In July, we all heard a collective sigh of relief from HR professionals when it was announced that penalties associated with the employer shared-responsibility provisions of the Affordable Care Act would not be enforced until Jan. 1, 2015. The government’s decision alleviated some of the pressure. However, organizations should use this time to take a more thoughtful and strategic approach to how they will manage the changes associated with the ACA.
First, you need to develop a strategy that’s right for your business. Yet there are so many variables specific to ACA compliance that it can be overwhelming, such as pay vs. play, affordability, and seasonal and contract employees. Each organization will be affected in its own way. Even with the delay, organizations need to start planning now, as the ACA will not only affect the U.S. health care system, but also the way organizations manage their workforces.
Most employers with a large percentage of part-time employees, high turnover or seasonality in their workforce have already started managing ACA compliance efforts by choosing a 12-month look-back period, even though guidelines state the look-back period can be three to 12 consecutive months.
The look-back period is an important first step in managing ACA compliance, as it is during this time that employers determine the number of full-time equivalent employees in their business. If they have fewer than 50, they are off the hook for now. If they have 50 or more FTEs, ACA compliance is required. Also during the look-back period, employers are determining employee eligibility for health care benefits. If they work less than an average of 30 hours per week during the look-back period, they are classified as part-time for ACA purposes and do not need to be offered health care coverage. Those who work 30 or more hours are classified as full-time and are eligible.
HR professionals should be helping their companies manage their look-back period as well as all of the requirements that follow. This will not only empower the HR team, but also help solidify their seat at the table when it comes to many future operational decisions. But how do these HR teams provide the tools and information needed during this critical time?
How Workforce Management Technology Helps
With workforce management technology, businesses gain access to the employee-specific information they need to manage the look-back period, including worker type (full or part time), total hours, worked weeks and average weekly hours. Workforce management tools can also help manage the workforce to fall in line with the chosen ACA strategy and the optimal full-time/part-time mix. By optimizing workforce-related processes, businesses can also achieve compliance, minimize costs and focus on business objectives.
No matter what strategy companies select, they will face new costs and other potential business challenges. By focusing on the workforce and the front-line employees who can influence results, they can do more than just survive ACA — they can thrive.
For example, for service industries, improving the customer experience presents a significant opportunity. In the customer’s eyes, value represents a combination of price, quality and their own experience. But it is important to remember that an organization’s workforce is largely responsible for delivering this experience, so these businesses should make every effort to retain the employees who deliver it best.
While there are multiple strategies to adopt when it comes to ACA compliance, most businesses indicate that they will pursue one of these two options:
• Play — Provide health care coverage for all employees who qualify as full-time under the ACA guidelines and elect to obtain coverage. In doing so, they expect their costs to rise, and finding a way to absorb these costs will not be easy.
• Pay — Choose to not provide coverage and elect to pay the government’s penalties for noncompliance. Companies choosing this strategy are at risk of employee and public backlash, which can result in anything from increased turnover, to decreased employee productivity and morale, to a negative impact on stock price.
The Tools You Need to Succeed
No matter which option a business chooses, workforce management technology can help minimize the costs and deliver better business results. It can help in the following areas:
• Time and attendance: By automating time and attendance processes, businesses can reduce labor costs by enforcing pay rules consistently and accurately across the entire organization. Also, certain time and attendance programs can help examine older data to determine employees’ full-time or part-time status under the ACA. Without this information, employers will find it challenging to manage the look-back period to develop the best ACA strategy.
• Scheduling: Effective scheduling programs enable managers to create the “best-fit” schedules that align labor with demand while also taking ACA full-time/part-time thresholds into consideration.
• HR and payroll: With HR and payroll programs, businesses can automate benefits administration and gain real-time insight into employee benefit eligibility, improving compliance and reducing financial penalties. These programs also apply rules, policies and regulations consistently across the board, simplifying complex processes and helping to ensure ACA compliance. The tools can also generate a complete audit trail to provide evidence of compliance efforts.
• Workforce analytics: The right reporting and analytics tools can help organizations monitor their workforce by analyzing schedules, time records and benefits enrollments in real time. Additionally, to help determine the right ACA strategy, users can examine “what-if” scenarios to select the right course of action — provide benefits, pay fines or examine employee hours — going forward.
Increasingly, more and more organizations are giving front-line managers the responsibility for compliance, and workforce analytics can provide visibility into how well this compliance is being managed. Delivering timely analysis of employee data can help determine benefit eligibility, thereby improving compliance and assisting in reducing financial penalties.
Time Is of the Essence
Regardless of which time period you chose for your look-back period, if you plan to pay or play, or how big of a financial impact ACA will have on your business, the key to surviving during this time of uncertainty is to implement the right tools right now. For many that have chosen a look-back period of 12 months, this is more critical than ever. Ideally, these organizations need a program that not only helps with the look-back period, but also with the ongoing monitoring that ultimately will be required.
Whether it’s increased visibility into the full- and part-time mix, the need to create reports required by the Internal Revenue Service or the ability to proactively manage their ACA strategy, forward-thinking businesses and their HR teams are already weighing the pros and cons of each potential strategy for both the short and long term, because in a year’s time, the government, Wall Street, customers and employees will all be watching.
Liz Moughan is director of the retail and hospitality practice group at workforce management company Kronos Inc.