One hot button issue in the employee benefits arena is how the Patient Protection and Affordable Care Act will impact temporary staffing agencies and employers who utilize their services. Although the IRS, Treasury and the Department of Labor have issued some guidance addressing the specific healthcare reform issues faced by temporary staffing agencies, a workable fix for this industry remains elusive. The million dollar question (literally) is which entity is responsible for offering coverage? The temporary staffing agency, or the recipient organization?
When employer shared responsibility penalties kick in in January 2014, employers with more than 50 full time equivalent employees must offer minimum essential coverage to employees working an average of 30 hours per week, or 130 hours per month. Absent an offer of coverage, these employers may face hefty tax penalties. But what about an employer who receives a portion of its workforce from a temporary staffing agency? Aren’t these individuals employees of the staffing agency? Under the employer shared responsibility regulation, this may not be the case. The employer shared responsibility proposed regulations published in the Federal Register January 2, 2013, provide that employers are responsible for either (a) providing coverage, or (b) paying penalties for their common law employees. While the temporary staffing agency may be the employer of record for payroll and employment tax purposes, the employee may be the common law employee of the recipient organization.
This is an important distinction both for temporary staffing agencies and their clients. An offer of coverage by the staffing agency to its staffers may result in increased service agreement prices for clients of the staffing agency, as the staffing agency will likely either pass through the cost of the insurance, or the projected cost of penalties. Clients of staffing agencies unaware of these regulations and the potential impact on their own organization may be surprised to learn that the number of common law employees employed is much larger than previously thought – and with a failure to act, may result in significant financial consequences.
For more information on the particular issues faced by staffing agencies, as well as the factors the government may consider in determining which employees are common law employees, see HCW’s May Eyes on Benefits newsletter.