Do Staffing Agencies have to offer Health Insurance?

Staffing agencies undergo many changes yearly but sometimes carry employees for an extended period. Many will work for your insurance agency, and you must guide them. Likewise, you need to be aware of the constant changes in regulatory responsibilities for your clients. In particular, staffing agencies must worry about how the Affordable Care Act could impact their hiring and benefit practicing and any potential consequences with the IRS.

Are Staffing Agencies Direct Hire Companies?

Part of answering whether a staffing company is responsible for providing health insurance to its hires is determining whether or not the agency is the employer. It depends on whether agencies contract the employees to other companies for a commission or if the agency pays the employee directly.

With direct hire, the agency is the employer. If it’s a situation where the agency brokers an arrangement for the company, like a recruiter for a fee, the company paying the salary is responsible for healthcare compliance.

The next element to determine is whether the agency operates by staffing direct hire or acts as a temporary hire organization. Since the ACA requirements apply depending on the factors like the number of full-time employees at the company, this element is essential.

What Are the Requirements for Providing Health Insurance?

When the agency operates as a placement company, the full-time employer is the client. If the agency isn’t acting as a placement company, the ACA applies depending on how many full-time employees are on the payroll. The law requires companies with 50 or more full-time to offer healthcare benefits to any employee who works an average of 30 hours a week or more.

With a direct-hire agency, the individuals work as full-time employees for the company though they may work part-time hours at various locations depending on the client contract. It can complicate how to determine who is eligible for healthcare benefits. The company must take an average of the employee’s hours worked to determine whether it has met the 30 hours-a-week tally. 

What Kind of Staffing Insurance Program Meets ACA Requirements?

Under the ACA, staffing agencies meeting the criteria must provide a health insurance benefit. For most placement companies, staffing agency benefits vary according to permanent office and administrative staff or employees hired on a temp or placement status.

Although there is an allowance for employees in the variable category where the hours are fluid, the IRS is highly critical of agencies who classify employees as variable hour employees when the positions or assignments with a particular client often end up as full-time positions. Withholding benefits in the initial stages of the contract could lead to negative IRS consequences.

Penalties for non-compliance have two components. Someone could find this in Section 4980H(a) and Section 4980H(b). These impose fines on a company depending on the circumstances.

How Can You Help Staffing Agencies With Healthcare Compliance?

As you work with your clients on insurance protections, you can also guide how to plan for ACA compliance and prevent unwanted IRS consequences. Staffing agencies must carefully examine their documentation to distinguish between part-time and total employees.

About World Wide Specialty Programs

For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.