Human Resource Blog

Unemployment Benefits for Independant Contractors

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We have an independent contractor that we have had to let go. The contractor claims that he is entitled to unemployment benefits. Is that the case?

Contractors are, sometimes entitled to receive unemployment benefits, even though they are not employed by your company on a full-time basis and in most cases, the contractor relationship is a temporary one. Contracts can sometimes indicate, however, that the contractor was expected to work longer than the company needed the contractor. As such, sometimes contractors are entitled to company benefits, but it depends on your state. Every state handles independent contractor status differently. One of the most common issues that presents itself when a contractor is fired is whether or not that contractor was actually an employee of the company or not – your state will determine that ruling.

When it comes to working with independent contractors, many companies are satisfied with the arrangement because they do not have to pay for benefits, such as paid time off, and other employee packages that can get costly. For this reason, many large companies rely on independent contractors to get their workers. Many also turn to staffing agencies that hire independent contractors to hire a good portion of their workforce.

However, independent contractors do, in many cases, qualify for unemployment benefits even if they are not entitled to other benefits with the company. You cannot, therefore, force a contractor to sign a contractor stating that they are not an employee, as many independent contractors will attempt to do. Even in the event that a company tries to have an independent contractor sign such a form that would sign away the contractors rights as an employee, the company may still be forced to pay unemployment benefits.

Keep in mind that as a good business practice, many companies offer benefits and incentives to their employees and their contractors. If you don’t currently offer benefits to your contractors, you may want to consider it just to enhance your overall morale and to retain employees. One way or the other, you may have to pay unemployment benefits at the very least.