Hour Management Considerations

Article 1 in the ACA Cost Mitigation series

In a recent survey by Zywave, 59.4% of employers surveyed said they are concerned about offering affordable health care coverage to all full-time employees now defined as those working 30+ hours a week. And rightly so. Every day that goes by without calculating your projected 2014 full-time employees under the ACA leaves your organization with less choices for making changes in employment practices that may mitigate the increased costs. Why? Because the full-time employee calculation involves a “look back period” whereby coverage eligibility is based upon hours the employee is working now, in 2013.

It is incumbent upon school districts and other local governmental employers to calculate and manage 2013 hours now and make decisions regarding employment practices before the ACA provisions go into effect. Once an employee triggers a penalty by receiving a premium tax credit or premium subsidy, it’s too late. For assistance with identifying full-time employees, see our March article The Mandate to Offer Affordable Coverage: Identifying Full-Time Employees of School Districts. 

Specific School District Issues
Under ACA, school districts cannot disqualify employees from full-time status by using the summer break period. This prohibition increases the likelihood that educational employees qualify as full-time employees in greater numbers as compared to their counterparts in non-educational occupations. This will invariably increase district costs.  

Hour Management Considerations
Many employers are contemplating changes to the number of hours an employee is allowed to work. The intent of hour management is to reduce the number of ACA-defined full-time employees qualifying for health insurance coverage, which would increase costs. School districts and other local governmental entities have narrow financial resources, sometimes driven by statutory limits and sensitive to the level of public taxation.

One of the best opportunities to restructure hours is when filling a vacant position. Reducing current employee hours may result in unintended consequences, making it more difficult to attract and retain qualified and experienced employees.

Unintended consequences may include:

• Violating employment contract provisions
• Violating ACA penalties relative to employment practices
• Reduced employee moral and productivity
• Qualifying employees for unemployment
• Triggering a discrimination complaint
• Improperly classifying substitutes as 1099 contracted employees

Your legal counsel should review matters regarding employment law.                      

Long-Term Substitutes
The FMLA (Family Medical Leave Act) and other employee leaves of absence may necessitate retaining a substitute worker for a period of time. As a cost mitigation strategy, districts may consider splitting the total hours or days between two different substitutes.

Example: A high school English teacher is scheduled for maternity leave that overlaps the end of one semester and the beginning of the next semester. Since semesters are natural breaks in teaching assignments, and may include a new classroom of students, one semester could be covered by one substitute and the subsequent semester can be covered by a different substitute. Another option is to have one substitute cover the morning classes and a second substitute cover the afternoon classes.

Short-Term Substitutes
School districts depend upon substitutes due to short-term employee absences. If one of these short-term substitutes averages 30+ hours per week for 120+ days, you must offer that employee affordable health insurance coverage. 

It may be difficult, as well as costly; to predict and track the average number of hours a substitute may work in a given year. As a solution, some districts have outsourced their substitute needs with private companies who provide these services. In this case, it would be the substitute agency’s responsibility to comply with the ACA regulations, saving the district time and money.

Job Sharing
Some employees that prefer working less than full time. To lower costs, the employer could split a full-time position between two part-time employees.

Example: The full-time receptionist retired. Two part-time receptionists were hired as replacements. The employer saved the cost of providing health insurance coverage and used the savings to fund extended daily hours and the lunch period without incurring overtime.    

Dual Employment Responsibilities
Some districts have one employee working two part-time jobs. For example: a bus driver who drives the bus before and after school, but during the day, she helps in the food service serving line; or a part-time teacher who is also the football coach.

Employers have some experience in tracking hours of these employees due to the FLSA (Fair Labor Standards Act). However, the new 30+ hour ACA threshold necessitates a thorough review of positions including:

• Bus drivers, field trip supervisors
• Cafeteria, food service workers
• Instructional aids, study hall, hall monitors
• Out of class pay, counts toward hours
• Extracurricular supervisors, coaches, ticket takers, referees
• Any part time or seasonal position

To save costs, employers may consider “unbundling” some of these dual responsibilities. 

Example 1:  A football coach is hired for $8,000 a season to coach the varsity football team. The coach decides to work with the players in the weight room before the season starts, before school and during lunch. In order to make sure the coach does not inadvertently extend the season and workday triggering a qualification for health insurance coverage, the employer can set a start and end date to the season and define specific hours. If additional time is needed, it can be assigned to the assistant coach who is scheduled for fewer hours.

Example 2:  Two 20-hour part-time custodians who work during the day also work nights to open and close the building for evening events and meetings. The night work increases their hours to 30, which qualifies both of them for affordable health insurance coverage. As a cost saving measure, the district may consider promoting the senior custodian to full-time and assign the other to evening activities only, thereby only one of the custodians would qualify for affordable coverage. 

Example 3:  A bus driver works for two hours before school and two hours after school. During the day, she helps in the food service serving line for an additional 2 hours, totaling 30 hours. To save costs, the employer may consider reassigning the serving line duties to another employee. 

Increasing Hours
If an employee already qualifies for health insurance coverage by working 30 hours but less than 40 hours per week, increasing their hours by assigning additional duties may help manage other part-time workers who you are trying to keep under the 30-hour threshold. 

Example:  A bus driver works for three hours before school and three hours after school. Because she works 30 hours a week, she already qualifies for health insurance coverage. To maximize her time, she can be assigned duties such as the food service line for 2 hours a day, making her total hours 40. This allows the district to better manage hours of other employees who are currently assigned to the food service line, assuring they are kept under 30 hours.

For more information on cost-mitigation strategies, feel free to contact Ken Zastrow.