best for you, but by actively moving money into it on at least a monthly basis, you’re committing to never taking unpaid time off from work again.
Do you believe benefits for self-employed professionals are important? Have you set up any benefit plans for yourself? Let us know in the comments.
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Featured image attribution: Alexander Dummer
About the Author
BiographyMore Content by Erin Ollila