New Member Promotion >>> Save $15 and get a SHRM tote!
Giving applicants with criminal backgrounds a fair chance at employment can be good for business.
Plus all the HR resources you need to be more efficient and effective this fall!
Apply for the SHRM Certification Exam and begin advancing your career.
Learn how to make the business case for diversity, October 25-27.
Staffing firms in the U.S. are struggling to comply with the Patient Protection and Affordable Care Act’s (PPACA) requirement that they provide health insurance to full-time employees or pay penalties starting in 2014.
Part of the difficulty stems from the law’s complicated provisions and the rules outlining which employees are full time. Finding and paying for health coverage for these workers also is proving challenging, several industry leaders and legal experts said in recent phone interviews with SHRM Online.
“Some staffing companies know that it’s coming and are preparing themselves; for others, it’s really overwhelming them,” said James R. Borah, senior benefits consultant at Cornerstone Group, a United Benefit Advisors partner firm.
Small Firms Likely to Get Hit Hardest
The staffing industry is among several sectors that are having a particularly tough time planning to comply with the PPACA because they depend heavily on temporary employees and those who work varying hours. Restaurants and theater chains are facing similar difficulties of providing affordable health coverage for those who will qualify for it in 2014—generally, those who work at least 30 hours per week, or 130 hours per month, for an employer with 50 or more full-time equivalent employees.
Traditionally, the staffing industry has offered limited or no benefits to temps, who, under common law, usually are considered to be employees of their staffing firms rather than of the companies to which they are assigned to work for weeks or months at a time. Now, the PPACA and associated regulations will require staffing firms to treat temps who meet the 30-hours-per-week threshold as full-time employees for health-coverage purposes.
Failure to provide health insurance to these "full-time employees" will result in an annual fine of $2,000 per worker. Some companies are considering absorbing that penalty instead of offering insurance. However, experts urge executives not to assume this is the best solution. The fines will not be tax-deductible, whereas employer-paid health premiums are. And not every employee offered a health plan decides to participate in it.
“Small firms should be looking hard for coverage to avoid that $2,000 penalty,” advised James A. Essey, president and CEO of TemPositions Group of Companies in New York.
Selecting a Strategy
Determining the best strategy involves many assumptions and factors. “That analysis is going to vary from staffing firm to staffing firm,” said Edward A. Lenz, senior counsel for the Alexandria, Va.-based American Staffing Association.
Experts say staffing firms have two primary decisions to make in the coming months if they intend to comply with the PPACA’s coverage mandate:
But there's another penalty to keep in mind: Like other employers with 50 or more full-time equivalent employees, staffing firms whose health care plan is not considered “affordable” under the PPACA will face a $3,000 fine for each worker who obtains coverage through one of the pending exchanges and receives a premium subsidy from the government for that coverage.
Staffing companies might consider a hybrid strategy of offering health coverage to only some of their full-time employees, leaving others to seek insurance through an exchange, said Ben Elliott, managing director and CFO of staffing firm Randstad USA.
Making a Good-Faith Effort
Compliance mistakes by staffing firms will be inevitable, especially at first, experts agree. “Build a documentation trail to demonstrate a good-faith effort to comply,” advised A. Kevin Troutman, chair of the national health care practice at the law firm Fisher & Phillips in Houston.
Some large staffing operations that provide long-term professional assignments, especially for IT specialists, have been offering health coverage to temps for years and might not be significantly affected by the PPACA. But smaller staffing companies could be hit hard. Many of these firms are expected to pass on much—if not all—of their added health care costs to their client firms.
“They are going to have to,” said Borah. “The margins have always been pretty tight in the staffing world.”
Selecting, Partnering with Brokers
Meanwhile, insurers are still determining what health plans to make available to staffing firms. “Insurance companies are just starting to dip their toes in the water,” said Elliott. Experts urge staffing firms to collaborate with their brokers on finding coverage that works for them.
“There are going to be some sweet spots for employees and some sweet spots for employers,” Elliott noted.
Finding the right broker is crucial, said Troutman. “You need people you can trust and who will stick with you through this process.”
Some regulatory details have yet to emerge. “Keep in the loop of upcoming guidance” from the government, suggested Tom Mehl, vice president of operations at workforce management firm Populus Group, during a May 16, 2013, webinar. “And learn how other staffing organizations are handling the transition.”
In some staffing organizations, health coverage decisions are being handled by the C-suite, but HR professionals should “make sure they know what the issues are,” said Alden Bianchi, benefits practice group leader at the law firm Mintz Levin in Boston.
Certain client companies are expected to cut back on full-time employees and replace them with temps who work less than 30 hours per week. Others will cut hours for internal temps to get them under 30 hours.
Staffing firms are being cautioned not to help any client evade the PPACA’s requirements. “The staffing industry is absolutely committed to compliance,” said Lenz.
Steve Bates is a freelance writer in the Washington, D.C., area and a former writer and editor for SHRM.
SHRM Calls for Flexibility in Applying Health Care Mandate,SHRM Online Benefits, March 2013
Proposed Rule Clarifies Employer Mandate Calculations,SHRM Online Benefits, January 2013
Coverage 'Threshold' Causes Concern,SHRM Online Legal Issues, January 2013
Two New PPACA Affordability Safe Harbors Proposed,SHRM Online Legal Issues, January 2013
Guidance on Full-Time Employees, 90-Day Waiting Period Limit,SHRM Online Benefits, September 2012
Challenges for Industries Reliant on Part-Timers,SHRM Online Benefits, August 2012
SHRM OnlineStaffing Management page
SHRM OnlineHealth Care Reform Resource Page
Keep up with the latest Staffing Management news.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
The application deadline is November 11
SHRM’s HR Vendor Directory contains over 3,200 companies