Contract Employment Benefits


Employees are hired at an hourly or yearly salary and are often entitled to certain benefits like health insurance and paid time off, while contract employees are usually hired to fulfill a specific function for which payment is issued per project. When not working directly on a project, the contract employee is not paid. Contract employees are typically not entitled to benefits except when an employer provides benefit options or when an employee pays for benefits out of pocket.


  • Typically, employers do not contribute to health insurance coverage for contract employees or the families of contract employees. In certain cases, in which an organization is already established with access to a group health insurance plan, the employer may open up access to the health plan for contract employees. In these instances, the contract employee would be responsible for the cost of all health insurance premiums and deductibles. Most of the time, the health insurance rates would be much lower as part of a group health plan than they would be should the employee attempt to find health insurance through a private health plan.

Retirement Savings

  • Retirement contributions are a common benefit provided to many full-time regular employees and often include an employer-provided match up to a certain percentage of the employee contributions. Contract employees are generally not considered to be full-time regular employees and, therefore, are not granted the same retirement savings privilege with a company-provided match to an investment or pension account. Some employers have begun to offer contract employees access to a company's 401k plan. The contract employee can make contributions into an individual 401k plan that will remain active and roll over as the employee completes new projects or works with additional companies through the years.

Build Your Own

  • Although the benefit options offered to a contract employee may be limited, a contract employee such as a freelance artist or web designer actually has the luxury of freedom to build a customized benefit package to fit individual lifestyle and unique needs. Many organizations such as the National Association for the Self-Employed, WorkForceLogic and the Freelancers Union specialize in providing cost-effective benefits and benefit packages to both self-employed individuals and business owners. A contract employee would technically be considered a self-employed entity and could be eligible to enroll in any one of these private benefit plans. The contract employee can design a benefits package to provide access to health, medical, life, dental and vision insurance for an individual or for an entire family. Disability and workers' compensation insurance can be purchased along with investment vehicles for retirement savings and programs to provision for contribution to the Social Security program through accurate payment of the self employment tax.

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