How to Schedule and Pay Seasonal or Temporary Employees

The Affordable Care Act Has Had an Impact on How Employers Look at Hours and Pay

Business owner at desk with a computer training temporary employee how to use the system.
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Many employers hire seasonal workers to help them with increased customer demand during the holiday or other high-traffic seasons. Other employers hire temporary and seasonal employees to cover for busy vacation times or agricultural work when harvest rolls around.

Hiring employees for temporary or seasonal work is an opportunity for employers to get to know potential long-term employees. It’s a chance to observe how well a potential employee adapts to your culture and interacts with your other employees and your customers. However, employers must understand laws pertaining to minimum wage, hours, and how these workers may impact employee-offered health care and other benefits.

Classifying Seasonal Employees

The Fair Labor Standards Act (FLSA), which is the governing Federal labor law for seasonal workers, does not define full-time employment or part-time employment. That is a matter generally left for the employer to determine.

However, because the number of employees you employ and the hours that they work during the prior year determines whether the employer must provide health coverage the following year, employers need to understand the Patient Protection and Affordable Care Act of 2010 (ACA)—commonly known as Obamacare—and all changes to the Act.

The ACA defines a full-time employee as anyone working 30 or more hours per week for at least 120 days in a year. Consequently, many employers cut employees' and seasonal employees’ hours back to 28 hours a week to ensure that something as simple as a bookkeeping error would not make a temporary employee eligible for health coverage.

Under the ACA, seasonal employees who work 120 days or less during a year, are not counted as employees for determining whether a company is a large (50 employees or more on average) or a small employer (under 50 employees on average). If a seasonal employee is working full time, the employee may be eligible for healthcare coverage since eligibility is determined by hours worked month to month.

Employers need to note these differences in how they schedule and pay seasonal help.

During President Trump's administration, some of the ACA rules changed. These changes included a provision that allowed employers to offer health reimbursement arrangements (HRAs) to employees in lieu of a traditional health plan. This makes it possible for some employers to reimburse employees for plans purchased on the exchange instead of directly offering insurance. For instance, a qualifying employer could offer an HRA to seasonal employees and insurance coverage to its full-time staff.

Minimum Wage and Overtime Requirements

Many seasonal employees work in retail and other businesses that are covered by the FLSA. This means that they must be paid the federal minimum wage or the minimum wage that was set by their state or local jurisdiction, whichever is higher.

Employers must also pay these seasonal workers overtime pay at a rate of one-and-a-half times their regular rate of pay for hours worked over 40 in a workweek. This applies whether the employee is a temporary or seasonal employee or a full-time regular employee. In some instances, however, certain retail or service employees who are paid by commissions could be exempt from overtime pay.

Working Hours Limitations

Federal law does not limit the number of hours or times of day for employees who are 16 years and older, but many states have enacted more restrictive labor laws that have higher minimum standards that businesses must obey.

Employees who are under 18 years old are limited in what they can do and must not be placed in hazardous occupations or given certain hazardous tasks to do. The federal government details various age-related worker requirements for employers at its YouthRules! site.

The information contained in this article is not tax or legal advice and is not a substitute for such advice. State and federal laws change frequently, and the information in this article may not reflect your own state’s laws or the most recent changes to the law. For current tax or legal advice, please consult with an accountant or an attorney.