While we have always known that the Patient Protection and Affordable Care Act (aka: PPACA, ACA, AHA, Obamacare) would impact the temporary staffing industry and its customers, the regulatory information that has been surfacing over the last several months is starting to reveal the impact of some of the details embedded in the law. We are finding both good and bad news in the newly published regulations—new requirements that will increase the costs of temporary and contract workers; nuances in those requirements that will make flexible workforce strategies an even more attractive model for driving down operating costs. While the law is still very confusing, the reality is that most of the regulations that will be written, have been written to the point where more and more cost conscious employers are starting to re-think how they get work done—what types of employees to put to work when, where, and how. The following information is being provided to PACE customers as a way to lay out the facts of the ACA and its regs, prepare you for what lies ahead, and offer some ideas for not only staying compliant, but mitigating some of the cost increases we are all anticipating. Our comments will focus primarily on the impact of the ACA on our client's non-W2 workforce, which includes not only your temporary and contract workers but any workers performing work on your behalf through the services of a third party employer. ACA Overview Under the ACA, all “large” employers are required to do three things to stay in compliance with the law as of January 1st, 2014.
- Offer “minimum acceptable” healthcare insurance to 95% of their eligible fulltime employees (leaving a 5% margin of error).
- Ensure that the cost of the plan they offer is “affordable” (i.e. will not require any employee to pay more than 9.5% of their annual pay towards the costs of an individual plan), and
- Ensure that the plans(s) offered and the employer’s contribution to these plans is not set up to favorably treat highly compensated employees.
1. Employers can use a third party employer solution to avoid compliance requirements. For employers who need to add staff, but also want to remain below the 50 FTE (fulltime equivalent) threshold that exempts them from the ACA regulations, using a third party employer solution to channel employees to another employer can delay the point when they must become compliant with the law.
The Employer of Record Service option is ideal for employers who have located an employee they want to hire, but don’t want to absorb the costs or administrative hassles of employing that worker directly. Employer of Record Services is especially ideal for companies who want to either avoid or delay the compliance requirements of the ACA.
We are encouraging our smaller clients to plan now for what lies ahead. We’ve heard stories of regulatory agencies getting ready to target companies who have been sending large numbers of already existing employees to a third party employer as a way to avoid ACA regulation. We do not recommend this strategy.
But for employers who haven’t yet reached that 50 FTE benchmark, a third party employer solution applied to your near term hires can successfully delay when your company falls under the ACA.
Word of caution: using a third party employer solution is considered a short term (one-two year) solution. The administrative rules of the ACA dictate that after one year, all workers in your facility, regardless of who employs them, will be counted as part of your FTE.
2. Employers Can Use a Third Party Employer Solution to Mitigate the Costs of Adding Staff. If you’re an employer who needs to hire but is reeling from the high costs currently associated with each new hire (and targeted to increase after January 2014), it may be time to seriously consider using a third party employer solution as an extended (6-12 month) onboarding strategy.
While you may have already reviewed and walked away from the more traditional temp-to-hire staffing models, the lower cost, Employer of Record Service model offers all the cost savings advantages of categorizing employees as variable, while providing a very behind-the-scenes model of W2 employment.
Whether you use the full service temp-to-hire service model, or the considerably streamlined Employer of Record Service model, the opportunity to onboard a large number of workers at substantially lowered worker costs compared to the costs of hiring directly is the outcome of either choice.
3. Employers Can Use a Third Party Employer Solution to Avoid Administrative Hassles. The ACA is not just a regulation that adds additional direct costs, but is a regulation rich in administrative detail and reporting requirements. Administering healthcare benefits where you have to apply definitions of variable workers, calculate look back, measurement and stability periods, and do e “affordability” testing, is going to be a daunting task for whoever takes it on.
And the penalties for not doing the right administration correctly will be significant.
As a staffing company with a large “third party employer” workforce, one of our core competencies is our ability to manage all federal and state staffing regulations, including the ACA. We are getting ready now to be fully compliant with all regulations by January 1st, 2014 and will be ready to help our customers manage through the transition.For a better understanding of how the ACA will impact your company and what you need to know about the options available for you to mitigate the costs associated with the new mandates, contact email@example.com to arrange for a personal consultation. Our approach to the ACA is not only to be fully compliant by January 1st, 2014, but to help our customers take full advantage of all aspects of ACA provisions that can drive down staffing costs. This article was prepared by Jeanne Knutzen, Founder and CEO of the PACE Staffing Network using information from a variety of legal, staffing, and other professional sources.