Article courtesy of SBAM Approved Partner AdvanceHR
Seasonal workers can give you a lifeline to survive crunch periods like the upcoming holidays. But it’s wise to consider the implications carefully and not cut any corners in the hiring process. Some federal employment and employee benefit rules apply to seasonal workers, and others may not. If you are getting ready to hire for the holidays, keep these rules in mind, along with a few practical management tips.
If your business traditionally picks up during the last quarter of the year, you may be accustomed to hiring seasonal help to augment your staff. Record numbers of people are out of work right now, and hoping to find at least temporary employment during the busy holiday season. This means the pool of applicants will be large. The competition for the best employees is always tight, but don’t let that cause you to rush. This year, with the Affordable Care Act looming just over the threshold of the new year, there’s more to consider than usual. So don’t hire too quickly. Take a breath and look before you leap.
Full-Time, Part-Time, Seasonal … Rules are Rules
Keep in mind, all the federal anti-discrimination and occupational safety rules apply equally to full-time, part-time and seasonal workers. The same is true for Workers’ Compensation and FICA. States often have additional requirements — don’t neglect to find out whether they apply to you.
The rules are a little murkier when it comes to eligibility for Family Medical Leave Act coverage. This law’s applicability depends on the degree to which you are truly acting as an employer, exercising the same control over these workers as you would over a regular full-time employee.
But hiring seasonal workers may impact whether you will be subject to the “shared responsibility” provision of the Affordable Care Act, which is also called, play-or-pay. Although the Affordable Care Act technically takes effect in 2014, the “pay” penalty for not “playing” was pushed back to 2015, so few small employers will worry about the requirement until then.
Will Seasonal Workers Make You a “Large” Employer?
For small employers who are close to the threshold of being considered a large employer, this is a question which can’t be ignored. The employer mandate, of course, applies to companies with at least 50 full-time equivalent (FTE) employees. In addition, any set of part-timers whose collective hours worked total 30 per week is counted as an FTE. The tricky part is determining whether your use of seasonal workers during the 2013 holiday season will impact whether you meet the large employer definition during the 2014 “look-back” period.
At the beginning of 2013, the IRS proposed rules spelling out how to determine who is considered a full-time worker. The law itself set the threshold at 30 hours per week or 130 hours a month, but the regulations add the fine print to the Affordable Care Act.
Although those regs have yet to be finalized, you might consider relying on the proposed version until the final version is published. And if the final regulations are more restrictive, they will only take effect after they are published. Whatever you decide, it’s important to consult with your professional advisers for help in setting your hiring policies.
Here are some highlights of the regulations:
- The 30/130 hours requirement described above includes paid vacation, holiday, incapacity, layoff, jury and military duty. Naturally, you may elect not to provide paid vacations or holidays to temporary workers.
- You have three ways to count the hours of salaried employees: 1) adding up the actual numbers they worked, 2) using a “days worked” method which assumes one day equals eight hours, or 3) a similar “weeks worked” method which assumes 40 hours were worked. However, if using either of those formulas would substantially understate their hours (that is, they were actually working much longer hours), those methods could not be used.
- New “safe harbor” definitions were also spelled out in the proposed regulations, which employers may use instead of the other methods.
Those rules help determine when you have hit the 50-employee threshold, and if so, which workers you will be required to provide with health benefits. A separate set of look-back rules is used to determine individual employees’ full-time status.
FTEs and Determining Your Mandate Status
You may have 50 FTEs, but only 10 bona fide full-time employees. In this scenario you would be required to provide health benefits only to the ten, or face the penalty. This is because, as noted, the hours of part-timers are combined to determine how many FTEs you have on a monthly basis. Your monthly FTE numbers are averaged over the entire prior year (that is, 2014 for purposes of determining the obligations you’ll face in 2015). Learn more by logging onto the Small Business Administration website to view this useful slideshow.
Seasonal Worker Exception
The Small Business Administration points out if your company is determined to have at least 50 FTEs employees for 120 days or fewer during a calendar year “solely due to seasonal workers,” you are not subject to the play-or-pay rule.
Whether or not seasonal employees will impact your size for purposes of the Affordable Care Act employer mandate is hardly the only consideration you would weigh in any hiring strategy decision. The Small Business Administration offers pointers on the practice. Here are a few highlights:
- Get a jump on your competitors by posting your seasonal job openings earlier so you will have the largest and best pool of applicants to choose from.
- Weed out unqualified applicants efficiently by having them complete a questionnaire, asking about issues most critical to your hiring decision. For example, how many years of experience applicants have working in your business sector.
- Don’t skimp on training seasonal workers. Not only do you need to ensure their productivity now, but you should be prepared for the possibility you might want to give them full-time status either after the seasonal period, or some time down the road.
If seasonal workers will have access to sensitive business information, have each of them sign a non-disclosure agreement.
Consider using a temp agency to find qualified seasonal workers if you lack the time or resources to conduct the vetting and hiring process yourself.
Bringing in extra help to fill your end-of-year labor gap may be second nature to you by now. But this year with the implications of the Affordable Care Act so close, it’s more important than ever to slow down, especially if you hope to keep some of those temp workers on after the new year begins. Take a little time to talk this over with your professional advisers.
A Tax Credit for Hiring?
You may have heard of the Work Opportunity Tax Credit (WOTC). Yes, it is still available if you hire before the end of the year.
The government promotes it as “money back for employers who hire good people who face a challenge getting a job.”
How much is the credit?
- The credit ranges from $1,200 to $9,600 for each eligible hire.
Who qualifies?
- veterans
- summer youth employees
- ex-felons
- members of a family which has received temporary assistance or food stamp benefits
- certain people with disabilities who receive SSI benefits or who are getting vocational rehabilitation
- people who live in certain low income communities.
Who does not qualify?
- relatives and dependents of the employer
- majority owners of the business
- current or former employees, regardless how long it has been since the individual has worked for the employer
To get a WOTC for a certain individual, you must apply before you make the job offer.
If the job will total less than 120 hours of work it will likely not result in a WOTC. This is because part of the paperwork cannot be submitted until 120 hours of work have been completed.
Find out details and get help with applications by logging onto doleta.gov/wotc.