How to offer benefits for 1099 and international independent contractors

Does your business hire a combination of employees and independent contractors (often called “1099” workers in the US)?

If so, you may have wondered how to create a stronger culture across your workforce and how to put every team member — employees and contractors alike — in positions to succeed.

As hybrid and remote working is flourishing around the world, it’s become increasingly common for companies to offer benefits to their long-term contract workers — even international ones. Benefits like health plans, stock options, and paid time off (PTO) are a great way to attract and retain top freelance talent and build trust within your organization.

In this article, we’ll explore why you should consider offering contractor benefits and how to create competitive benefits packages for everyone on your team while avoiding potential risks.

Why more companies are hiring 1099 and global independent contractors

The rapid growth of the gig economy is undeniable. Spurred by changes in technology, the economy, and the workforce, more workers than ever are turning to short-term gigs and freelancing to earn extra income or grow their careers.

Although this movement includes all sorts of workers, much of the growth of freelancing since 2020 has been spurred by technology and design freelancers (and the tech companies hiring them).

The benefits of freelancing include flexibility and variety of work as well as higher hourly wages on average than non-freelancers. Some contractors prefer freelance work because their untaxed checks are greater than what they would receive as employees. Further, contractors have more control over what they can write off as business expenses on their taxes.

For businesses, hiring independent contractors is an easy way to add extra bandwidth and scale faster. Tapping into contractor talent can be particularly powerful for small to medium-sized businesses looking to stay lean and access global talent.

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According to Barbara Matthews, Chief People Officer at Remote;

“Many companies in the startup stage are not yet ready to set up global entities to hire international employees, which can make hiring contractors an attractive alternative.”

However, large companies also rely on freelance talent. Google’s workforce, for instance, consists of 54% freelancers and 46% permanent employees. This is a growing trend in the tech industry, with many companies using contractors for 40-50% of their staff.

Businesses turn to contract workers when they need to scale and when they require niche talent for special projects. Contractors can offer their skills and knowledge part-time or short-term without having to be onboarded as full-time employees.

For contractors with valuable skills who don’t want to settle down with one company, freelancing can be the best of both worlds.

Why offer benefits to 1099 and global independent contractors?

Francesco Cardi, VP of Operations, Lifecycle at Remote, believes that contractors are a key part of our evolving digital workforce.

“Rules of employment are changing, and the world is moving ever closer to a contractor-driven economy.”

Contractors play important roles in the companies they join. In today’s competitive talent market, companies need to consider fair equity for all of their workers to create an environment that will attract top talent and keep their contractors engaged and happy. This starts with understanding the challenges contractors face and working to make their experience easier.

For many self-employed workers, the biggest struggle is not having benefits. As of 2022, over half of freelancers in the US reported having no access to regular employee benefits. This means no sick leave, unemployment, paid time off, and in many cases, access to health insurance.

At Remote, we have partnered with Allianz Global to make it easy for independent contractors to access important benefits. Contractors hired through Remote can easily select an International Health Insurance plan to help provide the security and peace of mind so often sacrificed by self-employed workers.

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If your business relies on contractor talent, offering benefits to your contractors can go a long way toward building trust with your freelance workforce. This is especially important to consider for any long-term contractors you work with. Working as a contractor can sometimes feel like being a second-class member of the team, so benefits such as assistance with health insurance costs can act as an equalizer.

Deciding whether to offer benefits not only impacts the individual lives of your independent workers but brings huge advantages to your company culture. Companies that foster belonging for everyone on their team have a serious competitive advantage.

With freelance talent more in demand than ever, companies not offering benefits to contract workers risk falling behind. Here, we’ll outline the best benefits you can offer your contractors and how you can create fair equity with your 1099 and global contractor team members.

The top US benefit: health insurance for 1099 employees

In the US, the most important benefit you can offer your independent contractors is healthcare.

As of 2023, only 32% of self-employed individuals in the US get health insurance from their employers. Freelance workers who aren’t lucky enough to get coverage through their clients’ companies have to look for other options, such as the following:

• Privately purchased insurance

• Medicaid

• Medicare

• A spouse’s health plan

• A parent’s plan

Given this picture and the high cost of health insurance, it’s understandable that independent contractors and gig workers value company-sponsored health insurance benefits or health stipends.

There are several options for business owners to choose from to offer some kind of health benefit, such as the following:

Health Reimbursement Arrangements (HRAs)

Companies can simply reimburse contractors for their healthcare costs. Individual Coverage HRAs (ICHRAs) allow employers to set a monthly allowance for contractors to purchase their own self-employment health insurance policy.

• Benefits: This arrangement offers flexibility for contractors and cost control for companies.

• Drawbacks: The company has no control over the individual health plans contractors choose, possibly leading to variance in coverage.

Association Health Plans (AHPs)

Small businesses, including those with 1099 workers, can band together to obtain health insurance coverage just as a single large employer would.

• Benefits: AHPs can provide lower rates due to the pooled risk of many businesses.

• Drawbacks: AHPs may lack comprehensive coverage, and new regulations can potentially affect their availability.

Private Health Exchanges

A company can provide a fixed stipend for contractors to purchase health coverage from a private exchange.

