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How Does Unemployment Work for Freelancer or Contractor?

Written By: Mo Eldessouky Updated On: December 15, 2022 | Read Time: 4 Minutes

Do individuals who aren’t traditionally employed count as being unemployed? Do freelancers who and independent contractors count as being unemployed when they are in between gigs or laid off from their ongoing contract? It’s a million-dollar question as these hard-working individuals face the same lay off’s as those who are traditionally employed in the midst of this ongoing pandemic.

Who is Considered a Freelancer or a Contractor?

Unlike traditional employees, freelancers and contractors operate independently – they’re self-employed. This distinction is important for unemployment eligibility.

Contractors could be independent or could work under a company. A freelancer while also performing services and providing labor differs from a contractor and can be defined as :

  • “A person working for different companies at different times rather than being permanently employed by one company.”

You are most likely considered a freelancer or contractor if:

  • You are paid by the job, rather than hourly, and you don’t get benefits like health insurance and other perks.
  • You can determine your own hours of work and working environment.
  • You set your own prices and negotiate your own contracts with clients.
  • You are responsible for paying your own taxes and providing your own equipment.
  • You often have multiple clients at once.
  • You’re in business to make a profit, rather than just earning wages from your job.

If you meet any or all of these criteria, then you’re likely considered a freelancer or contractor.

How is Unemployment Defined?

The Bureau of Labor Statistics defines unemployment as when individuals – do not have a job, have actively looked for work in the last four weeks. Individuals who have been temporarily laid off and are waiting to be called back to that job are also included in the unemployment statistics.

Unemployment is often used as a measure of the health of the economy. This is why governments are actively seeking out ways to reduce the unemployment rates of the countries they govern. The unemployment rate is the number of unemployed people divided the the number of people in the labor force.

The government will sometimes provide support for individuals who fall into the unemployed demographic.

How Does Unemployment Work for Freelancers?

Independent contractors may be found in all industries, from entertainment to construction and engineering.

Freelancers are typically hired under temporary contracts that can be renewed or not. Their income varies throughout the year and they do not receive any employee health or retirement benefits.

Some people become freelancers because they wish to and prefer the lifestyle. Others have no choice and take up freelancing because they are unable to find that traditional 9-5 job.

The latter set is considered unemployed as they are actively seeking employment.

So, according to the definition of unemployment, most freelancers and contractors are not unemployed but rather self-employed. Self-employed in the sense that they work for themselves, create their hours, pick their approach to a task. They have the sole power to determine their income but will usually belong to a particular income bracket.

Unlike typical employees, these sets of workers have no laid out benefits. Maternity leaves, sick leaves, pension, and HMOs are not laid out for them. Anything that affects them, affects the job and income directly unless there is someone to delegate to.

Freelancers and independent contractors are also not entitled to employment aid in times of crisis neither are they protected by union laws.

However, exceptions are being made in this period where the COVID-19 has wreaked havoc in every industry. Airlines, stock markets, small businesses, freelancers and independent contractors are all facing economic hardships.

Government to Support All Amidst Covid-19

In the United States of America, the government has declared 2.2 trillion dollars as aid for all Americans. According to an article by Forbes, self-employed individuals are included in the stimulus package even though they technically cannot be termed “unemployed.”

However, everyone is included in the CARES (COVID-19 Aid, Response, Economic Security Act) package to enable households and workers to stay afloat, while on lockdown.

Some of the benefits within this package extended to independent contractors and workers include:

  • Rent deferral for up to four months
  • A weekly stipend, up to $600 paid up to 4 months, for eligible individuals.

Freelancers and contractors eligible for the CARES package should log on to their state’s unemployment websites and apply as soon as possible for benefits. For freelancers and contractors in California, the site is at the Employment Development Department.

The type of unemployment benefits varies based on what state you find yourself in. Your income as an independent contractor will also matter. Benefits range anywhere from twenty to almost fifty percent of previous earnings in addition to the weekly $600 dollars stipend.

There is room being made for grants for small businesses up to the sum of $10,000 that don’t have to be paid back. Tech giants such as Facebook, Twitter and Google have, also, pledged support for affected small business owners.

Know a freelancer or contractor or are you one yourself? You may qualify for unemployment or COVID-19 aid from the federal government. Continue to stay updated on the current world-wide situation that we face today. Stay healthy, stay home and most importantly stay safe.

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