Most small businesses rely on multiple types of employees. There could be full-time or part-time workers. Maybe independent contractors. At some point, part-time employees are likely in the mix. And one of the questions employers often ask goes like this: “Are part-time employees eligible for health insurance?”
The short answer is “yes.” But that subject deserves a deeper dive.
OK, so you’ve decided to offer your part-time employees health insurance. Great. Now let’s talk about the rules you have to follow. There are several set forth by both the Affordable Care Act (ACA) and your insurance carrier.
The ACA requires employers with at least 50 full-time equivalent (FTE) employees to offer health insurance to each of those full-time workers or pay a penalty. The law defines “full time” as working at least 30 hours per week.
Though employers are not required to provide health benefits to part-time staffers, you may choose to do so. But you must comply with ACA rules if you do.
Before you decide to roll out a part-time employee benefits package, be sure to check with your insurance carrier.
For many small businesses, there is one big, fat reason that offering health insurance to part-timers seems out of the question. It costs too much! Health insurance premiums go up every year, and some employers find that they can’t afford to offer it to everyone.
But before you toss the idea out altogether, let’s look at some of the benefits.
All of your health insurance related expenses are tax deductible. You are able to deduct everything spent on premiums from both your federal and state income taxes.
Perhaps the biggest benefit to you, the employer, is that you’ll be better able to attract well-qualified people to your team. Many American workers say that health benefits are a deal-breaker for them when deciding whether or not to accept a job offer. In fact, some say they are willing to take a smaller salary to get better health benefits.
If you offer great health benefits, you are more likely to keep the employees you have, too. That should also lower your recruitment costs. Recruiting and onboarding a new employee typically costs about six to nine months worth of that employee’s salary.
Another important benefit is a healthy workforce. When your employees have access to medical care, they are less likely to get sick, and more likely to get fast treatment when they are ill. This means fewer sick days and better job performance.
You’ll also be helping your employees become more financially secure. An unexpected and expensive health problem can easily send a person into unmanageable debt. And while this might seem like a problem that only affects the employee, you can bet that the stress will affect their job performance and possibly their ability to continue working for you.
There are tax benefits to providing health insurance to your part-time workers too. For one thing, all of your health insurance related expenses are 100 percent tax deductible. This means that you can deduct every cent you spend on your employees’ premiums from both your federal and state income taxes.
You can also allow your employees to pay their share of the premiums with pre-tax dollars. It takes a little bit of paperwork, but it’s easy. The employees’ premium payments would be deducted from their paycheck pre-tax, thus increasing their take-home pay.
And if you own a small business, there are even more tax benefits available to you. Since 2010, the ACA has included a provision called the small business healthcare tax credits. Tax credits can be up to 50 percent of your premium expenses for any two years. In order to qualify, you must pay at least half of your employees’ healthcare premiums and have 25 or fewer FTEs who earn, on average, $50,000 or less per year.
What it might come down to, in the end, is a simple cost/benefit allowance. Take a look at all of these factors. How much will it cost you to purchase health insurance for your part-time employees? How much of a tax break will you get? Can you estimate the value of retaining those employees versus losing them to a company with better benefits? What about the value of a healthy workforce?
This article is for informational purposes and is not meant to provide legal, regulatory, accounting, or tax advice.