Do Freelancers Get Benefits?

Many people around the world receive some sort of benefits through their employer in addition to pay. These benefits, which can include different kinds of insurance, paid vacation time, retirement accounts or pensions, and professional development opportunities, vary based on role and location.

In the U.S., the majority of health, wellness, retirement, and vacation benefits — even maternity leave beyond 12 weeks — comes through private employers. When someone decides to work as a freelancer, they become responsible for securing benefits that would otherwise be arranged by a company. Understanding what benefits and protections apply to you (and the options available to you) is an important part of managing your self-employment.

Benefits a freelancer may want

A typical employment benefits package for full-time W-2 employees in the U.S. includes:

• Health insurance
• A retirement plan
• Paid time off for sick days and vacation leave
• Professional development opportunities

Health coverage often extends to a worker’s family, including a spouse and any dependents. Some employers also offer additional benefits like:

• Dental insurance
• Vision insurance
• Life insurance
• Health savings accounts (HSAs) or flexible spending accounts (FSAs)
• Child care stipends
• Paid disability benefits

Additionally, if someone is hurt on the job, their care may be covered in full or in part by their employer’s workers’ compensation insurance.

As an independent contractor, you typically don’t have access to such benefits from an employer. But you may have other perks, most notably:

• Being your own boss
• Having control over your schedule
• Improving your work-life balance
• Working remotely from anywhere
• Earning income based on a rate you set

Everyone needs to make their own assessment as to whether the flexibility and freedom of freelancing is worth the trade for losing employer-sponsored benefits.

How freelancers can get benefits

There are different ways to obtain the benefits you might want as a freelancer, from professional organizations offering insurance plans to working with an accountant who can help you select a retirement account. 

Health care

Many freelancers and solopreneurs obtain health insurance coverage in one of four primary ways:

1. COBRA. COBRA allows you to extend preexisting, employer-provided health insurance coverage up to 18 (and in some cases, 36) months after leaving a job. It’s important to know, though, that you’ll become responsible for 100% of the plan cost, also known as a premium. A premium is a yearly or monthly fee that’s assessed in addition to whatever medical expenses or out-of-pocket care costs you already pay for.
2. Parents. Freelancers under the age of 26 may be eligible to join a parent’s health insurance plan, even if they live in different households.
3. Spouses. Many employer-sponsored insurance plans allow workers to add a spouse or minor dependents for an additional fee every month.
4. Health insurance marketplaces. The Affordable Care Act (ACA) allows many Americans to buy insurance directly from private health insurance companies via a federal or state program. The cost for this insurance varies based on your location, income, coverage level, and the insurance company you choose.

Some freelancers also opt to:

• Purchase a short-term medical plan while they figure out what’s next
• Buy their insurance directly from a private insurer, bypassing government marketplaces
• Pay into a concierge medical platform that provides specific services on a subscription basis

Other health-related insurance plans, such as for dental and vision care, are often available directly through insurance companies. Organizations like the Freelancers Union can help you learn about different health insurance options, find the best rates when buying insurance directly through an insurer, join a group plan, and more.

Retirement savings

Full-time employers, with the exception of some small businesses, often provide their employees with a retirement plan like a 401(k) or Roth 401(k). You can opt to have a percentage of each paycheck invested into your retirement plan, and the employer may provide a full or partial matching amount. You usually get to keep everything that you invested, and some or all of your employer’s contributions, upon leaving your full-time job.

But while you can keep your retirement account, you might not be able to continue adding money to it as an independent worker. Instead, you may need to open up a second retirement plan that’s specifically for self-employed individuals. These can include options like a SEP-IRA or a Solo 401(k). Your eligibility might vary for different plans, so it’s a good idea to talk to an accountant or tax professional before opening an account.

Paid time off

Whether you’re sick or taking a relaxing vacation, you typically don’t get paid time off as a freelancer. When freelancing, setting aside enough money to continue paying yourself a consistent income during your time off is a helpful practice.

Professional development

As a freelancer, you’ll be responsible for finding and arranging your own professional development opportunities. Joining a group of like-minded professionals — either through an official organization or a casual meetup group — can help you get connected with different opportunities for growth. You can try:

• Attending conferences in your local area
• Signing up for a professional organization’s national conference
• Joining your local Chamber of Commerce
• Becoming a member of a local young professionals group 

How self-employed workers pay for their benefits

As a freelancer, you may be eligible for some tax deductions and subsidies related to your benefits — it largely depends on where you live and how much money you make.

You, however, will be responsible for the bulk of your monthly premiums, retirement savings, and more, so it’s essential to consider all of these costs when calculating your freelance rate. Before you start full-time freelancing, take some time to research:

• What your insurance options are based on your age, marital status, health status, and location
• How much health insurance premiums will cost with and without any available subsidies
• When you can enter into a regular or special enrollment period for a new health insurance plan
• What additional insurance options, including dental, disability, and life, are of interest to you
• How much you can contribute to a retirement account as a self-employed person

If you’re working full time, you may decide to keep your existing job for its benefits while starting your freelance work as a side hustle. If you determine that you’re ready, you may be able to go right into full-time freelancing. Luckily, there’s no wrong way to start your freelance career — as your own boss, you get to set the rules.

Start building your freelance career today

Whether you want to launch your own business today or start building a side hustle, you can begin finding work today on Upwork. Work on your own, refer another freelancer, respond to client invites, start an agency, or offer consultations — you get to choose how you work on Upwork. To get started, simply sign up or log in to begin browsing jobs and sending proposals to clients.

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This article is intended for educational purposes and should not be viewed as legal or tax advice. Please consult a professional to find the solution that best fits your situation.