As the weather changes, it’s time to begin thinking about your staffing for the upcoming season. You may find that you need to hire additional employees on a temporary, seasonal basis. Under section 4980H of the Affordable Care Act, certain seasonal employers may be subject to provisions and penalties implemented through the employer mandate, a requirement that all businesses with 50 or more full-time-equivalent (FTE) employees offer health insurance to their full-time employees or pay an Employer Shared Responsibility payment on their tax return. Calculating the number of full-time equivalents to determine whether a business meets the 50-employee threshold can be tricky, especially for businesses that have seasonal employees. The following overview will help you understand when seasonal employees do, and do not, count toward full-time-equivalent employee estimates under the Affordable Care Act.
Who Qualifies as a Seasonal Employee?
Under the ACA, employers are given the freedom to make a good-faith interpretation for classifying the people among their workforce who fall within the seasonal-employee category, and there are many types of temporary-worker groups that may be classified as such. The Affordable Care Act uses the Secretary of Labor definition of seasonal employees according to the IRS. It states that seasonal employees are workers who provide services or labor solely on a seasonal basis, such as retail workers hired specifically for the holiday rush. Seasonal workers must perform job duties that are only required for part of the year and that generally happen around the same time each year, according to the Cornell Legal Information Institute. For example, while a tour guide who works only at the height of tourist season each year is a seasonal employee, a contract employee hired for a short-term project is not.
Seasonal Employees and Full-Time Equivalents
To determine whether you fall under the employer mandate, you’ll need to calculate the number of full-time and full-time-equivalent workers that you employ. If you employ 50 or more FTEs, you will need to provide affordable, minimum essential coverage to employees or you may be subject to an Employer Shared Responsibility payment.
Seasonal workers’ hours do count toward your FTE number, although you are generally not required to offer health coverage to seasonal workers no matter how many hours they work each week. Under the ACA, an exception to the above tax penalty exists for certain employers who make use of seasonal workers, according to the IRS. Thanks to this exception, an employer of 50 or more FTEs may still avoid classification as a large employer and ultimately attain exemption from paying the tax penalty.
Employers of 50 or more full-time employees are eligible for the seasonal-employee exception if, over the course of the previous calendar year, they meet the following conditions:
- Their workforce was only at 50 or more FTEs for 120 days or less.
- The only cause for the 50-employee threshold being passed was due to seasonal employees.
For example, if your travel company operates for most of the year with 40 FTEs, you will not be considered a large employer if you hire an additional 20 FTEs on a seasonal basis during the busy summer season. The seasonal-employee exception can be applied to any four-month period during the calendar year with no obligation for days or months within the period to be consecutive.
It’s important to remember that seasonal employees or workers who provide services or labor solely on a seasonal basis should only be included in the employee-threshold headcount if they worked more than 120 days during the calendar year. Otherwise, seasonal employees are exempt from inclusion for the purpose of employer classification under the ACA, according to the IRS. Employers using the “look-back method” to determine a particular employee’s status as a full-time employee should consider the time frame in which the employee worked to determine if he falls into the seasonal employee category and, therefore, is not classified as full-time.
If you’re getting ready to hire seasonal employees, it’s important for you to understand how they affect the size of your business. Ensuring that you understand when workers can be classified as seasonal will help you achieve compliance with the ACA and avoid exposing your business to unnecessary penalties.
This content is provided solely for informational purposes. It is not intended as and does not constitute legal advice. The information contained herein should not be relied upon or used as a substitute for consultation with legal, accounting, tax and/or other professional advisers.
Simon Breedon is an American journalist and is the SEO & social media manager of KP 360 Agency, Viral Marketing Monsters and SeedAsia. He is also currently the D.C. online marketing examiner for Examiner.com. In 2008, he worked as a Capitol Hill reporter for the Washington Informer, covering the Obama administration.