How best to deal with the Obamacare employer mandate is a question many businesses are struggling with this year. Here are some often-overlooked facts to consider.
It seems that almost daily I read of desperate CEOs and business owners announcing that in preparation for the January (first 2014, now 2015) launch of the Obamacare employer mandate, they have begun to cut workers hours to under 29 per week. While I certainly understand their frustration at the massive federal intrusion into their conduct of business, I do think that it’s not the time for draconian moves or rash announcements. Someone needs to sound the warning call to CEOs and business owners across our land that there’s still time for calm deliberation on the best way to address the problem, especially since just slashing hours can dramatically alter both your business model, and your relationships with employees.
Let me throw out a few facts:
1. Right now there is great uncertainty about when or even whether key parts of Obamacare will be implemented. We’ve now moved from 2014 to 2015 for the key employer mandate, and conservative members of Congress keep attempting to repeal, replace, or defund Obamacare. We may not know until after the November 2014 elections what will really happen. There is at least a fighting chance that the employer mandate is going to change. Probably the effort most likely to succeed is to move the mark defining full time from 30 to 40 hours. I believe that even many Democratic representatives are going to find this one hard to pass up.
2. Smart CEOs and owners realize (hopefully) that there are more employee related costs incurred by a company than just the hourly wage and associated benefits. A recent study of over 150 senior HR professionals showed on average companies spend $1,250 per employee per year just on HR related costs. This survey covered all states and employers of every size. Business executives need to be sure to factor in these costs, because in order to cut employee hours companies are going to have manage a lot more employees — and that inflates your admin costs.
3. To be clear, the $1250 cost mentioned above is the cost per year AFTER hire. As everyone knows, there are substantial costs related to recruiting and hiring employees. At minimum it costs at least $1,000 to recruit a hire, and can cost a lot more depending your industry and situation.
4. We’re now at $2,250 per employee to hire and manage for just the first year and we haven’t even started training our new hire. In a report from Training magazine in 2007, companies spent an average of over $1,200 annually training a single employee.
So now, our grand total needed to keep the entire workforce part time comes to nearly $3500 for the average cost of every extra hire. Contrast that with the $3,000 per worker penalty for keeping everybody at longer hours but not offering insurance, and suddenly the all-part-timer solution doesn’t look so attractive any more.
While these costs are significant, I would say that the biggest cost of creating an all-part time workforce is simply the ill will (and stressed-out nature) of their employees. Let’s face it, 29 hour weeks are going to force many people to have not one but two (or even three) jobs, and will force them to stress out balancing their work schedules and their family’s needs. How much productivity do you think you can expect from workers with this kind of life?
I’ve often said myself that many employers will have no option but to go the 29-hour route because their businesses can’t afford the increased costs of the Obamacare mandates. However, as I’ve had time to ponder on this over the past several months, I wonder if I too was being too rash. Maybe what this time calls for is some level headed decision making with all the facts in hand. Maybe getting past our anger over having been forced to this brink will allow us to determine if it might be better, as employers, to employ fewer and not more people, and to provide our workers with longer hours and better benefits. Maybe, just maybe, if we think this way we can gain a competitive advantage over our rivals by being able to cherry pick their best 29-hour workers with a better offer.