Many businesses have busy seasons and hire more employees to meet increased demand. Are those new hires considered seasonal workers or seasonal employees? Believe it or not, there’s a big distinction. Learn how your company’s seasonal workforce affects compliance with ACA and requirements for other benefits.
Who are seasonal employees?
These are folks who are employed during the same part of the year (such as summer or winter) and work for six months or less. Some examples of seasonal employees include:
- Farm help hired to pick from June thru October (5 months)
- Ski instructor hired for winter season from October thru March (6 months)
- Lifeguard hired for summer from May thru August (4 months)
Who are seasonal workers?
These are folks employed for not more than four months (or 120 days) during the calendar year. Some examples of seasonal workers include:
- Retail worker employed during a holiday season (2 months)
- Farm hand that travels to find seasonal work even if the worker is employed during a major portion of the year (migrant worker)
Impact on ACA compliance
Seasonal employee: Employers are not required to offer health coverage to seasonal employees regardless of how many hours are worked. The reason is eligibility determination doesn’t occur for 12 months and at that point, the seasonal employee would no longer be employed. Keep in mind, employers must accurately track hours and use the lookback measurement method to prove they are seasonal (position consistently needed for 6 months or less in years past).
Seasonal worker: Employers must include seasonal workers in their calculations when determining if they are an Applicable Large Employer (ALE) under ACA. The seasonal worker exception provides relief for employers who employ 50+ full-time employees, but the reason for breaking the 50-employee threshold is due to seasonal workers. For the exception to apply, two requirements must be satisfied:
- The employer employs 50+ full-time employees for 120 days or fewer during the calendar year, and
- Those employees in excess of 50 employed during such 120-day period are seasonal workers.
ACA rules and associated penalties are different for Applicable Large Employers (ALEs). If above conditions are met, the employer avoids ALE status under ACA and would not be required to offer seasonal workers health coverage. ALEs must offer health coverage to “full-time” employees (includes full time equivalents like seasonal workers) unless they adopt a longer measurement period longer (over 12 months instead of 1 month). This will help ALEs avoid being required to offer seasonal workers health care coverage.
Eligibility for other benefits
To attract and retain talent, employer benefits packages extend beyond just health insurance. Let’s take a look at any requirements related to a seasonal workforce.
Voluntary benefits such as dental, vision and life insurance have the same eligibility requirements as health insurance. Seasonal employees would not be eligible. Seasonal workers would not be eligible if they are working for an ALE that has adopted a 12-month measurement period to determine “full-time” status.
Retirement plans are only offered to employees who have worked 1,000 hours or more per year and are employed on the day of eligibility. This requirement is the same for seasonal employees and seasonal workers.
Paid time off is at the employers’ discretion and must be outlined in any PTO policy. Employers should clearly outline their policy specific to seasonal employees and seasonal workers.
The distinction between seasonal workers and seasonal employees is complicated, but critical for employers to understand to avoid penalties. As the regulatory environment gets more complex, a growing number of small and medium sized businesses are using Professional Employer Organizations (PEOs) to outsource their HR. With Chicago PEO MidwestHR, clients can focus on growing their business knowing experts are handling daily HR demands. Give us a call 630-468-9286 to lean what is HR outsourcing and how is can benefit your business.
