Changes to the IR35 rules in April 2021 have clearly resulted in some self-employed workers joining company payrolls. But overall, the numbers of contractors, freelancers and other ‘non-traditional workers’ have been skyrocketing.
According to TUC research published in November 2021, during the last five years the number of people working for gig economy platforms at least once a week in England and Wales nearly tripled to 4.4 million.
Katarzyna Torunska, employment lawyer at Slater and Gordon, says: “As a result of recent changes in the job market caused by the pandemic, more and more firms are deciding to take on non-traditional workers. Employers benefit from a specific skill set whilst being free from the statutory obligations and liabilities that govern an employment relationship, and they save time on recruiting or training their existing workforce.”
But one of the prices paid by many such workers is that they miss out on employer-paid life and health covers.
To get employers to provide these is much more easily said than done, whether it be through existing group risk schemes, individual protection policies or innovative schemes offering something in between.
Group risk and retail
Group risk schemes can in theory cover contract workers if the work they are doing is clearly defined as being for the employer concerned, but little is actually happening.
One stumbling block is that scheme underwriters can refuse to play the game because of fears of anti-selection. Another is that the reason employers have opted to use contactors in the first place is probably to save money, so why would they want to fork out for cover?
Nick Homer, head of market management, corporate risk at Zurich, says: “Ultimately group risk is an employment arrangement and companies don’t use contractors that often. But, when they do, only a very small minority are included in group risk schemes – most likely ex-employees.
“I feel that retail solutions are probably the most appropriate for non-traditional workers, particularly because of their need for portability. Nevertheless, during the last three years we have seen more zero-hours contract workers being included in group life schemes for a basic amount of cover, although not in group income protection schemes.”
Individuals with their own limited companies can enjoy tax advantages by setting up relevant life or executive income protection policies. Otherwise, it’s largely a question of taking out a standard individual policy.
Alan Richardson, head of business protection and group at LifeSearch, says: “Individual policies will be more expensive than group risk and won’t have a free cover limit, so pre-existing conditions will be excluded. Although it would create a P11D liability, a company could pay for a freelancer’s life, critical illness and income protection premiums. But in practice this rarely happens.
“It’s very difficult for freelancers to convince employers to pay for their protection, although it can occur when someone has left a group scheme and their contract of employment gives them cover for a further limited period.”
Given the vast numbers of non-traditional workers already in evidence, it is perhaps surprising that group risk insurers haven’t been doing more to design half-way-house products to cater for their needs.
Deliveroo and Uber have launched sickness insurance schemes for their workers. They offer very basic cover and are underwritten by insurers outside the group risk industry.
Legal & General is the only group risk player to report producing anything relevant to the gig economy. It has partnered with new platform Portabl, a membership community for freelancers, gig workers and contractors, to bring its Protect mobile-first platform for group life, income protection and critical illness cover, to Portabl’s members. Protect, which was launched last year by Legal & General, marries the retail and group protection worlds; bringing together the cost efficiencies of group with the claims certainty of retail in terms of upfront underwriting.
Colin Fitzgerald, distribution director, group protection at Legal & General, says: “We’ve been working with a couple of organisations bringing together communities of contracting workers where they can network and benefit from shared services, including group risk and other employee benefits.
“We are not aware of any other insurers looking to cover the gig economy, so it’s a little bit experimental. But if this potential market keeps growing then this type of cover is likely to take off.”
Elsewhere, progress doesn’t seem to have exceeded the talking stage. Aviva and MetLife would not comment, whilst Canada Life reports no relevant developments. Zurich is exploring engagement opportunities but not working on any actual schemes.
Zurich’s Homer says: “These communities periodically make enquiries about group risk via employee benefit consultants but don’t fit the employer model. Being communities you can engage effectively with in the tech world creates opportunities and will in turn hopefully lead to more simplified product areas and solutions.
“The bulk of the gig economy is really just looking for a base level of protection, and the opportunity there would be to self-service via insurer retail platforms. Over time we could potentially see voluntary group arrangements emerging.”
“There would, however, need to be certain controls around anti-selection and the removal of work-related clauses from income protection” he continues. “There could be opportunities for short-term income protection or ASU (accident, sickness and unemployment) cover.”
Kevin O’Neill, head of workplace health at Barnett Waddingham, also sees possibilities for offering preferential rates for voluntary schemes and feels insurers could consider extending added-value wellbeing benefits to workers without cover.
He says: “Some insurers have widened added-value benefits to non-insured members, so why can’t they extend them to freelancers as well? I’ve seen no evidence of it happening but, given the way the workforce is changing, it would be no surprise if insurers felt they had to adapt and provide solutions for these workers.”
Sean McSweeney, employee benefits team director at Mattioli Woods, believes that the way forward could be establishing industrywide schemes in a similar way to what has been achieved in pensions via collective defined contribution (CDC) schemes in the Netherlands and some other countries.
Steve Herbert, head of benefits strategy at Howden Employee Benefits & Wellbeing, feels that insurers could possibly extend employee assistance programmes (EAPs) and group risk-linked employee discount schemes to non-traditional workers.
With millions of potential new scheme members up for grabs, all such possibilities seem well worth exploring. If motor insurers can offer the ability to pay for cover by the mile then could group risk providers adapt their offerings to suit irregular contracts, working hours and earnings?
BOX: Other forms of support
Employers can help non-traditional workers in a variety of ways beyond core benefits. All staff welcome support that can help them to fulfil the role to their potential, and making them understand and feel part of the company, even if they aren’t legally, can make a positive difference.
Richard Hill, head of legal/HR resourcing at Konexo (part of Eversheds Sutherland), says: “Giving an induction always helps both the consultant and employer get the most out of a temporary role. It can include introductions to team members, IT training for document management and bespoke systems, and the company etiquette for
video calls and length of meeting times.
“Making an extra effort to include consultants in team social calls and meetings about strategy, day-to-day working habits and personal improvement will help embed them into the working culture. And it’s a good idea to set expectations at an early stage of what their working day looks like, as it’s often different to that of permanent employees.”