One of the hottest topics in the staffing world this year has been the impending effects of the Affordable Care Act (ACA) on big business. Earlier this year, I was asked to advise some of my senior leaders on the impact of the ACA on our non-employees after swirling rumors of rate increases, penalty fees for misclassification, etc. I collected information from various webinars and conducted my own research, then presented to our leadership team and made my recommendations. I broke it down into two categories:
1.) The impact of the ACA
2.) How we are looking to Beeline for help
Responsibility: The Affordable Care Act is confusing enough, but it is really hard on the Contingent Staffing world and non-employee arrangements. There is an increased risk related to worker misclassification; if a worker is not properly classified as a contingent worker—whether it is a temporary worker, outsourced worker, or someone providing services through a statement of work—there is a possibility that their engagement could be construed as employment. If their engagement is determined to be an employment relationship, Southwest Airlines would be subject to compliance with the act and associated penalties. Many co-employment mitigation strategies discuss misclassification and can be used to assess this situation.
Most of us have heard from the Supplier community that they are going to have to raise the rates by $5.00-$10.00 per hour. Before you agree to anything, there are three really big questions that you need to ask your suppliers:
They are only required to cover full-time employees (FTE) which means they have to work 1560 (39 weeks @40 hours per week) in order to qualify. Let’s think about this one:
Did the Contractor opt out of the supplier’s plan b/c they are covered elsewhere? According to the Department of Labor, about 50% of temporary workers are covered under spouse or parent plans.
Many Suppliers already provide a healthcare option for their contractors especially in the Professional or Managed service space. However, you see it a lot on the staff-augmentation side. In many cases this cost is already factored into their margin and rate which means you shouldn’t see any increase.
If the supplier wants to increase their rates to cover their new costs, you need to know how they came up with the amount.
So this is the last big question, if the contractor meets the requirements to be considered a FTE of the supplier and there is an additional cost to them, how much should be passed along to you? Let’s keep this simple, how much of contractor’s time has been spent on an assignment for you. Figure that out and then work out a formula to estimate the cost.
My strategy on this is to require any supplier wanting to increase their rates to prove at the end of the year:
A huge fear I have with the ACA is that some are predicting the IRS will change their definition of what constitutes an “Employee” for a company, changing it to focus on where the individual actually performs the majority of their work. For example, a temporary worker that is on assignments at company for over 1,560 hours in a year would be considered an employee of that company, for ACA purposes. The IRS might not necessarily make the company add them to their benefits plan, but they could be expected to pay penalty fees in order to cover them.
System of record for all non-employees—I am a big advocate of utilizing the VMS in this way. Beeline has been able to support that with the Resource Tracking solution. So now, we have visibility to everyone and can report on who is NOT our employee.
Supplier coverage acknowledgment—I am going to ask Beeline to create a required field that suppliers must acknowledge whether they are covering their Contractor for ACA. We do something similar in the onboarding field for exempt/non-exempt. I think this is a great way to utilize the tool and have a “record” of coverage from their supplier.
Classification of Workers – Detailed worker classifications are fully supported in Beeline, so we can assess risk for each type of worker in each labor category at the most granular level.
Tenure by Worker (not assignment) – We can quickly identify and automatically manage our highest risks based on tenure because Beeline is the only VMS that offers tracking tenure at the granularity of the worker. Essentially, we can automate business rules, alerts, warnings, and escalations related to the Affordable Care Act. Other VMSs providers only offer limited reporting to consolidate details and require manual evaluation of risk.
Risk Dashboards – We can track and monitor compliance to our strategy across all recommended dimensions: tenure, assignment length, hours worked, type of worker, and even supplier. Beeline’s configurable workflows and dashboard capabilities enable us to enforce our strategy and then monitor and track compliance to 30-hour per week time limits, and annual 1560-hour restrictions by labor category and by type of worker. Key Performance Indicators (KPIs) can be created to identify how many workers are at risk at any given time.
As much as we prepare for the impact the ACA will have on our non-employees and ultimately our organization, any pre-identified solutions need to allow for flexibility. It has been helpful to understand what other companies are doing to prepare and how they are engaging with their suppliers. At this year’s Beeline Conference there will be intimate round table discussion on this topic. The Beeline Advisory Council will also be launching a whitepaper to help provide insight and guidance into the effects of the Affordable Healthcare Act. For more information, visit beelineconference.com