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Could “Obamacare” Increase the Demand for Contractors?

Debbie Fledderjohann November 8, 2013

July 24, 2012

Like it or not, it looks like the Patient Protection and Affordable Care Act (PPACA), otherwise known as “Obamacare,” is here to stay. Even if the upcoming election is a Republican landslide, experts say it is unlikely that the healthcare reform will be completely repealed.

One of the upcoming provisions that is worrying employers the most is the employer mandate. Under this provision, employers with 50 or more full-time employees will be required to provide affordable healthcare insurance or pay a $2,000 annual penalty on each employee, minus the first 30 employees.  Even if they do offer insurance, they could be subject to penalties if the coverage is “unaffordable,” meaning that it costs more than 9.5% of an employee’s income or the employer pays less than 60% of the premiums. And if they do offer coverage, their plan will be subject to new taxes and requirements under the PPACA that will increase their costs and administrative burden.

Even though the mandate won’t take effect until 2014, employers are already looking for ways to avoid these costs.  Some may shift some of their full-time employees to part-time to get below the mandate’s threshold.  Others may be tempted to classify workers as 1099 Independent Contractors, but since there has been a crackdown on worker misclassification at both the state and federal levels, this isn’t the wisest choice.

Some business owners are even considering breaking up their companies into smaller businesses to get around the employer mandate, according to a recentCNNMoney article. But since the employer mandate looks at the total number of workers employed under common ownership, that also is not a viable option.

One possible solution is utilizing contractors who are W-2 employees of a recruiter or a contract staffing back-office.  In this scenario, it doesn’t matter how many hours the contractor works because they will be counted as an employee of the recruiter or back-office, not the company.

The demand for these types of positions has already surged since the recession due to economic uncertainty, employers’ desire for a flexible workforce, and increased employment regulations. In fact, according to the American Staffing Industry, temporary/contract positions accounted for 91% of job creation between June 2009 and June 2011.

Only time will tell if Obamacare really affects the number of contractors in the workplace, but as employers try to contain their costs, contract staffing offers a viable solution.  You will want to be sure that you are able to provide contractors so that you can be a sole-source provider to your clients, able to handle ALL of their staffing needs. But keep in mind, if you have more than 50 contractors and you run your own back-office, you will be subject to the employer mandate and will either need to offer insurance or pay the penalty. If you outsource to a contract staffing back-office, the contractors will become their W-2 employees, so the back-office, not you, will be responsible for complying with PPACA.

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

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One comment on “Could “Obamacare” Increase the Demand for Contractors?

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