• Benefits: This solution offers a variety of plan options and potential cost savings.

• Drawbacks: Contractors may find navigating the exchange and choosing the right plan too complex.

Direct Contractor Insurance Assistance

Companies can opt to subsidize a portion of a contractor’s health insurance premium.

• Benefits: This approach helps contractors afford insurance and can have a favorable impact on attracting and retaining talent.

• Drawbacks: It could be more costly for the company, and tax implications need to be carefully considered.

How to offer health benefits for international contractors

Of course, the US isn’t the only country where employer-sponsored health benefits matter.

In Europe, most countries have a primary healthcare system that anyone can access, but more specialized care typically requires secondary insurance, which can come through employment.

Partnering with a Global HR platform that helps hire and manage contractors is an option to consider if your company would like to extend health plan options to independent contractors abroad.

A global HR platform is a third-party organization that handles various employment responsibilities, including providing benefits such as health insurance in partnership with insurance providers. HR platforms like Remote have expertise in local labor laws, regulations, and healthcare systems, which can be particularly beneficial when managing international contractors.

Managed health plan options for employees can include the following:

• Local health insurance plans: Provide access to local health insurance plans, which are often more suited to a contractor’s needs in their home country. These plans are generally compliant with local healthcare regulations.

• International health insurance plans: Offer international health insurance plans for contractors who travel frequently or work in multiple countries. These plans provide comprehensive coverage across multiple countries and often include additional benefits, like medical evacuation.

• Group health insurance: Leverage their larger employee base to negotiate group health insurance plans. These plans can provide better coverage at lower costs due to the larger risk pool.

One way to extend these same benefits to independent contractors is to convert them to regular employees. This conversion plus an offer of health benefits is something to consider if the company wants to retain top independent contractor talent.

At Remote, we facilitate other benefits avenues as well. We help businesses offer benefits to workers all over the world. In many of these countries, we have partnerships with industry leaders in benefits management to give contractors the option to sign up for their own affordable plans.

Our specialists are also available to advise companies on how to cover these costs through stipends.

Other coveted benefits to offer 1099 and global independent contractors

In addition to offering health insurance options, consider offering 1099 workers and global contractors benefits like the following:

Paid Time Off

Needing time off for personal matters and engaging in self-care doesn’t end because someone is a freelancer. While freelancers have the option for greater flexibility and control over their schedules, often they end up working just as much, if not more, than their full-time peers.

If you have long-term contractors on your team, consider offering them paid time off. A global leave policy is a simple way to create fair equity and a culture of belonging among all the workers in your organization.

Remember to consider misclassification risk if you’re considering an annual leave policy for contract workers. Worker classification laws in most countries stipulate that contractors should maintain the ability to control their own schedule – otherwise in some instances the worker may be instead deemed to be in an employee relationship.

If an employer wants to retain the worker legally and offer specific leave provisions, conversion from contractor to employee status is often the best way to provide these benefits and steer clear of misclassification penalties.

Home office and continued learning budgets

Offering workers a stipend for their home office and continued learning is an investment in your workforce that will bring direct returns to your business. When workers are comfortable in their office space, they’re more efficient and productive.

When you invest in your workers to help them learn new skills, they bring that new knowledge to their work and enrich your organization. Stipends also show workers that you care about their well-being and ongoing development, which leads to greater happiness, engagement, and retention.

Stock options

Stock options are a great way to keep workers motivated. If you’re offering stock options to your employees, you can consider offering stock options to your contractors as a reward or an incentive!

Remote has deep experience in international equity offerings. Contact us today for an equity incentive planning consultation.

Use our Contractor Compliance Checklist to avoid misclassification

Work through this checklist to help determine if a new hire should have a contractor or employee relationship.

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Risks to consider when offering benefits to independent contractors

When hiring contractors, whether they’re 1099s in the US or contractors in other countries, employers must consider the potential risks. Contractor misclassification is a serious danger for companies hiring abroad. Incorrectly classifying a worker who is deemed to be in an employee relationship under local law can lead to significant fines and penalties.

Francesco explains that misclassification is a constant business risk that can have lasting consequences without the right consideration;

“The biggest risk is the chance that a local authority will determine that the worker is actually an employee. Since most countries’ laws see the employee versus independent contractor issue as binary, companies that offer increased employee-like benefits to contractors run the risk that the contractors will be deemed their employees. This can result in substantial tax and regulatory liability.”

To steer clear of these risks, consult a legal expert in the country where you’re hiring. If you want a long-term solution to enable scalable hiring, Remote is purpose-built to handle the complexities of hiring and paying contractors while keeping you globally compliant at all times.

Remote makes hiring independent contractors easy

If you’re interested in hiring contractors or exploring benefits for your contract workforce, Remote offers the most simple, secure, and cost-effective solution for contractors all over the world.

With Remote, you can:

• Create localized contracts to onboard contractors in 180+ quickly.

• Make payments to workers, all in one invoice in your local currency, and set up automated invoices to manage payments.

• Allow contractors to buy discounted health insurance for themselves.

Our hiring specialists can help you stay compliant with local labor laws and advise on the best benefits to offer all members of your team.

If you’re ready to build a more trusting global workforce, get started with Remote today!