The numbers are not lining up in the favor of small businesses. 9, 30, 50, 120 are all digits that may start putting a stranglehold on small business in 2014. We want to review what these numbers mean to your small business and how their death grip can be relaxed.
Times are already hard for small businesses and 2014 looms ahead as getting even tougher. The new healthcare law, the Patient Protection and Affordable Care Act (PPACA), commonly called Obamacare, goes into effect and the Democratic Party is now pushing for a mandated increase of the minimum wage.
PPACA requires a company that employs at least 50 people for 120 days or more a year to provide affordable health insurance for those employees who work on average 30 hours a week (or 130 hours per month). “Affordable” is defined as less than 9.5% of the employee’s family income. Employers “would determine each employee’s full-time status by looking back at a defined period of not less than three but not more than 12 consecutive calendar months, as chosen by the employer (the measurement period), to determine whether during the measurement period the employee averaged at least 30 hours of service per week.” Read more. If an employee qualifies based on this measurement period, then the employer must provide health insurance for this employee for a minimum of 6 months, but no shorter than the look back period. Failure to provide affordable health insurance under these guidelines will result in a $2000 fine per qualified employee (after the first 30). In other words, the first 30 employees in a 50 employee company would be exempt and the fine assessed against 20 (20 employees x $2000 =$40,000 fine). This fine is prorated on an annual basis by each month that the employee is not covered. A great site with Q & A is located here.
What should a small business do now? Keep in mind that this new law goes into effect on January 1, 2014, so the “look-back” period will begin on October 1, 2013. Some companies near the 50 employee threshold are trimming back on staff (which isn’t good for growth). The difference between 49 and 50 employees is more than one paycheck. It’s the cost of health coverage for 50 employees or a $40,000 fine. Many companies are cutting hours, while others are analyzing the costs of paying the fine instead of providing the insurance.
The other emerging strain on small business is the potential increase of the minimum wage from $7.25 to $9.00 an hour. This is a 25% increase that some business owners believe will transcend beyond just their minimum wage employees. Their more experienced hourly employees who are currently paid in the $9.00 an hour range will demand a raise.
What options does a small business have other than laying off employees, cutting hours and choosing to pay a fine? An alternative is to invest in a system that can strictly and diligently monitor the time of variable hour remote employees. By tracking accurate time, companies can cut the waste caused by handwritten timecards and keep weekly hours down.
The result could be enough savings to cover what the government is trying to squeeze out of you.