SB 238: Better Benefits for Independent Contractors

To track the status of this bill, find it on our Legislation Tracker. Click here to contact the sponsor of the bill to share your thoughts, or click here to email your Senator and Representative about it.

Last year, Utah passed the nation’s first voluntary portable benefit plan, offering a new path for gig workers and other independent contractors to access worker benefits without sacrificing their flexible work arrangements. Rather than crack down on independent work, as the Department of Labor (DOL) and states like California have, Utah welcomed the growing ranks of self-employed workers by knocking down a legal barrier to benefits.

Since then, other states including Kentucky and Virginia have followed Utah’s lead with their own portable benefit legislation. But this year, Sen. John Johnson introduced SB 238, which would go a step further and offer independent contractors a state tax incentive to go out and buy portable benefits. 

It’s important to note that independent contractors – including gig workers – make up the heart of the economy, but receive next-to-none of the same benefits as regular employees do. Moreover, independent contractors take on all the liability, cover all the business expenses, pay all the taxes as both employer and employee, and take on the task of finding work when a job is done. This is true for workers in the app-based gig economy, like rideshare drivers, shoppers, and freelancers, as well as those in occupational trades like plumbers, electricians, and carpenters. 

With all of that in mind, a bill like SB 238 that improves the affordability of self-employment makes perfect sense for the most business-friendly state in the country. 

As proposed, the bill creates two possible avenues for contractors to access portable benefits. First, the bill would give hiring parties a 50% tax credit on contributions up to $2,000 made to any contractor it works with. Contractors can then use the contribution to purchase any insurance they need, including portable benefits. 

Second, for independent contractors who don’t receive contributions from a hiring party, the bill would allow them to claim 4.65% of up to $2,000 in payments made for portable benefit coverage or other insurance coverage. Importantly, the bill would allow contractors to count payments that are deducted as business expenses on their federal taxes. 

There will always be disparities between contractors and employees in terms of taxation and basic benefit coverage. But bills like SB 238, that seek to ease the burden on contractors, bring contractors and gig workers one step closer to a world where stability and flexibility go hand-in-hand.