Answers to Critical Obamacare Questions for Staffing Firms

The good news for staffing firms regarding the Patient Protection and Affordable Care Act (PPACA), or Obamacare, is that it has the potential to push more companies toward contract staffing. Under the employer mandate, companies with 50 or more employees will have to provide healthcare insurance to them in 2014. By utilizing contractors who are the employees of a back-office or a staffing firm, smaller companies can keep from going over the 50-employee threshold.

But while all staffing firms may be eager to take on the added business, larger firms may have their own concerns about the PPACA. Here are some common questions staffing firms are asking and answers that we have compiled with help from our insurance broker and the American Staffing Association.

Does my firm have to provide health coverage under the employer mandate?
All employers with 50 or more full-time or "full-time equivalent" W-2 employees must provide coverage. This includes staffing firms. To determine your full-time equivalent number, divide the hours of non-full-time employees in a month, including overtime, paid time off, and holidays, by 120. The number calculated must be added to the number of actual full-time employees to determine if a company falls above or below the 50-employee threshold.

How can I avoid having to provide coverage?
You could limit the number of contractors you take on to ensure you don't have 50 or more employees, but that means you may have to turn away business. Another option is to outsource the employment of a select group your contractors to a contract staffing back-office, such as Top Echelon Contracting. Because the back-office becomes the legal employer of the contractors, they are responsible for PPACA compliance and providing coverage, not you. This would allow you to take on as much contract staffing business as you want without worrying about the 50-employee threshhold. For example, we've experienced situations where a staffing firm employs all of their contractors who live and work in their own state but outsources the employment of contractors who have assignments in other states.

Can I create divisions or separate firms to stay under the 50-employee threshold?
No. Companies and divisions under common ownership are considered to be one company under the law. Therefore, employees in all of the companies or divisions under the common ownership will be counted.

Who is the employer for the purpose of offering coverage: the staffing firm/back-office or the client company?
Common law determines this. If you pay the contractor as a W-2 employee and assume the employer responsibilities, your firm would be considered the employer and would be responsible for providing coverage.

Who is the employer for purpose of offering coverage if a recruiter/staffing firm OUTSOURCES the back-office?
Again, common law dictates this. If you outsource the payroll and other employment duties to a contract staffing back-office and they pay the contractor as a W-2, they would have to comply with the law and provide coverage, if required.

This article is for informational purposes only and should not be construed as legal advice.

Debbie Fledderjohann is the President of Top Echelon Contracting, Inc.

Comment by Jeff Dahlberg on April 8, 2013 at 1:11am: LeveragePlus Organization offers a little more affordable alternate solution to those who see to keep more control over their employees through the use of a professional employer organization. Much like a back office set-up the PEO handles payroll administration, and creates a co-management employment relationship. the major difference is that the PEO allows the staffing agency to keep far more of the profits. PEO's do not take away the responsibility to providing insurance however for those already above the 50 employees PEOs usually provides a better solution.

Back office companies do provide an awesome optipon for smaller staffing companies who can not afford to put into place a professional staffing structure. They also offer as the author stated insurance options and a payroll solution with legal and HR assistance much like the PEO.

Both are worthy solutions that anyone calling themself a staffing professional should become educated as it could be the difference in increasing the bottom line and going out of business. Each usually have lawyers, human resource professionals and workforce safety on staff to figure out complex situations like ACA which would become a financial burden on small staffing agencies.

I wouild encourage any staffing agency to look into both of these options. as an improvement in your tools.