The Real Cost of Not Paying for Freelance Vacation and Sick Time

Now that Microsoft requires companies that contract with them to offer freelancers paid time off, will others follow suit?


While paid vacation and sick time might seem like a pretty basic benefit, there is no federal policy that mandates that companies offer the benefit, even to full-time employees—despite the fact that the Healthy Families Act was introduced more than a decade ago and has yet to make it to Congress.

Some businesses aren’t willing to wait for legislators to decide on an issue that has the potential to impact 43 million workers, according to Senator Patty Murray (D-WA). In an effort to set an example, Microsoft announced it is going to begin to require that many of its 2,000 contractors and vendors offer their employees who work for Microsoft 15 paid days off for sick days and vacation time.

When you consider that one in three Americans work as freelancers, who do contract work for employers as large as Microsoft and those as small as a local boutique, this is a massive step to equalize the benefits offered by employers to full-time staff and those who may work just as many hours but don’t get any paid time off.

This benefit isn’t just calculated in hard numbers like an extra paycheck. A recent survey of almost 2,000 workers from Limeade, an employee engagement platform, found that people were much more productive and willing to commit to the organization when they had these types of work-life benefits.

A brief breakdown of their findings:
  • On average, employees who said their organization provided health and well-being benefits were 11% more engaged than those that didn’t.
  • More than 3/4 of workers want time off to recharge, yet less than half of employers provide it.
  • Providing paid time off corresponded to a 13.8% increase in engagement.
  • 71% of workers want paid breaks during the workday yet just over a quarter (28.4%) of companies provide it.
  • Employees are around 20% more engaged when they have the right amount of balance between their work and personal life.

The recent Gallup poll that surveyed nearly 50,000 businesses showed that paid time off impacts a company’s bottom line. Organizations that scored in the top half for employee engagement had double the odds of success of those in the bottom half. On the flip side, disengaged and disgruntled employees cost the U.S. economy about$370 billion per year.


Contractors’ engagement is just as important. ThinkHuman CEO Meredith Haberfeld, who provides employee engagement consulting to such organizations as SoulCycle, Goldman Sachs, and Spotify, says that treating employees one way and contractors another will likely impact the company in the long term.

“The employees who receive better vacation policy or benefits predictably notice that contractors don’t,” Haberfeld points out. “The resulting dynamic subtly but powerfully undermines the perceived authenticity of the company’s culture commitment—and as a result, impacts the culture in a quiet but meaningful way.”

Haberfeld believes that Microsoft’s “supply-chain” view of vendor benefits brings its pledge to people outward, to the next concentric ring of the culture. “An authentic, unwavering commitment to culture is felt and experienced by employees, partners, customers and even the extended community,” she explains.

But she also believes that forcing vendors into compliance is a bad idea. “Not only does force rarely produce the best result, it will likely raise costs for both parties—and, more importantly, it doesn’t create an authentic value alignment in the vendor,” Haberfeld adds.

Companies who want to change the way contract workers are treated—whether they are small or large—can begin by partnering with contractors who align with their core values, says Haberfeld. “This will eventually add an extra layer of synergy to the vendor-partner relationship and increase the level of engagement—and, as a result, predictably better results.”