Exploring portable benefits for gig workers

Gig-based work and self-employment have expanded significantly in recent years, increasing from 27% of respondents in 2016 to 36% of respondents in 2022, according to a McKinsey survey. While these new modes of work offer benefits for workers and firms, they also complicate an important aspect of compensation in traditional employment models: employer-sponsored benefits.

On December 10, 2024, The Brookings Institution’s Center on Regulation and Markets hosted a private roundtable to discuss policy solutions to this challenge, specifically on the topic of portable benefits—a model of benefits that includes traditional employer-sponsored benefits like retirement plans, health care, life insurance, paid time off, but which are primarily attached to the worker rather than the employer. Portable benefits allow workers to flexibly manage and combine benefits from multiple employers as they move between various roles.

The roundtable convened a range of policy experts from academia, think tanks, government, and industry (including gig workers). The overarching theme of the event focused on how the government and private sector can work together to deliver benefits desired by gig workers while preserving the flexibility and independence of gig work. Gig workers include a broad range of workers who do not fit the traditional employee-employer relationship, spanning app-based work like ride-hailing app drivers, babysitters, administrative workers, delivery drivers, freelance software engineers, freelance writers, and more. The first panel included current and former Congressional staffers and focused on the current policy landscape at both the state and federal level. The second panel featured economists and legal scholars focusing on the policy implications of the academic literature on the gig economy and portable benefits. The third panel featured industry representatives and an app-based gig worker and focused on the policy priorities of the gig industry and gig workers.

Who are gig workers?

Participants frequently emphasized the diversity of gig work and gig workers. For example, one panelist posed the question “What is the profile of the typical gig worker?” to which one discussant answered, “There is no ‘typical’ profile.” They pointed to research showing that gig workers encompass a diverse range of demographic and professional characteristics, including a wide range of ages, industries, motivations for gig work, number of concurrent jobs or gigs, and levels of benefits access. As one participant pointed out, this means that rigid policy solutions based on a single definition of “who a gig worker is” and what their benefit needs are will likely fail to meet their diverse circumstances.

What kinds of benefits are important?

While industry and academic panelists explained that gig workers’ preferences for specific benefits are diverse, they share a common desire for financial security. One participant described the most important pillars of financial security as “the big five,” which include retirement, health care, childcare, education, and housing. Various benefits contribute to these pillars of financial security including employer contributions to retirement savings, employer-subsidized healthcare, employer-provided or subsidized childcare, and employer-sponsored education or training. Other important benefits discussed included paid time off, short-term disability, medical leave, and expense and income tracking for tax return preparation.

How could benefits be provided? Who could pay for them?

Participants framed the discussion of benefit provision around three central stakeholders: workers, governments, and the private sector. Because gig workers have diverse needs, participants agreed that benefit programs should allow workers to decide how to allocate their own benefits. Participants’ opinions on the specific role of government were more varied. In other settings, governments set mandates for firms (like minimum wages), provide benefits directly (like unemployment insurance), subsidize privately provided benefits (like Affordable Care Act (ACA) subsidies), or facilitate a marketplace for benefits (like the ACA marketplace). A critical component of the policy debate centered around what combination of these government interventions is appropriate to provide gig workers with adequate benefits. Participants discussed how private firms can take advantage of pre-existing government-sponsored programs, for example, by building on top of the ACA marketplace to provide more customized information for gig workers to more easily purchase health insurance using their portable benefits.   

Policy landscape: Federal and state policy actions

The discussion covered a broad range of legislative initiatives, reflecting diverse ideological perspectives. Key initiatives discussed included the Retirement Savings for Americans Act of 2023 and the Portable Benefits for Independent Workers Pilot Program Act. These bills aim to provide benefits to gig and independent workers through new channels like portable benefits or national public retirement. The Portable Benefits for Independent Workers Pilot Program Act would allocate $20 million to the Department of Labor to fund grants for testing and developing portable benefits models. The outcomes of these pilots would culminate in a report for Congress and recommendations for the secretary of labor, potentially laying the foundation for a nationwide portable benefits system. The Retirement Savings for Americans Act would create a flexible, national retirement benefits system, featuring federal matching contributions to address the needs of Americans excluded from the employer-centered retirement system.

While participants largely agreed that federal initiatives are critical, others also underscored the important role states are playing in filling policy gaps. In states like Pennsylvania and Utah, steps have been taken to implement portable benefits systems for gig and independent workers. In Utah, S.B. 233 allowed companies to extend benefits to independent workers, enabling them to establish a portable benefit program. Meanwhile, DoorDash’s pilot program in Pennsylvania provides portable benefits specifically for DoorDash drivers. Although participants generally felt that these state-level efforts are promising, one discussant emphasized the risks of a fragmented approach, warning of a growing divide between “haves” and “have-nots” across state lines. They highlighted the need for federal legislation to establish a consistent baseline for independent and gig workers, allowing states to build on and enhance federal efforts.

Another key theme of the conversation focused on the regulatory hurdles that make it difficult for gig economy companies to provide benefits when some of their workers are not classified as employees. One participant argued that federal employment definitions have not kept up with evolving work arrangements, such as gig work, leaving courts to determine how to classify workers in nontraditional roles. As a result, existing regulations deter companies from offering benefits to gig workers due to potential legal repercussions, exacerbating the problem.

The discussion also explored opportunities for bipartisanship. Participants highlighted a shared interest across the political spectrum in addressing the benefits gap for independent and gig workers. As one participant noted, policy debates often appear disconnected from the realities on the ground, including those affecting gig workers, underscoring the need for pragmatic, actionable solutions.

Worker classification

While worker classification was not the main subject of the discussion, some participants agreed that classifying gig workers as employees could threaten their workplace flexibility. While no law explicitly prohibits employees from working flexible hours, app-based gig company representatives argued that complying with labor laws designed for traditional employee-employer relationships would make business models based on flexible work unsustainable. Another participant pointed to a study on the impact of California’s law, AB 5, which effectively reclassified gig workers, including app-based gig workers, as employees.  The study found that after the law went into effect, there was a decrease in self-employment with no corresponding gains in traditional employment. The participant argued that reclassifying gig workers as employees may decrease much-desired gig work opportunities. Another participant acknowledged that while the worker classification problem remains controversial, focusing instead on how to provide these workers with flexible and portable benefits regardless of their classification cuts through the contentiousness and provides a practical solution to a problem these workers face.

Insights from an app-based gig worker

One participant worked full time as an app-based gig worker after transitioning from a career in various traditional employee jobs. Although the preferences of gig workers are incredibly diverse, many participants nevertheless found his insights to be informative and useful. He expressed his strong preference for the flexibility afforded by his current job compared to previous traditional roles. He also expressed gratitude for the portable benefits program provided by the gig work company in partnership with another financial technology company. One concern he raised was over the safety of gig workers, especially for those in rideshare settings. He wondered what companies or governments could do to improve the safety of gig work. He also expressed his desire for gig companies to provide workers with short-term disability in case of injury on the job. Further, he wondered how gig companies could provide more training opportunities for their workers regardless of their classification. Overall, he viewed gig work positively and expressed desire for expanded benefits and protections for more gig workers while maintaining their independence and flexibility.