Source: Michael LaLonde, Expense Reduction Analysts
There has been much talk about how the new Affordable Care Act (“ACA”) will affect U.S. companies, particularly the impact on a company’s internal employees. However, in addition to the impact on employees, companies should consider the use of temporary and contract staffing firms, as there are special considerations when dealing with these firms.
- Many employers are considering strategies to reduce the full-time employee count to below fifty employees. Some strategies reported include reducing the hours of part-time employees to less than thirty hours, supplementing internal staff with the use of temporary or contract employees, or moving to a Professional Employer Organization (“PEO”) model (see below.) The topic of the ACA and PEOs was recently discussed in Entrepreneur.com and NBC News.
Click here to view the article - By using temporary or contract employees, a company can more easily identify (and often reduce) total employee costs. The hourly bill rate charged by the staffing firm represents the total cost of the employee, including employer mandated taxes and insurance (Social Security, Medicare, workers’ compensation, state and federal unemployment insurance) and health care costs. Some employers don’t track that total cost so this information from the staffing firm may add clarity in understanding the true cost of incremental employees and operating costs.
- Non-traditional contract staffing has increased dramatically in recent years as a hedge against business growth risk, employment risks or hiring challenges. In the past, most companies used traditional office clerical and light industrial staffing but professional positions such as medical personnel, engineers, IT professionals, and financial personnel represent the fasting growing sector of temporary and contract staffing.
- Now is a critical time to update agreements with your staffing firms. This update will enable companies to develop a working relationship and cost structure with these important service providers before some of the provisions of ACA become effective.
- Be aware of the total cost which your staffing firms charge. Although there may be some cost increase due to the ACA and other items, you should require that staffing firms justify any pricing increases proposed
- Considering the move to a PEO for all employees is another strategy. A PEO assumes responsibility for payroll taxes and insurance and also provides health care plan options as a part of their services. Because many PEO’s are the employer of tens of thousands of employees, their purchasing power, especially for health insurance, is much better than any given employer with a much smaller number of employees.
Strategies to address the ACA should be based on a company’s unique position. But every company that might be affected by the new health care law should be evaluating the impact and developing a strategy to address this complex and dynamic piece of legislation
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Scale Finance LLC (www.scalefinance.com) provides contract CFO services, Controller solutions, and support in raising capital, or executing M&A transactions, to entrepreneurial companies. The firm specializes in cost-effective financial reporting, budgeting & forecasting, implementing controls, complex modeling, business valuations, and other financial management, and provides strategic help for companies raising growth capital or considering M&A/recapitalization opportunities. Most of the firm’s clients are growing technology, healthcare, business services, consumer, and industrial companies at various stages of development from start-up to tens of millions in annual revenue. Scale Finance LLC has offices throughout the southeast including Charlotte, Raleigh/Durham, Greensboro, Wilmington, Washington D.C. and South Florida with a team of more than 40 professionals serving more than 100 companies throughout the region.
