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Should Your Business Offer Benefits to Independent Contractors?

Posted by John Barrett on Jun 22, 2023 2:20:03 PM

As the working economy continues to shift to and adapt to flexible working models, more companies are utilizing freelancers and independent contractors for ongoing projects. While independent contractors, sometimes referred to as 10-99 contractors, are nothing new, they are much more prevalent and make up a higher percentage of the workforce than ever before. Unlike salaried employees, there is no legal obligation to provide benefits to contractors, but the critical question is: should businesses provide benefits to retain contracted workers? Understanding the advantages and disadvantages can better educate companies on their options for 10-99 employee benefits programs.

Advantages to 10-99 Benefits

Recruit and Maintain Top Talent

Many high-performing employees work independently rather than under a permanent contract with a company. Businesses that want to adapt to modern working styles and attract top talent may struggle if they don’t provide adequate benefits. It's been shown that poor benefits lead to lower retention rates, which not only affects the immediate operations of a company but future recruiting opportunities as well. Ensuring all employees have access to some level of health and wellness benefits can help attract top talent, and maintain that talent long-term.

Lower Your Group Insurance Premiums

Most companies with contractors also have standard W-2 employees as a part of their core staff. W-2 employees have access to group health benefits, which can be costly for companies with limited staff. Having more employees under your coverage plan can reduce the overall premium costs for both the company and the employee’s out-of-pocket pay. This can save your business upfront costs, and potentially increase retention by providing lower-cost benefits to employees.

Qualify for Group Health Coverage

To qualify for small business group medical coverage, companies must meet the required employee count. This number ranges from state to state but can be anywhere from 2-50 minimum employees. There are both financial and coverage benefits to opting into a group plan, and for companies with fewer employees, adding 10-99 contractors can help you reach headcount requirements.

Mitigate Legal Risks

While not common, there are risks with misclassifying a 10-99 contractor, including both tax and legal repercussions. If a worker is filed as an independent contractor but does not fit the requirements and should be entitled to standard benefits, businesses may face legal action. Providing all employees with standard benefits can reduce your legal risks and ensure that even with a false classification, repercussions are minimal

Disadvantages to 10-99 Benefits

Increased Costs

Depending on the number of contractors working within your organization, providing full benefits can increase your upfront costs. Small businesses with limited excess budgets may find it challenging to provide healthcare and retirement benefits and may need to limit what they provide.

Increased Administration Efforts

Employee benefits can already cause a significant amount of paperwork and admin efforts for standard employees. Since paperwork for 10-99 employees will be separate from W2 employees, this can add an administrative burden with regard to health insurance. Benefits can impact other paperwork including tax exemptions, complicating the process for finance and payroll teams.

What Type of Benefits Can Organizations Provide 10-99 Contractors

While some benefits can implicate organizations and their standard processes, many benefits can ensure top talent stays loyal to your company without burdening operations. Regardless of what your business is able to provide, considering some benefits to offer can ensure that your organization has an inclusive and positive working environment, and maintains high employee satisfaction. Some benefits to consider include:

Health and Retirement Benefits

Heath and retirement benefits are the most important to consider, as they have the biggest impact on both the business and its employees. While some organizations may not be able to provide full health and retirement plans, even a lower-level package can help employees feel appreciated and taken care of under your management. For larger companies that can set aside an extra budget for these plans, the rewards are significant for long-term talent and operations.


Stipends are a low-cost way to help employees maintain their personal and professional well-being. Many companies provide workplace stipends for remote employees to access a good home working environment, or transportation stipends for in-office workers. Some other stipends to consider are Wi-Fi, wellness, and volunteer stipends.


PTO is standard for W-2 employees but much less common for contractors. As the workforce shifts, it's becoming more popular for contractors to get paid time off as an extra insensitive for employment. While it can be tricky to add standard PTO to a 10-99 contract, it’s possible to negotiate salary to include hours that an employee would want to take off, ensuring pay equals what it would if PTO was included.

Access to Educational Resources

Training and certificate programs can be extremely valuable to independent contractors as they increase their professional standing and overall resume. Providing access to internal training programs that a W-2 employee would likely access can not only improve the quality of work for your contractors but improve their employee satisfaction and loyalty.

Explore Your Benefits Options with ECBM

ECBM’s cost-effective approach to insurance management ensures your organization has access to the coverage you need, at the best possible price point. Our expert agents have years of experience in a wide range of insurance solutions, including employee benefits packages. Whether you're looking to add 10-99 contractors to your benefits plan, or simply want to improve your current package, contact us today for a free consultation.