President Barack Obama signed the Affordable Care Act on March 23, 2010, five years ago! The results are yet to be significantly determined, but there is no doubt that it has had an impact on many industries, the staffing industry included.
In a recent blog relating to the impact of the Affordable Care Act on the staffing industry, Will Thompson writes in great depth about the ACA and how it impacts employers with a specific spin on staffing companies. The infographic provided in the blog is extremely helpful. Below is a brief synopsis along with some added thoughts on the subject.
Let’s examine the rules:
- Size of workforce is calculated by averaging the number of employees over the year
- Employers with 50 or more full-time employees is an Applicable Large Employer
- Employers with less than 50 full-time employees can purchase health insurance through the Small Business Health Options Program (SHOP)
- Those companies considers ALEs may have to pay a penalty if they do not offer ACA coverage
So, companies with more than 50 employees are required to provide health insurance for everyone. Hiring from a staffing agency was considered a potential solution to this dilemma for those smaller companies struggling to commit to insurance coverage. The other side of the coin is whether or not staffing agencies with 50 or more individuals on payroll are required to provide insurance. The rules are constantly shifting, but many agencies will have to do so.
A temporary worker of a staffing agency is considered to be an employee of the agency. The staffing agency would be required to provide healthcare coverage, or incur ACA penalties. Certainly the agency is not obligated to pass on these costs to their customers, but it would appear that hiring from a temporary agency is not a way of avoiding the cost. Someone has to take responsibility.
Penalties for those companies employing 100 full-time employees or more, involve non-tax-deductible excise taxes if coverage is not offered. It may well be more cost effective to offer the coverage than pay the tax. If your company is presently under 50 full-time employees, but consistently growing, you may want to consider the implications. The likelihood is that 2015 will see penalties for both non-coverage and inadequate coverage. No-coverage penalties kick in when the majority of full-time employees are not offered premium coverage and the penalty is approximately $2000 per employee. Inadequate coverage applies when health coverage is available but it fails to meet the minimum value amount. In this case the penalty rises to around $3000 per employee.
Fines are strictly enforced, and insurance can be costly, so it is worth preparing for every eventuality. ACA is a reality, at least for now. Trying to avoid mandates could end up costing in the long run.
Providing health insurance to your full-time employees is just one of the costs to consider when running your staffing agency. Cash flow is vital, and if you find your customers paying late because you have offered them terms, or for any other reason, you may have trouble making payroll. Consider an alternative staffing agency financing option, to keep your cash flowing, and pay your staff on time.