Worries over the costs and regulatory effects of federal health care reform are convincing some small employers to reduce their ranks of full-time employees and rely more on a part-time workforce.
Small companies with nearly 50 employees are especially eager to avoid new “Obamacare” rules taking effect in 2014 that would require companies with 50 or more full-time equivalent (FTE) employees to purchase health insurance or pay a penalty. While hiring part-timers may not allow them to skirt the mandate altogether—since part-timers’ hours are factored in to the full-time equivalency calculation—it may help them reduce the cost of health care reform. The health care laws will only require that employers offer insurance to employees who work 30 or more hours per week.
Many large companies, including Regal Entertainment Group, originally announced plans to cut hours for many employees to dodge the mandate. However, more small businesses, local franchisees and even school districts are now making a similar decision.
Mack McLamb, owner of Carlie C’s, a 16-store North Carolina grocery chain, said he will reduce the hours of some part-time employees—though raise the hours of others—in order to reduce the number of employees he will have to offer health insurance to next year. “Essentially, if we were to cover everyone who had been making 30 hours or more, our health care costs would more than double,” he told Durham’s Herald Sun. Deseret Industries, a thrift store and rehab facility owned by the Church of Latter Day Saints, also just announced plans to cut hours.
There are no formal statistics yet on how many businesses are reducing worker hours or how many workers will be affected. However, a survey by the Federal Reserve of Minneapolis found that four percent of employers have already shifted more to part-time employees, while seven percent are planning to. The new rules are likely to affect certain types of small businesses, such as food service and retail, more than others. A recent study by the UC Berkeley Labor Center examines which industries and types of workers are most at risk for getting their hours cut.
The increase in part-time hours, however, isn’t welcome news for many workers. It’s causing a rise in the “involuntary part-time” workforce—people who want to work full-time but can’t.
Some small companies, however, are choosing a different way to ease the pain of health care reform: They’re planning to pay the penalty rather than continue to insure their employees.
Read more about the effects of Obamacare.