If You're a Gig Worker, Here's How You Can Still Get Disability Protection

Company benefits are great to have, but if you're a contractor, chances are you're out of luck. And if you get injured or are too sick to work, you could quickly find yourself in hot water. However, those self-employment taxes you’re paying come with a federal benefit ready to act as your safety net.

(Image credit: Copyright (C) Andrey Popov (Copyright (C) Andrey Popov (Photographer) - [None])

The modern gig economy, dependent on contract workers, offers flexible jobs to millions of people, but only so long as these people are able to show up. No work, no pay, no benefits.

More traditional part-time workers can face a similar situation. As the economy booms, demand for seasonal workers is on the rise. Retailer Kohl’s announced it will increase holiday hiring to 90,000 people this year, and Target will hire 120,000 people this year — up from 100,000 in 2017. Most of these workers also will not be eligible for company benefits.

Most part-time employees do have one advantage over freelancers: access to workers’ compensation benefits, as long as they receive a wage and have taxes deducted from their paychecks. On the other hand, companies generally are not required to provide workers’ compensation coverage to independent contractors. If these workers get injured on the job, they may have few supports. Some very small companies are excluded from this requirement as well. One way to verify your options is to check with your state, as requirements vary. Here is a resource from the National Federation of Independent Business. Yet the Social Security Administration (SSA) estimates one in four 20-year-olds will be disabled before reaching age 67.

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At the national level and across some states, there has been some discussion of – though not much movement toward — a system of “portable benefits” that would follow individuals across their variety of gig employments. This would provide a much-needed safety net for surviving a job interruption. According to the Federal Reserve Board’s 2015 survey regarding household economics, 53% of adults don't have a rainy day fund that could cover them for even three months of living expenses. Almost half reported not having enough cash to cover a $400 emergency expense.

Your Disability Safety Net: SSDI

Until such a system gets implemented, it’s good to know that there is already a program in place designed to help today’s part-timers and gig workers: the Social Security Disability Insurance (SSDI) program. SSDI is an income replacement insurance for former workers with disabilities, provided through the Social Security Administration. To be clear, this “insurance” is not something you have to sign up for or buy. If you pay FICA or self-employment taxes, you are already paying into it and are on your way to being covered. Workers who earn at least $1,360 (in 2019) per quarter get credit toward their disability insurance. Typically, to be covered you must have paid FICA payroll or self-employment taxes for five out of the last 10 years.

SSDI benefits are portable — available if you meet eligibility requirements, no matter how many different companies you were employed by.

When someone experiences a severe disability that prevents them from working for 12 months or more, SSDI also unlocks other important benefits, such as Medicare prior to age 65, dependent benefits and return to work support. SSDI continues until the individual is able to return to work on a regular basis or until retirement age, when old age benefits kick in. It has the added advantage of protecting future retirement benefit income.

Applying for SSDI Benefits

Although more than 2 million people apply for SSDI benefits each year, doing so is ultimately a personal decision. The experience is different for everyone. Work history, education, age and mental or physical conditions can all impact the SSDI process and your outcome.

To be eligible for benefits, you have to meet the work history requirements and be able to prove that your condition prevents you from working. Provided you meet the SSA’s requirements, SSDI is an extremely valuable resource to keep in mind if you experience a disability without private long-term disability insurance or workers’ compensation protection.

Crime Never Pays, But Honesty Does

SSDI is a huge advantage of a more standardized gig economy. Drivers for companies like Uber and Lyft work “on the books,” meaning they must file taxes each year as self-employed workers, which includes payroll taxes. Besides breaking the law, individuals who work side jobs for cash without reporting to the IRS will not be eligible for Social Security programs like SSDI.

Those FICA deductions can be a hefty amount of each paycheck, but they’re especially important for gig, part-time, contract and seasonal workers who have limited options for protecting themselves and their families if they can’t work because of a disability.

No matter which — or how many — companies you work for, SSDI can be there to catch you when things take a turn for the worse.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Michael Stein
Assistant Vice President, Allsup

Mike Stein, assistant vice president of operations strategy and planning, has 25 years experience helping people with disabilities through his work with Allsup. He oversees the claims operations for both Social Security Disability Insurance representation and the Veterans Disability Appeal Service for veterans. During this time, he has become an authority on the SSDI application process, as well as Social Security Administration programs.