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State of Play: Federal Paid Leave and the Self-Employed
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State of Play: Federal Paid Leave and the Self-Employed

Emergency pandemic programs and proposed federal legislation offer important lessons in ensuring paid leave for the self-employed.

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U.S. Sen. Kirsten Gillibrand (D-NY) speaks at an event on child care and paid leave in Washington, D.C., May 2023. (Getty/Paul Morigi for MomsRising)

At the federal level, there is currently no right to paid leave for anyone, nor any paid leave insurance system—leaving the self-employed, as well as traditional employees, without the protections they need. Thankfully, there are important models for policymakers to consider: COVID-19 pandemic-era emergency federal programs offered a powerful lifeline to the self-employed in a crisis, and proposed federal legislation to create a universal paid leave program would include the self-employed.

Pandemic programs

In 2020, with the country and the economy reeling from the sudden impact of the COVID-19 pandemic, the federal government launched two temporary federal paid leave programs for the self-employed. While these programs have since ended, both merit further research to better understand lessons learned from these programs for future efforts.

First, the Families First Coronavirus Response Act (FFCRA) created an emergency right to paid leave benefits for self-employed workers unable to work due to certain COVID-19-related needs, in the forms of advanceable, refundable tax credits. As designed, the credits in effect replaced the equivalent of an average day’s pay—or, for some needs, a portion of an average day’s pay—for each day the person was unable to work due to the covered need. Money went into workers’ pockets early because the IRS authorized the self-employed to reduce their estimated tax payments proportionally, in effect pre-funding the credits. The credits were initially in place for absences between April 1, 2020, and December 30, 2020, mirroring the availability of paid leave to covered employees under the FFCRA, and were later extended twice, to ultimately cover absences through September 2021.

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Second, the Pandemic Unemployment Assistance (PUA) program, while not styled as a paid leave program, played that role in practice for many self-employed workers. PUA was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the second major relief package passed in response to the COVID-19 crisis. Under the program, workers who are ineligible for traditional unemployment insurance, including the self-employed, could receive cash benefits while they were not working for a specific list of COVID-19-related reasons. These included those who were out of work due to having contracted the virus or caring for someone who had contracted the virus, needs that resemble traditional family and medical leave needs. In other words, PUA put cash in the pockets of self-employed people who were temporarily unable to work due to certain health or caregiving needs.

While other kinds of workers could also qualify, the self-employed constituted a substantial share of program users: 41 percent in 2020 and 49 percent in 2021. In total, nearly 2.6 million self-employed people, or more than 15 percent of all those self-employed, received unemployment insurance benefits between March 2020 and December 2020, a particularly staggering proportion for a population that is generally totally ineligible. PUA benefits ended as of fall 2021.

Learn more about the self-employed in the United States

Permanent proposals

In 2021, legislation that would have created a universal paid leave benefit passed the U.S. House of Representatives as part of the Build Back Better package. This benefit would have included the self-employed automatically, just like Social Security, rather than requiring an opt-in. The program proposed under Build Back Better would have used self-employment income, alongside wages and unemployment benefits, for purposes of determining eligibility and setting benefits, meaning that those who draw income from multiple sources would receive the benefits of all such sources. However, paid leave provisions were not included when a subsequent iteration of the Build Back Better package became law as the Inflation Reduction Act.

Longtime paid leave champions Rep. Rosa DeLauro (D-CT) and Sen. Kristin Gillibrand (D-NY) recently reintroduced a related proposal in the form of the Family and Medical Insurance Leave (FAMILY) Act. The bill would cover the self-employed automatically and would use self-employment income, alongside other sources of income, for purposes of eligibility and benefits calculations. Workers, including the self-employed, could qualify for up to 12 weeks of benefits for serious health or caregiving needs. Benefits would be paid at a progressive wage replacement rate, with the lowest-income workers receiving 85 percent of their income and others receiving a percentage of their income on a sliding scale. The FAMILY Act would create a social insurance program paid for with a dedicated payroll tax. Mirroring Social Security, employers and employees would each pay into the program an equal percentage of employees’ incomes, while the self-employed would, in effect, pay both the employer and employee contributions.

Conclusion

A universal solution is necessary to guarantee the self-employed the paid leave they need when they need it, regardless of where they live or work. Only federal law can provide that on a national level. From the experience of pandemic-era programs and the promise of federal proposals, policymakers have substantial materials with which to build the foundation the self-employed—and all workers—need.

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The Women’s Initiative develops robust, progressive policies and solutions to ensure all women can participate in the economy and live healthy, productive lives.

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Photo shows a mother wearing a mask with her 1-year-old daughter on her lap. A nurse in dark-blue scrubs gives the child a vaccine in her leg

Millions of Americans are self-employed, whether they call themselves freelancers, independent contractors, entrepreneurs, or small-business owners. When a serious health need strikes or a new child arrives, the self-employed need time away from work just as employees do but all too often cannot afford to take it—unless there’s a paid leave program to protect them. This series explores who the self-employed are, what paid leave means for them, and the state of play in federal and state policy on paid leave for this population.

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