Tuesday, August 27, 2013

How Large Companies Are Dealing With Part-Time Employees Under ObamaCare

We are now just 36 days away from the October 1st enrollment date for the individual mandate of ObamaCare, which will take effect January 1, 2014. Meanwhile, the group mandate has been delayed until 2015; however, we are seeing companies already preparing for 2015. Some big companies are trying to get a head start on ObamaCare to get a handle on their budget for 2015, which is when they are required to offer benefits to all their workers, including part-time employees. Moreover, it seems some companies are using ObamaCare as a scapegoat to cut employee benefits, while others are welcoming it with open arms.


United Postal Service (UPS), a Fortune 100 company, announced that they are going to cut some 15,000 workers' benefits ahead of ObamaCare. The cut will exclude coverage for 15,000 working spouses, who are eligible for benefits through their own employer, for the 2014 plan year. In a memo to UPS employees, increasing costs, “combined with the costs associated with the Affordable Care Act, have made it increasingly difficult to continue providing the same level of health care benefits to our employees at an affordable cost.” According to UPS spokesperson Andy McGowan, “UPS expects the move, which applies to non-union U.S. workers only, to save about $60 million a year.” It is typical for a company to charge more for spousal coverage or not pay for it at all. Some companies will only pay for employee coverage, and if they want spousal coverage, they can pay the difference. Therefore, this is not unheard of for a company to do, but it seems localized to lower-level UPS employees. Upper management’s spousal benefits remains unchanged.

Now we shift gears to the fashion industry and clothing store mogle, Forever 21. Forever 21 recently sent a memo to their employees, that got leaked on the internet, explaining an upcoming reduction in hours. The reduction will take non-management positions from full-time to 29.5 hours a week, just under the ObamaCare guidelines of a part-time worker. Of the 30,000 employees at Forever 21, it is unclear how many of them will be getting a reduction in hours and benefits, but the reduction seems to be confined to just non-management positions. According to AOL, “Forever 21 has an estimated 30,000 employees, which could mean about 300 will lose money and benefits.” The reduction in hours to 29.5 per week will begin August 31st, but it does not seem that they are blaming ObamaCare. According to Associate Director of Human Resources Carla Macias, “[Forever 21] recently audited its staffing levels, staffing needs, and payroll in conjunction with reviewing its overall operating budget.”

The Seattle-based hipster coffee regime of Starbucks recently added their two cents about ObamaCare and how it will affect their company. On Monday, Starbucks announced that they will not be cutting workers' benefits prior to ObamaCare. “Other companies have announced that they won't provide coverage for spouses; others are lobbying for the cut-off to be at 40 hours. But Starbucks will continue maintaining benefits for partners and won't use the new law as excuse to cut benefits or lower benefits for its workers," said Starbucks CEO Howard Shultz. Starbucks is already ahead of ObamaCare and currently offers benefits to part-time employees. Starbucks' definition of a part-time employee is someone who works more than 20 hours, which is lower than ObamaCare’s 30.

We already see companies wrestling with the idea of cutting hours ahead of ObamaCare, but now it is starting to take hold in the larger American companies. Therefore, as ObamaCare draws closer, we will see more companies reducing employee hours. According to a survey released in March by consultant Towers Watson and the National Business Group on Health, 4 percent of large employers excluded spouses from their health plan in 2013 if they could buy coverage where they work, and 8 percent more planned to do so for 2014. However, Starbucks, as always, has gone against the grain and plans on making no changes prior to ObamaCare while still offering richer part-time benefits than ObamaCare’s mandates.

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