Do Temporary Employees Get Benefits?

Employers develop benefit plan structures to support budget requirements, as well as the needs of their workforce. In terms of benefit and insurance costs, employers must consider which of their employee populations will receive benefits—the more employees that are eligible for benefits, the higher the costs. Legal requirements and compliance also drive which populations to which employers offer benefits.

To Whom Do Employers Typically Offer Benefits?

It’s common practice for employers to offer benefits to regular full-time employees and not offer them to part-time employees. Questions often come into play, though, regarding seasonal and temporary full-time employees. Where it’s generally clear that employers are not required to offer benefits to part-time employees, are employers required to offer benefits to temporary and seasonal full-time employees?

What Defines a Temporary Full-Time Employee?

According to the IRS, temporary full-time employees work at least 30 hours per week, or 130 hours per month, and are hired into a job for under 12 months. The Affordable Care Act (ACA) calls those who are temporary full-time employees short-term employees.

Do Temporary Employees Get Benefits?

Several factors impact whether a temporary full-time employee receives benefits. The size of the organization, whether the employee is paid or unpaid, and whether they are variable-hour or seasonal workers impact whether you’re required to offer benefits to temporary full-time employees.

Other factors that impact employee benefit eligibility are state and local laws and the type of benefit offered. Unlike federal laws, some state and local laws require employers to offer all employee categories—part-time and full-time—the same level of benefits, depending on the benefit type. Sick leave, for example, is mandated for all employees regardless of the category in some states.

In many instances, if they meet the 30-hour-per-week threshold, temporary full-time employees are eligible for the same benefits as regular full-time employees. According to the ACA, applicable large employers (ALEs) with 50 or more employees are required to offer benefits to any class of full-time employees. Employers with less than 50 full-time employees might also need to comply with ACA benefit requirements to avoid penalties. Essentially, the IRS prevents exemptions for penalties for short-term, variable-hour, and seasonal employees unless specific requirements applicable for each type of employee are met.

Note: Independent contractors are not considered employees under the ACA, so employers are not required to offer them benefits.

Seasonal Employees and Variable-Hour Employees Defined

Seasonal Employees

Seasonal employees are hired to work a specific part of the year, such as during the Christmas holiday or summer months, and their employment is projected to last less than six months.

Variable-Hour Employees

Variable-hour employees can be deemed variable-hour if the employer is unsure if they’ll work full-time hours at the time of hire.

Seasonal Employees and Variable-Hour Employee Benefit Eligibility

Seasonal Full-Time Employees

Employers need to use the initial measurement period to determine if seasonal employees are eligible for benefits, even if they work over 30 hours weekly. A status can be assigned to a new seasonal employee using the following look-back method:

1.      Use a look-back measurement period, like six or 12 months, to calculate the average weekly hours worked and assign a status to the employee.

2.      For a subsequent stability period that spans several months, lock in the employee’s status, regardless of the hours worked on average during the defined stability period.

Variable-Hour Full-Time Employees

To determine which variable-hour employees are eligible for benefits, employers should use the look-back method mentioned above.

Interns and Temporary Workers

Temporary workers and interns could fit into the variable-hour or seasonal employee category, which would require using the same methodology to determine if they’re eligible for benefits.

Pro Tip: Since it’s not always straightforward or clear-cut, it’s best for employers to consult an insurance or employee benefits broker or legal consultant to determine how to properly categorize employees.

At What Point Do Employers Need to Offer Temporary Full-Time Employees Benefits?

According to the ACA, employers have a 90-day waiting period before they have to offer full-time temporary employees benefits. To take this approach, employers need to create a temporary worker or intern category specific to this group. For employees that employers know will work at least 30 hours per week, they should offer them insurance benefits from the time of hire to avoid penalties.

It’s possible for employers to take three to 12 months from the hire date and use the look-back method before offering benefits. However, if the employer knows the employee will work at least 30 hours weekly, they need to offer them benefits during that period or from their hire date. Employers that fail to offer benefits to seasonal employees during the initial measurement period, though, even if they are working 30 hours or more weekly, are typically not liable for ACA fines and penalties.

Since large employers have the ability to establish separate employee classes for temporary workers with a 90-day waiting period, they have the flexibility to wait a bit before offering benefits to clarify who will or won’t fall under the eligible category. Many temporary employees end up leaving the organization prior to becoming eligible for benefits, so the employer will be safe and not incur any penalties and fines for non-compliance.

What Are ACA Penalties for Non-Compliance?

If you’re an ALE and do not offer the minimum essential coverage required under the ACA to 95% of your full-time employee workforce, it carries a hefty penalty of $2,500 annually for every employee. The fine is $3,750 annually per employee if you meet the 95% threshold but still don’t offer coverage to certain categories of eligible workers.

What Are the Requirements if You’re Not an Applicable Large Employer (ALE)?

Employers that are not considered ALEs under the ACA still need to remain in compliance with state and local regulations to determine who is eligible for benefits within their workforce. Some questions to consider include:

·        What are our organization’s provisions for benefit eligibility, and do full-time temporary workers meet those requirements?

·        Do our benefits programs have exclusions for seasonal, interns, variable-hour, or other temporary workers?

·        What are our local and state laws regarding benefits eligibility?

Key Takeaways: Do Temporary Employees Get Benefits?

·        It’s common practice for employers to offer benefits to regular full-time employees and not offer them to part-time employees.

·        Employers need to determine if their full-time temporary employees are eligible for benefits similar to their regular full-time employees.

·        According to the IRS, temporary full-time employees work at least 30 hours per week, or 130 hours per month, and are hired into a job for under 12 months.

·        The size of the organization, whether the employee is paid or unpaid, and whether they are variable-hour or seasonal workers impact whether you’re required to offer benefits to temporary full-time employees.

·        If they meet the 30-hour-per-week threshold, temporary full-time employees are typically eligible for the same benefits as regular full-time employees.

·        Unlike federal laws, some state and local laws require employers to offer all employee categories—part-time and full-time—the same level of benefits, depending on the benefit type.

·        According to the ACA, applicable large employers (ALEs) with 50 or more employees are required to offer benefits to any class of full-time employees.

·        Employers with less than 50 full-time employees might also need to comply with ACA benefit requirements to avoid penalties.

·        The IRS generally prevents exemptions for penalties for short-term, variable-hour, and seasonal employees unless specific requirements applicable for each type of employee are met.

·        A status can be assigned to new seasonal and variable-hour employees using the following: 1) Use a look-back measurement period, like six or 12 months, to calculate the average weekly hours worked and assign a status to the employee, and 2) for a subsequent stability period that spans several months, lock in the employee’s status, regardless of the hours worked on average during the defined stability period.

·        If you’re an ALE and do not offer the minimum essential coverage required under the ACA to 95% of your full-time employee workforce, it carries a hefty penalty of $2,500 annually for every employee.

·        The ALE fine is $3,750 annually per employee if you meet the 95% threshold but still don’t offer coverage to certain categories of eligible workers.

·        Employers that are not considered ALEs under the ACA still need to remain in compliance with state and local regulations to determine who is eligible for benefits within their workforce.

·        Due to the complexities of the process, business leaders and human resources often work with an employee benefits or insurance broker, legal counsel, and benefits administrators to understand how to categorize their employees for benefits eligibility properly.

Benefits Brokers Can Help Define Employee Categories and Eligibility

Categorizing employees can be a complex process, which is why business leaders and human resources choose to work with an employee benefits or insurance broker, legal counsel, and benefits administrators to understand how to properly categorize their employees to remain in compliance.

KBI’s team of expert brokers is standing by to help. Contact us today for more information.