February 8, 2016

For Staffing Companies, the ACA’s Employer Mandate Can Be Downright Baffling


When the Affordable Care Act (ACA) was signed into law in 2010, it brought with it an Employer Shared Responsibility provision, also known as an “employer mandate.” The mandate is fairly straightforward for average employers. Per the IRS,

“For 2015 and after, employers employing at least a certain number of employees … will be subject to the Employer Shared Responsibility.

“Under the Employer Shared Responsibility provisions, if these employers do not offer affordable health coverage that provides a minimum level of coverage to their full-time employees (and their dependents), the employer may be subject to an Employer Shared Responsibility payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage on one of the new Affordable Insurance Exchanges, also called a Health Insurance Marketplace (Marketplace).”

In other words: Under the ACA, employers of a certain size have to offer health care to their full-time employees. If they don’t, they’ll get fined. The size of the fine varies according to a number of factors, but, at a basic level, we can say that employers are fined $2,000 per employee if they don’t offer insurance when they should have offered it.

(I highly encourage any business owner who is confused about the employer mandate and its ramifications to confer with a lawyer posthaste. I am but a humble writer – get thee to an attorney!)

But while the employer mandate is relatively easy to understand for most organizations, it isn’t so comprehensible for staffing agencies – and that’s causing a lot of woe for the staffing industry.

“There is a lot of fear in the staffing industry right now because the employer mandate as it relates to staffing companies is very vague,” explains Susan Wurst, vice president of account management at staffing software company TempWorks.

For Staffing Companies, the ACA Is One Big Headache

The main problem, Wurst says, is that “the employer mandate really didn’t take staffing companies into mind.”

One can see evidence of this fact in the ACA’s categorizations of workers. Under the ACA, full-time employees are those who average 30 hours or more per week. That’s all fine and good for traditional employers, but for staffing companies, workweek averages are really difficult to discern.

Cliff“In temporary staffing, when you have a new employee come in and you place them on an assignment, you don’t know how long that assignment is going to last. Therefore, you don’t know whether, in the course of their employment, the [employee] will average 30 hours per week,” Wurst explains.

For example, say a new employee is placed on an assignment that is scheduled to run 40 hours per week for three months. Easy enough – the employee is full-time, right? Well, what if, after that assignment, the employee goes a month without an assignment? Are they still full-time? What if the employee’s new assignment is only 24 hours per week? How do you classify the employee now?

“It’s like trying to see into a crystal ball,” Wurst says. “It’s simple for regular companies, but for staffing companies, it has layers and layers of complexity.”

In the end, Wurst says, most staffing companies are left relying on guesswork to classify employees. Come tax season, that could result in some serious fines just because the companies “didn’t guess correctly.”

What’s a ‘Variable Hour’ Employee? No One Really Knows

The ACA tried to accommodate staffing companies by introducing a “variable hour” employee classification.

Unfortunately, Wurst says, the ACA doesn’t do a great job of defining what makes an employee a variable hour employee instead of a full-time or part-time employee.

“There are no set rules as to what the ‘variable hour’ [classification] means,” Wurst says. “The employer mandate really only says that, just because a worker is with a temp service, that doesn’t mean they are automatically a variable hour employee. But there are no rules surrounding [the classification].”

What constitutes a variable hour employee is largely left open to interpretation. That means staffing companies can run into serious problems if their interpretations of the variable hour classification don’t align with the interpretations of the auditors – who may end up slapping them with hefty fines as a result.

“[Staffing companies] are doing their best to comply with [their own] interpretations of the employer mandate, but no one knows what the audit situation will be like when the time comes,” Wurst says. “There is so much room for interpretation that we can only assume that [the individual discretions of auditors] will play a role in the audits.”

A ‘Revolving Door’ of Insurance Enrollments

The break in service rules of the employer mandate also cause major stress for staffing companies.

Under the employer mandate, an employee who doesn’t work for 13 weeks and then comes back to a company is considered a new hire and, therefore, subject to new coding and measurement periods.

StarsIn the staffing industry, 13-week breaks aren’t exactly uncommon.

“It’s not unusual for an employee to be registered with five or six staffing services,” Wurst says. “The employee will work for whoever offers a placement at the right time. They come and go from the staffing companies.”

Wurst says this situation has caused a “revolving door of insurance enrollments and cancellations” in the staffing industry: An employee comes in, gets coded as full-time, and gets insurance. Once the assignment is over, the employee goes off to work elsewhere, and their insurance is cancelled. But then the employee comes back, and the whole process repeats itself.

Searching for a Legislative Solution

Wurst believes, as do many, that the only way to solve the problems that the ACA poses for staffing industries is to get some better definitions into the employer mandate. Everything that’s open to interpretation needs to be specified and made concrete, and staffing companies will need some explicit instructions on how they are supposed to understand and comply with the ACA.

Until the government steps in, staffing agencies are left with stopgap measures that, while not perfect, can at least make things a little bit easier. For example, TempWorks recently announced that its software would track employee statuses and calculate their classifications and insurance needs via a set of algorithms.

It’s a good start, but much more remains to be done. Here’s to hoping the nightmare ends for staffing agencies fairly soon.

Read more in Temp Agencies

Matthew Kosinski is the managing editor of Recruiter.com.