You may be thinking of hiring additional seasonal help for a busy time of year. If your company employs more than 50 people (full time equivalent), you also know that, within a year, you must provide health insurance to your employees or face an Employer Shared Responsibility payment (for companies with 50-99 employees, you’ll need to provide coverage in 2016). Understandably, you might be wondering how seasonal employment affects this mandate.
Although you must follow all labor laws when you hire and employ seasonal workers, you’re under no legal obligation to offer health insurance to part-time or seasonal workers. The following takes a deeper look at important regulations related to seasonal employment.
1. Seasonal-Employee Classification
Under the Affordable Care Act, you are permitted to make a good-faith interpretation for whom to classify as seasonal-employment workers. The IRS lays out the terms on which this good-faith interpretation should be based. The legislation borrows from the Secretary of Labor definition of seasonal employees, which defines them as employees whose labor or services are contributed on a seasonal basis. In this case, seasonal means fewer than 120 days (or four months) and generally occurring at the same time each year.
2. Seasonal Employees vs. Full-Time Equivalents
The ACA differentiates the category of seasonal employees who work full-time hours (30 or more per week) from full-time employees. An employer is not considered to exceed the 50 full-time-employee threshold if the full-time-equivalent employees responsible for making the company exceed the threshold are seasonal workers and if the employer exceeded the threshold only during the time frame in which the seasonal employees worked.
3. Look-Back Method of Determining Seasonal Status
The look-back method works as follows, in order to determine the full-time status of seasonal employees:
- Identify a set time frame, between three and 12 months, for assessing the hours worked. This is the measurement period.
- Look back through the measurement period to assess the total number of hours worked by seasonal employees and whether penalties are applicable. The look-back period must be the same for all employees.
- Assess each employee’s average hours over the time period, including weeks in which the seasonal worker was not employed.
Retail workers hired for holiday events, as well as employees protected under the Code of Federal Regulations for Migrant and Seasonal Agricultural Worker Protection, are two distinct groups that are nearly always classified within the seasonal-employment category.
It is important to note, based on existing regulations, that it is unlikely for a truly seasonal employee to be considered full-time. For example, if you use a 12-month look-back period, a seasonal employee who worked 120 days over six months would need to work at least 65 hours per week to average 30 hours per week over the whole 12-month period. Likewise, a seasonal employee who worked only four months would need to work at least 97.5 hours per week for the 16 weeks he worked in order to average 30 hours per week over 12 months.
These types of calculations, as well as your discretion in establishing which months constitute the look-back period, play a significant role in how seasonal employees are classified. If you discover that one of your seasonal employees should have been considered part-time, you can avoid penalties by offering insurance to this employee going forward.
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.