Do you think you have some ideas about how staffing agencies might circumvent Obamacare once it comes into law? Think again, says the IRS, they're already a couple of steps ahead of you.
When I wrote this post last June about a staffing agency owner who claimed Obamacare might force him to shut down his business, it inspired lots of comments from readers about how staffing agencies - and others - might try to circumvent it.
The Internal Revenue Service (IRS) must have been reading too, because the agency recently issued a 144-page notice stating how they intend to enforce the employer mandate rules.
Just to remind you, when most major provisions of the Patient Protection and Affordable Care Act are phased in next year, firms employing 50 or more people on a full-time basis, that don't offer a plan at all, or don't offer "affordable" (defined as costing an employee no more than 9.5% of their total household income) health insurance coverage, will have to pay a penalty for every employee who isn't covered or who opts out of the employer coverage and gets insurance through the state.
Seasonal employees, classified as those who work 120 days/year or less, aren’t going to be counted under Obamacare. I posed the question in this post about whether this will set up a scenario where some staffing company owners are simply going to try and play the numbers game. And hire more people for less time in a given year.
I talked to one staffing company owner who said he will consider taking a worker who is doing a perfectly good job, and who otherwise would be working continuously, and idling them for one week out of the month so they wouldn’t meet the full-time threshold.
The IRS didn't address that possibility specifically, but they did speak to some other possibilities.
“The Treasury Department and the IRS are aware of various structures being considered under which employers might use temporary staffing agencies (or other staffing agencies) purporting to be the common law employer to evade application of section 4980H,” says the recent IRS notice.
"The Treasury Department and the IRS are aware of various structures being considered under which employers might use temporary staffing agencies (or other staffing agencies) purporting to be the common law employer to evade application of section 4980H."
The IRS outlines two particular ways in which employers might try to circumvent the mandate.
Under scenario one, an employer might hire an employee directly for 20 hours a week, use that same person through a staffing agency for an additional 20 hours per week, but not classify them as a full-time employee.
Under the second scenario, an employer might not hire the individual directly at all, but instead might hire them through more than one staffing agency, again getting full-time work, but avoiding having them considered a full-time employee of either the employer or any of the staffing agencies.
Here is the IRS response to those two scenarios.
“It is anticipated that the final regulations will contain an anti-abuse rule to address the situations described” above.
IRS warnings aside, Jim Cramer, the host of CNBC's Mad Money, said here companies are nervous about the looming new law.
That's why businesses of all sizes are now searching for ways around the law and the easiest way to avoid paying these expenses is to hire more temps.
"That's why businesses of all sizes are now searching for ways around the law and the easiest way to avoid paying these expenses is to hire more temps," Cramer said. "Since most temp assignments are just three to four months long, the temp agencies are unlikely to get hit with the full brunt of the law."
In fact, Cramer actually goes so far as to predict a bull market for staffing companies and recommends buying stock in publicly held staffing companies such as Robert Half.
So it looks like Obamacare is a comin.' Predictions on whether it will be a boon - or a boondoggle - for staffing companies?