One of your employees has left on short notice (due to a medical emergency, perhaps), and you’ve decided to hire a temporary employee to fill the gap until they return. After welcoming the newcomer aboard, it hits you—do you need to provide benefits for this full-time temporary employee?

Possibly, yes. In this guide, Union Risk Services, an employee benefits broker, explains temporary employees and whether you must provide benefits for those your company employs.

Temporary vs. Permanent Employees

Temporary employment is a job that lasts for a predetermined amount of time, which could be anywhere from a week to one year. Temporary full-time employees can work the same number of hours as permanent employees. The only difference is that their employment has a known end date.

Permanent employment, as the name suggests, does not have a determined end date.

Temporary employment may appeal to both workers and employers for several reasons:

• It allows workers to maintain income, avoid resume gaps, and enjoy a level of job security during periods of extended unemployment.
• It enables employees to gain experience in a new field when changing careers.
• It allows employers and employees to “test drive” a new arrangement. After the temporary employment period is over, the employer might decide to make the worker a full-time employee.

Do Temporary Full-Time Employees Get Benefits?

Must you provide benefits to a full-time temporary employee? If you’re an applicable large employer (ALE) with 50+ full-time employees, the answer is most likely yes. Under the law, you’re required to provide minimum Affordable Care Act (ACA) coverage to full-time employees who work at least 30 hours per week.

If you employ seasonal or variable-hour employees, you might or might not have to provide benefits to them. Here’s the difference between these employment categories:

• Seasonal employees: These employees are hired for less than six months during a specific season, such as summer or winter. Produce harvesters are often classified as seasonal employees.
• Variable-hour employees: If you’re unsure whether an employee will be part-time or full-time when you hire them, you can classify them as variable-hour.

To determine whether you’ll need to provide benefits to seasonal and variable-hour employees, you can use a look-back period. This involves:

• Calculating how many hours the employee worked on average for a select period, such as three months. This will tell you whether you can classify the employee as part- or full-time.
• Retaining the worker’s status for a few months, regardless of how many hours they worked during this period.

A Word About State Laws

Suppose your business doesn’t fall under the requirements for an applicable large employer. You don’t have to provide benefits to a full-time temporary employee in this case, right? Not necessarily.

In some states, you must provide benefits to temporary full-time employees regardless of the number of full-time employees your business has. Fail to do this and you could owe expensive penalties when tax season rolls around.

If you’re not familiar with your state’s laws, it’s smart to reach out to an employment lawyer.

Do You Have To Provide Full-Time Benefits to Contractors?

Independent contractors are individuals who do work for your business, but whom your business does not employ. For example, suppose your business uses the services of a third-party plumber or electrician. They would be classified as independent contractors.

If you do not employ the worker, you don’t have to provide benefits to them. They aren’t a full-time temporary employee, so they are responsible for obtaining their own benefits.

Not sure how to classify a worker? Independent contractors:

• Pay their own Medicare and Social Security taxes
• Provide their own tools and equipment
• Have the freedom to accept and refuse tasks
• Control their own schedules

It is important not to misclassify an employee as an independent contractor in an attempt to avoid employee eligibility for benefits. If the IRS catches you, your business will be on the hook for costly fines.

What About Workers’ Compensation?

Workers’ compensation is a type of business insurance that provides benefits to employees who get hurt on the job. If an employee has a workplace accident, workers’ comp will cover their medical treatment and lost wages.

Protecting temporary workers is just as important as taking care of full-time permanent employees. Thus, temporary workers are eligible for workers’ compensation just as permanent employees are.

When Do Employers Need To Provide Benefits?

Under the ACA, businesses have 90 days from the date of hire to obtain benefits for temporary full-time employees. This grace period is helpful because many temporary employees leave the job before three months are up.

However, if you’re certain that a temporary employee will work at least 30 hours per week, it’s best to provide them benefits as soon as you hire them. This will help you avoid a fine, and your new employee will appreciate it, too.

What Happens if You Don’t Comply With ACA Requirements?

Under the ACA, ALEs must provide minimum essential coverage to at least 95% of their full-time workers. If you fail to do this, you’ll have to pay a $2,500 fine per employee per year.

And even if you do provide coverage to at least 95% of your workers, you might still owe a fine if you don’t offer coverage to select categories of eligible employees. In this case, the fine increases to $3,750 per employee per year.

Should Non-ALEs Provide Benefits?

Non-ALEs aren’t obligated to provide benefits to temporary full-time employees per current ACA requirements, but should you do so anyway? As always, it depends.

Providing benefits to temporary workers can increase employee satisfaction. This may pay off if you decide to transition the employee to permanent status down the line.

And remember, your state’s requirements might differ and require you to provide benefits to all full-time employees regardless of how many you have.

We’ll Help You Know Whether Employees Should Get Benefits

Offering benefits to a full-time temporary employee can help you retain talent and avoid expensive penalties that hurt your business’s bottom line. Not sure whether you need to provide benefits? Call Union Risk Services at (718) 370-3131.