1099 workers, those who are self-employed and lack the traditional benefits accessed by W-2 employees, are among those most affected by the COVID-19 pandemic.

As the unemployment rate nears 18% of the U.S. population, 1099 workers are feeling the full force of the pandemic’s economic impact. Aside from cuts in freelance pay, reduced sales and overall little work, these employees are struggling with day-to-day finances, yet continue to receive little aid.

The Coronavirus Aid, Relief and Economic Security (CARES) Act expands unemployment insurance benefits for gig workers and the self-employed under the Pandemic Unemployment Assistance (PUA) program, but reports have found that some nontraditional workers will not receive benefits until weeks from now. In Illinois, for example, self-employed workers may begin collecting unemployment insurance starting May 11. Because unemployment insurance benefits are regulated by the state governments, each system can vary.

Additionally, even though the CARES Act doubles the total amount unemployed workers are allowed to borrow from a 401(k), those who were self-employed are not eligible. While these workers can apply for loan assistance through the Paycheck Protection Program (PPP), the benefits allocated for them are relatively scarce, says Kevin Boyles, vice president and business development director at Millennium Trust.

“There isn’t a lot when you’re a gig worker,” he continues. “You don’t have conventional health benefits and the like, adding to the challenge.”

Too Late to Prepare

Allocating savings for emergencies and retirement is already tough for some workers under the self-employed umbrella. Boyles splits these nontraditional workers into two groups: Freelancers, who tend to work according to fairly regular schedules in architecture, design, journalism, etc., and what he describes as “classic gig workers.” Workers in this second category include Uber and Lyft drivers, independent retail business owners and specialized contractors.

“There have always been decent retirement and savings plans for freelancers—who are generally on the higher-income end of the spectrum,” he adds. “The classic gig workers don’t have much support or information available, so they probably weren’t doing a great job at saving for retirement before this all happened.”

According to a Commonwealth study focusing on financial security and emergency savings among Etsy workers, 30% of the retail brand’s sellers reported having no savings for emergencies. The leading financial concern for Etsy sellers was debt, followed by emergency savings.

“If these workers don’t have those short-term needs addressed, it’s very hard to prepare for the long-term and retirement,” says Brian Gilmore, a director at Commonwealth.

The reality is that for many 1099 workers, focusing on retirement isn’t a priority during these times, Boyles agrees. For those recently out of work, who have had their hours reduced or are seeing their businesses take a large hit, adding an emphasis toward retirement savings can be insensitive or unnecessary.

“Right now, that’s a rather tough road,” Boyles says. “It’s almost tone deaf.”

Instead, employers, financial advisers and policymakers can consider means to better support these workers after the crisis. On a policymaker level, Boyles expects to see states following the likes of California, which has started to implement workplace rights, benefits and safety nets for gig workers. Last year, California legislators approved a bill mandating ride-sharing companies, as well as other contracting firms, to treat nontraditional workers as employees, extending workplace benefits to these independent contractors.

A Better Future?

For financial advisers, understanding how the crisis has affected 1099 workers in particular is essential. Because they have less control over when they can earn, this group faces greater income volatility, Gilmore says. Pushing savings tools, such as high-yield savings accounts, allocates money toward a liquid account while yielding higher returns than a typical checking account.

Gilmore says Commonwealth is exploring whether sidecar savings accounts can be considered tax advantaged. “Employees are allowed to contribute to retirement savings tax-exempt or deferred, but there’s nothing like that for emergency savings,” he points out. “Is there a way for employers to offer an emergency account that’s tax advantaged?”

Boyles emphasizes the need for advisers to work with these people—since most nontraditional workers will now be highly determined to save for emergencies as well.

“There’s going to be a heightened sense of awareness among that segment of the workforce around the need to not just save for retirement, but also for a rainy day,” he says.