In short? No. Independent contractors don’t receive paid time off because they don’t have an employee-employer relationship with their clients. However, there are ways to give contractors a break, and even access to healthcare benefits, without risking misclassification penalties. In this article, we’ll discuss the challenges of providing paid time off to contractors, and how to navigate these challenges to support your team.
What you need to know about contractors and paid vacation:
- Independent contractors don’t receive paid time off because they aren’t full-time employees—which is a requirement for paid time off.
- Providing paid time off to independent contractors could lead to misclassification penalties if workers are deemed to be employees under the law. There are ways to give your contractors a break, though, which we’ll cover below.
- Independent contractors typically do not receive other benefits, like healthcare. But, you can get them access to premium healthcare if you hire them through an EOR.
No, contractors don’t get paid time off. Here’s why.
The answer is simple: Independent contractors don’t get paid time off because, by definition, paid vacation is something that employers can give to their employees. Because contractors don’t have an employee-employer relationship with their clients, they don’t get paid vacation.
Put simply, contractors are responsible for managing their own time and are not entitled to the same benefits as employees, such as paid vacation time and sick leave.
Overall, the lack of paid time off for independent contractors is a result of their illegal status as self-employed individuals. While this lack of benefits can be seen as a disadvantage, it also provides independent contractors with greater control over their schedules and the ability to work on their own terms.
Giving contractors PTO could put them at risk of misclassification
Another reason you don’t want to provide paid vacation to your contractors: This can lead to misclassification penalties if the workers are deemed to be employees under the law.
If you provide paid vacation to independent contractors, they may be seen as treating those workers like employees, which could lead to a determination that the workers are misclassified and should be considered employees. That can lead to penalties.
If you’re caught misclassifying, you may be required to pay back wages, overtime, and other benefits that the worker would have been entitled to if they had been properly classified as an employee. You may also be subject to penalties for misclassifying the worker.
For these reasons, it’s important to carefully consider whether a worker should be classified as an independent contractor or an employee. If there’s any doubt about the proper classification, it may be wise to consult with an attorney to avoid potential misclassification penalties.
OK, then how can my contractors take time off?
If you’re reading this, it’s probably because you’re hiring contractors (or you’re thinking about it). And it’s natural to want to give your teammates some time off, especially if they’ve been working for you long-term.
Here are a couple of ways you can get around the paid vacation obstacle:
If your contractor is on a monthly retainer
When they need to take time off, have them let you know. Because contractors are able to do their work on their own schedule, you might not have to do anything. For example, if a contractor is hired for 80 hours of work per month and needs to take a week off, there’s still plenty of time for them to complete the 80 hours.
But, if the time off is more significant (say, they’re taking an entire month off), you can modify their contract and pay to reflect that. Since they’re not employees, they’re not qualified for a set amount of paid time off. So, how you handle this is up to you.
If your contractor is on a project-by-project basis
If your contractor is taking on projects one at a time, time off likely won’t be a serious issue. If they need to take time off, simply don’t assign them any projects during the time they’ll be off. If they have to take time off mid-project, you can change the project deadline to reflect the new timeline.
Do contractors get other benefits, like healthcare?
Independent contractors typically don’t receive other benefits, like healthcare. As an employer, you’re not required to provide healthcare to your contractors—and it can be complicated to do so, even if you want to.