Will Obamacare Be a Windfall or Downfall for Your Recruiting Firm?

It looks like the highly debated employer mandate provision of the Affordable Care Act (ACA or Obamacare) may really go into effect. Barring any last minute changes, the mandate will be effective on January 1, 2015, for certain employers. 

Employers have been preparing for this for some time. Some have instituted hiring freezes or cut employee hours to reduce or eliminate their costs under the law. Obviously, this is bad news for direct hire recruiters. Less hiring means fewer direct hire job orders. But recruiters who also provide contract staffing services could find the employer mandate to be a huge windfall.

First, let's quickly review what the employer mandate actually is. It is the provision of the ACA that requires employers with 50 or more full-time or “full-time equivalent” employees to provide health coverage to its full-time employees. The provision will first kick in for those with 100 or more employees, who must start providing coverage on January 1, 2015. Those with between 50-99 employees can delay compliance until January 2016 as long as they don't reduce their workforces specifically to qualify for the delay.

Failure to comply can result in a $2,000 penalty per employee per year. Employers could also incur a penalty if they provide coverage but that coverage does not meet the law's minimum value and/or affordability standards.

But offering coverage can be cost prohibitive, too, especially for employers that don’t currently offer health insurance. Besides the employer contributions, there are also costs associated with understanding the law and administering the benefits. 

Employers using hiring freezes, hour reductions, and layoffs to avoid the mandate risk their company's growth, productivity, profitability, and ability to attract quality workers. Some may think 1099 independent contractors (ICs) would be a better option, but the risks associated with that can be even worse. The IRS has strict guidelines for who can be an IC. If an employer is found to have misclassified ICs, they not only face the traditional fines, penalties, and back wages but once the employer mandate kicks in, they could also incur fines for failing to offer insurance to the misclassified workers under that employer mandate. 

Another safer option is for companies to use contractors who are the legal employees of a contract staffing provider (back-office). As the legal employer, the back-office is responsible for providing healthcare insurance and the cost and administrative burden that comes with it.

This is where you can turn Obamcare into a windfall for your firm. You can be the one to recruit and provide the contractors to your clients and then outsource their employment to a contract staffing back-office service. While Obamacare may result in the lost of some direct hire job orders, you can easily replace them with contract staffing job orders . . .  and enjoy the consistent income that comes with those placements.

This can also help you attract star candidates. Under the ACA's "individual mandate," most Americans must now carry health insurance that meets the regulated minimum value standard. Many catastrophic plans some ICs carry don’t comply, so they have to find an individual plan that does, either privately for through the state or federal exchanges. You can provide another option - making them a contractor who is the legal employee of a contract staffing back-office that provides ACA-compliant healthcare insurance. This allows them to continue to enjoy the variety and freedom they have as an IC along with the perks that come with being a W-2 employee.

The first step to turning the employer mandate into a windfall for your firm is to align yourself with a quality contract staffing back-office that will become the legal W-2 employer for the contractors you place.  Otherwise, YOU could be liable for ACA compliance. The back-office should be ACA-compliant and provide health coverage to your contractors.

Will Obamacare be a downfall or a windfall for your firm? By providing contractors employed through a quality contract staffing back-office, you have the opportunity to turn it into a windfall. The choice is yours!

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.

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