First off, once an employer has determined their ALE status for the current year, the term “Full-time Equivalent” is no longer used. Employees are Full-Time either from a declaration at hire or completing a measurement period as Full-Time. Let’s talk about the hiring process done by Human Resources or any company recruiter. When a new employee is hired, it is incredibly important to make sure that both the recruiter and new employee understand the type or reason for their hire – basically what sort of employee are they? This very well may come down to the way the position was advertised and the new hire’s expectations walking in the door.
When considering the Affordable Care Act, employees will fall into one of four hired positions: Full-Time, Part-time, Variable Hour, or a Seasonal employee. The recruiter should adhere to the following logic:
⦁ Are you reasonably sure that the employee will work more than 30 hours per week?
⦁ If Yes, this employee should be declared Full-Time
⦁ Are you reasonably sure that the employee will work less than 30 hours per week?
⦁ If Yes, this employee should be declared Part-time
⦁ Is the employee being hired to help manage a busy season? (A season should be a time frame that repeats, year after year such as a harvest or holiday)
⦁ If Yes, this employee should be declared Seasonal
⦁ Are you reasonably sure that the employee’s hours will not be stable? (Sometimes above or below 30)
⦁ If Yes, this employee should be declared Variable Hour
*Please make note that the length of employment or temporary assignment was not part of the consideration made. The ACA explicitly states that employers must be prepared to provide sufficient documentation for why employees were hired, if requested by the IRS.
While on the topic of new hires, it’s important for employers to know the changes to traditional orientation periods. Often called waiting or probationary periods after being hired, to the ACA this is commonly known as a bona fide new hire orientation. The IRS has stated that if this period of time does not exceed 30 days, they won’t look twice or question it; however, some employers may choose to have a longer program. Make sure there is adequate documentation, just in case.
Aside from the four types of employees at-hire, there are a multitude of other employee classifications, the most pertinent to the ACA is the Common Law Employee. If the employer has the right to control the employee’s schedule and work environment, they are the employee’s Common Law Employer.
Some other employee classifications:
⦁ Non-Employees
⦁ Sole Proprietor
⦁ A partner in a partnership
⦁ S Corporation shareholder who owns at least 2% of the S Corp
⦁ A leased employee
⦁ Independent contractors (1099 Employees)
⦁ People such as doctors, veterinarians, and auctioneers who follow an independent trade, business, or profession in which they offer their services to the public, are generally not employees
⦁ The general rule is that an individual is an independent contractor if you, the person for whom the services are performed, have the right to control or direct only the result of the work and not the means and methods of accomplishing the result
⦁ Statutory Employees
⦁ A driver who distributes beverages, meat, vegetable, fruit, or bakery products
⦁ A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts for one life insurance company
⦁ An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name
⦁ A full-time traveling or city salesperson who works on your behalf and turns in orders to you from retailers or contractors
⦁ Statutory Nonemployees
⦁ There are three categories of statutory nonemployees
⦁ Direct Sellers
⦁ Licensed Real Estate agents
⦁ Certain companion sitters