Employees’ Classification in the Workplace Defines Benefits and Health Care Requirements under Affordable Care Act

The times they are a-changin’ and that is no more evident than with the implementation of the Affordable Care Act (ACA). The leadership of every small business and workplace has to consider the reforms and new requirements taking effect. Needless to say, small business owners with employees have a lot to think about.

The Payroll Department is ready to handle the changes that impact payroll services, but getting to that point can be confusing, especially for entrepreneurs who are more concerned with getting orders and product out the door. The Small Business Administration has established a website with a wealth of information all in one place to help small business owners, entrepreneurs and human resources professionals navigate the complexities of the ACA. According to that SBA site,

There are different categories of employers with employees:

  • Employers with Fewer Than 25 Employees
  • Employers with Up to 50 Employees
  • Employers with 50 or More Employees

And each category has its own set of key provisions. At least if you know which category you fit under, you only have to learn about that one. But how do you know?

It’s hours employees work, not labels

You have to determine how many full-time and part-time employees you actually have, as defined by the ACA.

The definition (according to the SBA) of a Full-Time Employee: an employee who is employed on average 30 hours or more per week (or at least 130 hours of service in a given month).

Included in the ACA is a provision regarding something called the Full-Time Equivalent (FTE) Employee. According to the SBA, an FTE employee is: a combination of employees, each of whom individually is not a full-time employee because they are not employed at least 30 hours per week, but who, in combination, are counted as the equivalent of a full-time employee.

–For example, two employees each of whom works 15 hours/week are added together to equal one full-time employee.

That means, for example, that an employer with 40 full-time employees and 20 part-time employees could still potentially fall under the 50 or More Employees category and have to abide by the provisions of that category.

It’s not a simple determination for employers to say they have less than 50 full-time employees. All the part-time employees must be taken into consideration and accounted for in the FTE calculation.

There has been talk circulating that employers would simply change jobs and replace full-time workers with all part-time or at least more part-time workers. With the calculation, you can see that that is not a feasible solution because it is the number of hours employees work, not the label that is put on their employment. Payroll for the workplace does not change because you need people to work a minimum number of hours to complete their jobs.

For small business owners, the employer mandate has been delayed until 2015. As a small business owner myself, I take that not to mean we have a year breather. I see it as a year to determine what the best business strategy for benefits and health care will be for each of our businesses going forward. And that gives us time to make plans with benchmarks throughout 2014 so we are ready for 2015.

-Teresa Ray, owner, The Payroll Department

Posted in: Benefits and Health Care, Operating a Small Business, Payroll, Payroll Processing, Rules, Regulations and Laws

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