Paid Time Off for Independent Contractors

Paid Time Off: Do Independent Contractors Get Holiday Pay?

Find out if independent contractors are entitled to holiday pay and how other employee benefits apply to them.

Anja Simic
Written by Anja Simic
August 12, 2021
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Have you recently become an independent contractor or self-employed? If so, you’ve probably experienced numerous perks of such type of work until now.

To avoid burnout, it’s necessary to go on a vacation every once in a while, and you’ve started wondering if you’re entitled to time off. You’ve been working hard without taking a day off so far, and now you want to go on a well-deserved holiday.

On the other hand, you don’t want your finances to suffer because of it, so want to find out if you have the right to some kind of vacation pay under federal law.

This article will walk you through the rights you have as a contract worker when it comes to public holidays, vacation time, sick leave, and more.

What is holiday pay?

Every employee in the US is entitled to time off. However, paid time off, such as paid annual leave, sick leave, or public holidays, is usually a matter of the employment contract between the employer and the employee, rather than a matter of law.

Although most employers offer some kind of a PTO policy, the Department of Labor doesn’t demand that they have one. There is no legislation within the Fair Labor Standards Act (FLSA) that requires an employer to pay their workers for the time when they’re not working. This is not the case in Europe, for example, when employers typically must provide around 21 days off for their employees during one calendar year.

However, full-time employees usually get their share of paid holidays along with other perks that come with working for an employer, such as paid health insurance, social security, and other taxes that a contractor needs to cover on their own.

Do independent contractors get paid holidays?

The short answer is - unfortunately, no, and there are no exemptions to this rule.

Independent contractors don’t get to enjoy many employee benefits that are typically a part of workers compensation. Contract employees or consultants don’t have paid time off - they're only paid for the time they spend working. The same goes for those who have their own business - they don’t receive money when they’re not performing any work.

Entitlement to paid sick days also belongs to those who are classified as employees. Independent contractors are not eligible for overtime pay, parental leave, or minimum wage, either.

The problem with paid time off for independent contractors

There may be cases when independent contractors work with big clients that are willing to pay for their time off. But is that allowed by the employment law?

It’s something you probably shouldn’t do if you want to avoid the employment misclassification issue.

Misclassification of employees as independent contractors

We already mentioned that the employer doesn’t cover health insurance, income taxes, and many other additional costs for independent contractors. That’s why, for many employers, it seems more affordable to work with contractors instead of employees who work for them full-time or part-time.

But this practice isn’t quite legal. In case the government discovers the employer has a certain degree of control over the independent contractor’s work that overcomes their contract, the contractor should be classified as an employee.

Misclassification of employees is a frequent issue and here’s how you can determine if you fall into the employee category. The official IRS website offers a thorough explanation of the three aspects to look at if you’re not sure if you’re a contractor or an employee:

Behavioral control

  • Does the employer control where and when the independent contractor works?
  • Does the employer provide the necessary supplies and equipment to perform the work?
  • Does the employer require and/or provide training on how to perform the work?

Financial control

  • Is the independent contractor required to work for a particular employer only?
  • Does the independent contractor have a regular monthly or weekly wage?

Business relationship

  • Does the employer provide employee benefits such as paid holidays or health insurance?
  • Does the independent contractor perform activities crucial to the employer’s business?

These are only a few examples of questions you may want to ask yourself. If your answer to most of them is “yes”, the worker is likely an employee and has the right to file a lawsuit, so the employer may suffer legal and financial consequences. Before you decide to act on this, it’s best to seek legal advice from a professional to determine the basis of the misclassification case.

The best-known example of how this law isn’t an empty threat to employers are Uber and Lyft. The California attorney general sued these two companies and a judge ruled that they will need to categorize their drivers as employees rather than independent contractors, which had been the case up until the lawsuit.

How to take time off as an independent contractor?

As one can’t work without ever taking a break, you have two options for when you want to go on vacation.

You can either:

Prepare your bank account in advance and really take time off. You would be putting a pause on your work and only continue it when you’re back from the holiday.

Hire a subcontractor or virtual assistant who can cover at least some of your tasks while you’re gone. Of course, you will need to pay them, but at least your workflow will remain undisturbed.

Another option may work well for situations when you’re ill or you need to take care of a sick spouse or another family member. These situations may last shorter than a vacation (for example, your child catches a cold and can’t go to daycare), so despite not receiving sick pay, you don’t lose your revenue.

Weighing your options

As an independent contractor, you may not have a paid holiday and other employee benefits, but you do have options when it comes to time off. You may need to plan your vacation more carefully than an employee, but it’s not impossible to get some rest.

Get a calculator and see what works better in your case - whether it’s to really take a break or hire someone to cover the workload while you’re away. Just don’t forget to pick someone you can trust with your business completely if you really want to go off the grid and recharge.

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