4 ways advisers should structure benefits for gig employees
With the rise of the gig economy, more Americans are working on an intermittent versus permanent basis — for staffing firms as freelance contractors, for retail, restaurant and hospitality companies as variable hour employees, or simply for themselves. The one thing they have in common? They are not part of an employer’s core, active workforce and as such, many have limited or no access to medical and other benefits.
The emergence of the so-called intermittent workforce is a full-fledged paradigm shift. In 2016, there were roughly 54-68 million independent workers out of a total workforce of 160 million working Americans (34%-43%), according to McKinsey. Various sources, such as Forbes and Entrepreneur, predict that 50% or more of the U.S. workforce could be employed on a freelance basis by 2020. And a 2016 study by former presidential economic adviser Alan Krueger and Harvard economist Lawrence Katz found that from 2005-2015, “alternative” or intermittent workers comprised 94% of net job growth.
Given these data points, the composition of the U.S. workforce is in the midst of a fundamental and seismic restructuring. And we see this metamorphosis continuing as employers manage full-time employee labor expense and workers spanning different generations seek greater lifestyle flexibility.
So why are these trends important to benefit advisers? Simply put, because plan sponsors with large populations of intermittent workers will need knowledgeable advisers who can design a benefits rewards program for the intermittent workforce.
When designing a benefits program for intermittent workers, benefit advisers should be mindful that different principles apply compared to the principles used for the active benefits program. For example, intermittent workers often are less sophisticated consumers of employee benefits, have higher turnover, earn less, retain coverage for shorter durations and are more culturally diverse. Further, due to variable-hour work schedules, where pay can fluctuate from pay period to pay period, they often miss premium payments for elected benefits due to insufficient payroll deductions.
Also see: “5 trends affecting the gig economy.”
These characteristics suggest a number of different considerations:
· First, more sophisticated plan design features often found in the medical plan offered to active workers aren’t necessary for the medical plan offered to intermittent workers. The plan should be relatively straightforward such as a simple bronze-level minimum value plan (self-insured with no employer contribution requirements or fully-insured with some employer contribution requirements) or a sub-bronze minimum essential coverage MEC-plan (self-insured only with no employer contribution requirements).
· Second, to create consumer choice, the medical plan should be supplemented with affordably-priced, employee-pay-all fixed indemnity, dental and other voluntary benefits which often cost $20 a week or less.
· Third, active “accept / decline” enrollment conditions with a formal worksite marketing plan should be established with the client to drive employee engagement and participation.
· And fourth, benefits administration should be fully vetted, particularly given that intermittent workers often can’t pay premiums due to variable-hour work schedules. Will the employer assume the full premium liability risk and fund the missed premium payments to the carrier? Or, will the employer want a benefits administration platform that tracks missed premiums by employee, by payroll period, by product and offers various ways of dealing with those missed premiums, such as temporary suspension of coverage, so that the employer is not incurring the hidden cost of funding missed premiums?
Given the uncertainty surrounding the individual market, intermittent workers will increasingly look to their place of employment for quality, payroll-deducted group benefits. And employers will increasingly want to consider an attractive benefits rewards program for their intermittent workforce for recruiting, retention, competitive edge and employer of choice reasons.
All of which creates new opportunities for benefit advisers savvy enough to recognize this trend and develop the proficiencies needed to properly advise clients in need.