Every industry has its own, unique workforce challenges. Some industries have legacy workforce practices – for good or for ill – that predate the earthquake of change that has occurred in labor markets over the last 15 years. It is when the “we’ve always done it this way” perspective runs full bore into the new paradigms at play in the modern labor market that we see some significant friction and subsequent exposure to risk.
The most recent instance of this phenomena is the effect that the passage of the Affordable Care Act (ACA) has been having on how healthcare benefits are administered and managed in US businesses. The ACA, a broad and sweeping shift in the fundamentals of how employer-based healthcare is managed, has forced most industries to revisit their practices in this area; often with fractious results. One such industry heavily affected by the ACA is manufacturing in the US.
Manufacturers, particularly automobile manufacturers, are some of the more robust users of contract labor. As such, for their significant non-employee workforce, the auto industry has been relying on their staffing suppliers to handle ACA compliance. The manufacturers’ position is, “we’re outsourcing this workforce management to you Mr. Supplier, precisely because we don’t want to deal with the particulars of ACA compliance, among other considerations." The suppliers have responded largely by offering plans that satisfy the letter of the law but not necessarily its intent. That is, they have been offering expensive plans that the lower-wage contractors mostly cannot afford. Of course, the staffing suppliers (and by extension the manufacturing clients) are compliant on paper, but how does this achieve the “affordability” the law was intended to deliver?
The answer is, not well at all. And the IRS and other regulatory bodies are wise to this practice. It should be pointed out that these attempts to skirt the intent of the law do not inure manufacturers from penalties for non-compliance.
Another interesting quirk recently experienced by workforce management solution providers working with manufacturing companies is the practice of employing undocumented workers because without social security numbers they won’t pursue benefits. In some cases, manufacturers are reporting the expense of these workers by issuing 1099s to them. The dangers of this practice (outside of immigration and other legal issues) rests in the chance that these employees get injured on the job. By not providing these workers with the mandated coverage, ALL co-employers are subject to lawsuits and those prosecuted are typically being made to cover 100 percent of the damages plus hefty penalties and fines.
Manufacturing is not the only industry to engage in questionable practices with respect to ACA compliance and this blog is not designed to single the industry out. ACA compliance has simply become part of the cost of doing business in 2015 and the sooner all organizations and their respective staffing suppliers come to terms with it, the better they all will be able to avoid legal penalties and fines. Read more about ACA compliance in our new eBook.