Will Obamacare Change Your Staffing Operations?

The House has voted more than 30 times to defund, dismantle or repeal the Affordable Care Act since President Obama signed it in March 2010. On Wednesday, in the first vote since the Supreme Court upheld the law and defined one of its key provisions as a “tax,” House lawmakers finally approved the repeal bill. Regardless, it faces certain demise in the Democrat-controlled Senate and President Obama has vowed to veto it anyway in the unlikely event it were to ever reach his desk. So let’s assume Obamacare will live on and we can continue our spirited engagement about how the law might impact staffing companies.

There has been a lot of conversation – and some confusion – in the comments section of my first Obamacare post concerning the 50 employee threshold.

Here’s how it breaks down broadly. If your business has 25 or fewer employees, you may be eligible for federal tax credits to help you buy health insurance for your workers.

If you employ 50 or more workers, and don’t provide them with health insurance, or they can’t afford the insurance you offer, you could be fined beginning in 2014.

Depending on the size of your business and the state in which you are located, you may also be able to purchase a less expensive small group policy through a highly regulated health insurance exchange.

You might see some staffing companies consider dropping coverage altogether, opting simply to pay the penalty instead.

Penalties are in place today for the misclassification of W-2 workers vs. 1099′ers, and this Obamacare threshold would certainly raise the stakes.

Seasonal employees, classified as  those who work 120 days/year or less, aren’t going to be counted under Obamacare. So do you think it 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?

Here’s another way that might play out. A full time worker is defined as someone who works an average of at least 30 hours per week for a period of one month.

That’s going to make for some clock watchers. 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 this threshold.

Of course there may be provisions passed later that could address or close some of these potential loopholes, but the point is, some end arounds are already being considered by staffing company operators. How about you?

We all know there are a lot of pressures on the staffing industry. Health insurance coverage has increased, and by some estimates will increase by 10% – 15% under the Affordable Care Act.

Premiums will go up for individuals and employers.  Costs will be passed down to clients in the form of higher rates. And costs will be passed on to workers in the form of lower wages.

Premiums will go up for individuals and employers.  Costs will be passed down to clients in the form of higher rates. And costs will be passed on to workers in the form of lower wages.

Regular Staffing Talk reader – and commenter – Steven Cary says  it becomes an issue of scale.

“The large national chains may be able to absorb those costs and the reduction in profit for long enough that the market adjusts to the ‘new pricing’. Smaller companies likely will not. The initial reaction from client companies will be one comparable to a hiring freeze until they figure out what a new hire actually costs. Then they will shop the staffing companies to compare. The nationals, buying in bulk, will be better suited to defray the costs of the bill. The smaller companies will see sales shrink, and if they are lucky, after a couple of years, the ‘new pricing’ will not be so shocking and they may be able to start selling on quality again, rather than price.”

“The large national chains may be able to absorb those costs and the reduction in profit for long enough that the market adjusts to the ‘new pricing’. Smaller companies likely will not.”

Is there a silver lining anywhere for the staffing industry? Perhaps smaller companies will consider purposely keeping their full time workforce numbers down, and then increase their reliance on the staffing industry to fill in the gaps? That’s one possible good news scenario.

Overall though, there’s not much good news when it comes to health care. Not when there are 50 million Americans without health care coverage, and costs keep going up for those who have have it as well as those who provide it.

The ranks of the uninsured today are equal to the combined populations of Oklahoma, Connecticut, Iowa, Mississippi, Kansas, Kentucky, Arkansas, Utah, Oregon, Nevada, New Mexico, West Virginia, Nebraska, Idaho, Maine, New Hampshire, Hawaii, Rhode Island, Montana, Delaware, North Dakota, South Dakota, Alaska, Vermont and Wyoming.

In so many other parts of the civilized world, the idea that government should have a central role in assuring basic health security was settled long ago.

We’re still trying to figure it out. Did we take a step forward with Obamacare? Or a step back?

Tagged as: 1099, Affordable Care Act, Congress, Obamacare, permanent workforce, Staffing Industry Laws, Staffing Industry Trends, temporary workers, uninsured, W-2 workers