How Working Without a Contract Can Impact Your Social Security Benefits in the US

Working without a contract might feel convenient in the short term, but it can lead to serious financial consequences, especially when it comes to Social Security eligibility and retirement planning.

Key Takeaways:

No contract = No health benefits, no unemployment insurance, and no retirement credits
SSA requires documented earnings to qualify for benefits
Employers can also face legal risks for hiring off-the-books workers

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Working Without a Contract Can Affect Your Social Security Benefits

Working without a contract might seem like a flexible or temporary option, but in the long run, it can seriously affect your financial stability—especially when it comes to your Social Security benefits. Whether you’re close to retirement, receiving disability support, or just starting your career, it’s important to understand how undocumented work could put your future benefits at risk.

Let’s break down the key impacts of working without a formal employment agreement and how it may affect your Social Security eligibility and protections.

Why Working Without a Contract is Risky

Across the United States, over 70 million people rely on the Social Security Administration (SSA) for monthly benefits, including retirees, disabled individuals under Social Security Disability Insurance (SSDI), and those receiving Supplemental Security Income (SSI).

But when you work “off the books” or without a written contract, several things can go wrong—starting with your access to basic rights and ending with a major dent in your retirement future.

1. You May Lose Access to Health and Social Benefits

One of the most immediate downsides of working without a contract is not being eligible for health coverage or employment-based benefits.

No health insurance: Many formal jobs provide medical coverage, which is essential in the U.S. where healthcare costs are high.
No paid leave or protections: Without an official employment record, you likely won’t get sick leave, maternity/paternity leave, or disability protection.
No workers’ comp: If you’re injured on the job and not legally employed, you may have no right to compensation.

This leaves workers financially vulnerable in case of illness, injury, or emergencies.

2. You Can’t Claim Unemployment Benefits

Another major consequence is that unemployed workers without a documented job history usually cannot claim unemployment insurance.

Why? Because to qualify for unemployment benefits:

You must prove you were legally employed.
Employers must have paid unemployment taxes on your behalf.

Without a contract, you have no official record of earnings or job separation, meaning you’re on your own financially during tough times.

3. You Might Not Qualify for Social Security Retirement

Here’s the biggest long-term consequence: no contract means no work credits. And without credits, you won’t get Social Security retirement benefits later in life.

How work credits work (2025 figures):

You earn 1 credit for every $1,730 in documented wages.
You can earn up to 4 credits per year.
You typically need 40 credits (around 10 years of work) to qualify for retirement benefits.

If your income is under the table or not reported, you won’t earn credits—even if you work full-time for years. This puts your entire retirement safety net at risk.

4. Employers Can Face Legal Trouble Too

It’s not just workers who are affected. Employers who hire people without contracts:

Can face legal penalties and fines for violating labor laws.
May be required to pay back taxes, insurance, and compensation.
Lose the trust and loyalty of workers who feel insecure or undervalued.

Having a contract protects both sides—the employer and the employee—by setting expectations and ensuring compliance with wage, tax, and benefit laws.

Protect Your Future: Always Work with a Contract

If you want to secure your retirement, health coverage, unemployment support, and legal protections, it’s essential to work in a job that provides a clear, legal agreement.

Even part-time, freelance, or gig work can—and should—be documented, either through employment contracts, pay stubs, or tax records (like Form 1099 or W-2). This ensures: