Staffing agencies: how to offer benefits to temporary and placed employees under the ACA.
How the ACA applies to temporary workers, how to measure hours for assignments that start and stop, how agency and client responsibilities divide and how to make benefits affordable for workers on short assignments. Written for the agency owner or HR lead.
Temporary Workers Still Count
Temporary employees of an agency are the agency’s employees for most ACA purposes.
Agency Offers Coverage
The agency, as the employer, generally has to offer coverage to its full-time employees to avoid penalties. This applies to the agency’s own employees, which usually includes the temporary workers it places and pays. Ask your adviser how the offer, measurement and penalty exposure work for your mix of assignments, and review it before busy hiring periods.
Hours Across Assignments
Hours across assignments may need to be added together, depending on how the agency measures. A worker may take several short assignments in the same period, so hours from each one may need to be combined. Make sure your payroll and applicant records link assignments to one person so total hours can be seen in one place.
Client Arrangements
Some client contracts address benefits and who bears the cost. Client contracts may spell out whether benefit costs are passed through or absorbed. Have your counsel and adviser review these terms before you sign, so pricing, eligibility and any client obligations match what the plan actually provides.
Measuring Hours for Short Assignments
Assignments start and stop, so hours are irregular.
Look-Back Method
A look-back measurement method with a stability period suits workers with irregular assignments. Pick a measurement period, track hours through it, and then hold the result for a stability period. This keeps status steady for workers whose hours vary, but the details depend on your workforce, so confirm the periods with your adviser.
Gaps Between Assignments
Define how a gap between assignments is treated. Workers often have unpaid time between placements, so decide in advance when a gap counts as a break in service and when it does not. Write the rule down and apply it the same way to everyone, so decisions are not made case by case.
Document the Method
Keep a written method and apply it consistently. Keep the measurement method, the periods and the reasons behind them in a short written policy. If a worker or agency auditor questions a status decision, a consistent written method is the first thing you will want to show.
Plans Workers Can Afford
Placed workers often earn modest hourly rates.
Lower-Cost Options
Consider a plan with a low employee premium and clear limits. A plan with a modest employee premium and clear limits may fit temporary staff who are price sensitive. Explain the coverage clearly, including what is not covered, so workers can compare it with other options before they decide.
Affordability Test
Test contributions against a safe harbor. Choose one of the available safe harbors and run it on the lowest-cost plan offered to employees. Because pay rates and hours vary in staffing, check the results again when wages or premiums change, and keep the calculations on file.
Minimum Value Coverage
Offer coverage that meets the minimum standards. The coverage offered should meet the minimum value standard, which the carrier or plan documents can help confirm. Ask for that confirmation in writing before you roll the plan out to placed workers, and keep the paperwork with your plan records.
Employee, Contractor or Client Employee
Classification affects who offers coverage.
W-2 Temporary Employees
Most placed workers are the agency’s W-2 employees. Because they are employees, W-2 temporaries can be counted and offered coverage under the same rules as other staff. Confirm with your adviser how to classify each placement, and keep payroll, tax and benefits records aligned for each worker.
Contractors
True independent contractors are generally not on the agency’s plan. The label in a contract does not always decide the issue. Misclassification can create real exposure, so have counsel review how you classify workers and keep your documentation consistent with how the work is actually performed.
Joint Employment Questions
A client may share employer responsibility in some cases, which is a legal question. Whether a client is a joint employer depends on facts such as control over the work and pay, and the answer may not be clear. Ask employment counsel to review your contracts and practices before assuming responsibilities sit with either party.
Using Benefits to Win Candidates
Benefits help attract and retain candidates.
Show the Offer Early
Tell candidates about benefits at the time of placement. Provide a short summary of the plan, the cost per pay period and the enrollment steps along with the assignment details. Workers who see benefits up front are more likely to understand eligibility and decide whether to enroll.
Tenure Reward
Give longer-assigned workers better terms. A schedule that offers a better contribution or a shorter wait to workers who stay with the agency can reduce turnover. Put the tiers in the plan document, apply them to everyone in the class, and have your adviser check the design.
Internal Staff Benefits
Do not forget your own recruiters and office team. Recruiters, coordinators and office staff often want coverage too and are part of your retention picture. Decide how the internal group fits with placed workers, and tell new office hires about their options at onboarding.
Details That Matter to Staffing Firms
Agencies face problems that direct employers rarely do.
Price Benefit Cost Into Bill Rates
Benefit cost belongs in the bill rate. Agencies that price it late absorb the cost. Build an estimate of employer cost per hour into the rates you quote so the margin reflects what you actually pay. Review the figure each renewal, because a rate set once can fall behind when premiums or eligibility change.
Coverage When an Assignment Ends
A worker already in a stability period generally keeps the measured status even if the assignment ends. Decide how coverage and COBRA are explained. Tell workers in plain terms what happens to their coverage when a placement ends, including any steps to continue it. Check with your adviser or administrator how continuation rights apply, and keep a record of the notices you send.
Separate Classes for Internal Staff
Recruiters and office staff are a different class from placed workers. Define both in the plan document. Defining classes in the plan document makes the rules for each group clear and helps avoid unintended favoritism. Have your adviser review how the classes are drawn and make sure the contribution and eligibility rules for each are written out.
The questions that come from staffing firms.
Six questions staffing agencies bring us about benefits.
Are temporary workers the agency’s employees?
Generally yes for most ACA purposes.
How do we measure hours?
Use a look-back method suited to irregular assignments.
What if a worker has a gap between assignments?
Define the gap treatment in your policy.
Can clients share the cost?
Contracts sometimes address it.
Are contractors covered?
Generally not if they are independent.
Where should we start?
Set your measurement method and plan options.
Ready? Send us your renewal, or talk it through with someone first. No cost, no obligation.
General information for staffing firms, not legal advice. Agency and client roles are fact-specific, so confirm yours with counsel.
Related guides.
Administrative and Support Employee Benefits
Benefits for staffing and support services.
Variable-Hour and Seasonal Employees
Measuring hours for irregular work.
Minimum Value and MEC Plans
What counts as qualifying coverage.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
Laws and rules referenced
26 C.F.R. § 54.4980H-1 — Definitions, including full-time employee, seasonal worker and how employees are counted.
26 C.F.R. § 54.4980H-3 — Determining full-time employees: monthly and look-back measurement methods.
This page is general information, not legal or tax advice. Rules change and facts matter, so confirm your situation with counsel or a qualified advisor.
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