CWS 3.0: March 19, 2014

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Contingent Worker Parity and Co-employment Risks

By Christopher Minnick

Governments around the world are enacting new laws to achieve pay and benefits parity between contingent workers and employees. For example, the Agency Worker Regulation (AWR), which came into force in the United Kingdom a few years ago, gives temporary agency workers rights to benefits from day one of their assignment, while other rights to equal pay and benefits are available after the completion of a 12-week qualifying period. Companies first had to understand how to comply with these regulations before looking at whether they needed to comply. The first step in understanding how led many companies to conduct an assessment of their job title taxonomies and pay rates of both employees and contingent workers to determine “equal pay” for an equivalent employee position and skills.

Aligning the pay rates of contingent workers to employees struck fear in the heart of many HR professionals who have long been concerned with knowing (let alone setting) the pay rates of contingent workers for fear that knowing this information would increase the risk of co-employment. Setting (or knowing) pay rates for contingent workers in and of itself does not establish a co-employment scenario. Government agencies make the determination by an examination of all the facts and a “totality of circumstances.”

In the U.S., employers are facing another form of parity in the Patient Protection and Affordable Care Act, commonly called the Affordable Care Act (ACA). The ACA was enacted with the goal of increasing the quality and affordability of health insurance for uninsured individuals by introducing a number of mechanisms — including mandates, subsidies and insurance exchanges. Much like in the U.K. with the AWR, companies are first trying to understand how to comply before looking at whether they needed to.

While there have been some delays and interim adjustments, the ACA mandates that by 2016, employers with more than 50 full-time equivalent employees offer affordable health coverage to at least 95 percent of their full-time“substantially all” employees or risk paying a penalty. “Substantially all” means at least 95 percent of full-time employees or a combination of full- and part-time employees that is equivalent to at least 50 full-time employees. Employers need peace of mind that they have properly excluded their contingent workers and that an unexpected change in employment status (from temporary agency worker to common law employee) for some contingent workers does not unintentionally tip their ratio out of compliance and put the employer at risk.

Companies are advised to:

  • Train HR and procurement staff on ACA basics and the unintentional consequences of its contingent workforce
  • Assess working hours of all seasonal and variable employees including contingent workers
  • Assess potential co-employment scenarios across the contingent workforce population

Failing to identify full-time employees (or equivalents) and offering coverage, or contributing less than the ACA affordability standards may subject your organization to some steep penalties.

We have the benefit of hindsight with the AWR. Unfortunately large employers are still trying to figure ACA out. Fasten your seat belts. It’s going to be a fast and bumpy ride to 2015.

 Christopher Minnick is a co-founder and executive vice president of Brightfield Strategies, a management consultancy specializing in contingent workforce strategies. Minnick leads Brightfield’s Governance, Risk and Compliance (GRC) practice. He can be reached at cminnick@brightfieldstrategies.com.

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