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(Editor’s Note: This is the next in a series of guest blog posts about contract staffing, courtesy of Top Echelon Contracting, the recruiter’s back-office solution.  Similar posts will appear in future issues of The Pinnacle Newsletter Blog.)

Debbie Fledderjohann
Like it or not, it looks like the Patient Protection and Affordable Care Act (PPACA), otherwise known as “Obamacare,” is here to stay.  Even if the upcoming election is a Republican landslide, experts say it is unlikely that the healthcare reform will be completely repealed.

One of the upcoming provisions worrying employers the most is the employer mandate.  Under this provision, employers with 50 or more full-time employees will be required to provide affordable healthcare insurance or pay a $2,000 annual penalty on each employee, minus the first 30 employees.

Even if they do offer insurance, they could be subject to penalties if the coverage is “unaffordable,” meaning that it costs more than 9.5% of an employee’s income or the employer pays less than 60% of the premiums.  And if they do offer coverage, their plan will be subject to new taxes and requirements under the PPACA that will increase their costs and administrative burden.

Even though the mandate won’t take effect until 2014, employers are already looking for ways to avoid these costs.  Some may shift some of their full-time employees to part-time to get below the mandate’s threshold.  Others may be tempted to classify workers as 1099 Independent Contractors, but since there has been a crackdown on worker misclassification at both the state and federal levels, this isn’t the wisest choice.

Some business owners are even considering breaking up their companies into smaller businesses to get around the employer mandate, according to a recent CNNMoney article.  But since the employer mandate looks at the total number of workers employed under common ownership, that also is not a viable option.

One possible solution is utilizing contractors who are W-2 employees of a recruiter or a contract staffing back-office.  In this scenario, it doesn’t matter how many hours the contractor works because they will be counted as an employee of the recruiter or back-office, not the company.

The demand for these types of positions has already surged since the recession due to economic uncertainty, employers’ desire for a flexible workforce, and increased employment regulations.  In fact, according to the American Staffing Association, temporary/contract positions accounted for 91% of job creation between June of 2009 and June of 2011.

Only time will tell if “Obamacare” really affects the number of contractors in the workplace, but as employers try to contain their costs, contract staffing offers a viable solution.  You’ll want to be sure that you’re able to provide contractors so that you can be a sole-source provider for your clients, able to handle ALL of their staffing needs.

But keep in mind, if you have more than 50 contractors and you run your own back-office, you’ll be subject to the employer mandate and will either need to offer insurance or pay the penalty.

If you outsource to a contract staffing back-office, the contractors will become their W-2 employees, so the back-office, not you, will be responsible for complying with PPACA.

(Editor’s note: this article is for informational purposes only and should NOT be considered legal advice.)


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Bruce WidnesAt Top Echelon Network, we encourage our Preferred Member recruiters to send us articles of interest to share with the rest of the Membership, articles that affect what recruiters do on a daily basis.

Bruce Widnes of The Recruiting Group, Inc. sent us just such an article recently.  That article is “Americans Cling to Jobs as U.S. Workforce Dynamism Fades” by Rich Miller.

Click here to read the article in its entirety on the Bloomberg website.  Below are passages taken from the article that are especially relevant for recruiters and their dealings with candidates.

Passage #1:

Spooked by the severity of the recession and stuck with underwater home mortgages, Americans are less inclined to leave their jobs and less willing to strike out on their own to build businesses, government data show.  Even with swelling profits, companies are holding back on hiring, complaining that they can’t find skilled workers for positions they do have open.

As a result, the labor market is losing some of the dynamism for which it’s long been known.  And the trend predates the recession: an aging population and the growth of two-income households have reduced Americans’ mobility to about half of what it once was, while technological gains and globalization have led to a loss of middle-income jobs.  The economic slump only exacerbated the loss of vigor.

Passage #2:

In the past, such geographic disparities would have been ironed out as Americans flocked to where the jobs were.  Labor mobility has long been a major source of strength for the U.S. jobs market when compared with Europe.

That is less the case today.  About one in 10 Americans currently move each year, according to James Manyika, director of the McKinsey Global Institute, the research unit of consultants McKinsey & Co.  That’s well below the roughly one in five average that prevailed from 1945 through about 1990, he said.

The percentage of Americans who changed residences between 2010 and 2011 fell to a record low of 11.6 percent, from 12.5 percent the previous year, according to Census Bureau figures.  That compares with 17 percent in the recession of 1990-’91.

The rise of the dual-income family is one reason, he said: when both partners are working, it’s harder to coordinate a move.  More recently, the collapse in housing prices has played a role in damping mobility, he added, although [Steven Davis, professor at the University of Chicago Booth School of Business], said that research suggests the impact of that is small.  More than 11 million households owed more on their mortgages than their homes were worth in the fourth quarter of last year, according to data provider CoreLogic, and would face losses if they opted to sell to move elsewhere for work.

While Americans are more willing to leave their jobs for other opportunities than they were at the depth of the recession, they still have a way to go before they regain the confidence they exhibited prior to the downturn.

The so-called quit ratio—which measures the number of people voluntarily leaving their jobs as a proportion of total employment—stood at 1.6 percent in March. That’s up from a low of 1.2 percent almost three years ago, yet still well below the 2.3 percent peak seen in late 2006.

“We just haven’t had people changing jobs enough,” said Betsey Stevenson, an assistant professor at the University of Pennsylvania’s Wharton School in Philadelphia and a former chief economist at the Labor Department.  “We need to see people have the confidence to quit their job and find a better one and create an opening for someone else.”

The jobs recovery hasn’t been strong enough to convince many Americans to re-enter the labor force and start looking for work again.  The labor participation rate—the share of working-age people holding a job or seeking one—stood at 63.8 percent in May, just above a three-decade low of 63.6 percent the previous month.

What are YOUR thoughts about this article?  Does it accurately reflect what you’re currently seeing on your desk?  If not, why not?

Do you have an article of interest that you believe would be beneficial for the rest of the Network Membership?  Send it to, and we’ll include it in a future issue of The Pinnacle Newsletter Blog.