Should My Business Offer Benefits to Temporary Employees?

Chris Freitas • 22 August 2024

Businesses are rethinking traditional approaches to employee benefits, including whether to extend those benefits to temporary employees. While it's common practice to reserve comprehensive employee benefits packages for full-time, permanent staff, offering benefits to temporary employees can yield significant advantages, particularly when it comes to attracting talent, boosting productivity, and promoting a positive company culture.

Why Offer Benefits to Temporary Employees?

Offering benefits to temporary employees may initially seem unnecessary, especially if they're only with your company for a short period. However, there are several compelling reasons to consider extending benefits to this segment of your workforce:

Encouraging Hard Work and Loyalty: Temporary employees who receive benefits are more likely to feel valued and motivated. This can lead to increased productivity, better quality of work, and a more engaged workforce overall. When employees feel secure in their role, even on a temporary basis, they are more likely to go the extra mile, reducing productivity issues that can arise from disengagement.
Potential for Long-Term Employment: Many temporary employees can transition into permanent roles. By offering benefits early on, businesses can encourage these workers to consider long-term employment with the company. This can reduce turnover and the costs associated with hiring and training new staff. Temporary employees who become permanent are already familiar with your company culture and processes, making the transition smoother and more cost-effective.
Creating Company Ambassadors: Even if temporary employees don't stay with your company, offering benefits can leave a lasting positive impression. These employees may become brand ambassadors, spreading the word about your company’s positive work environment to other potential hires. Word-of-mouth recommendations can be incredibly valuable, especially in competitive industries where attracting talent is challenging.

Who Is Eligible for Benefits?

When deciding whether to offer benefits to temporary employees, it's important to understand the legal requirements surrounding benefits eligibility. According to the IRS, a temporary full-time employee is someone who works at least 30 hours per week or 130 hours per month and is hired for a position lasting less than 12 months. If these employees meet the 30-hour-per-week threshold, they are typically eligible for the same benefits as regular full-time employees.

However, eligibility isn’t just about hours worked. Factors like the size of your organization, whether the employee is paid or unpaid, and whether they are classified as variable-hour or seasonal workers also impact whether you're required to offer benefits. For example, under the Affordable Care Act (ACA), applicable large employers (ALEs)—those with 50 or more full-time employees—are required to offer benefits to all classes of full-time employees, including temporary ones. Failing to do so can result in significant penalties. If you don’t offer minimum essential coverage to 95% of your full-time employees, the penalty is $2,500 annually for every employee. If you meet the 95% threshold but still fail to cover certain eligible employees, the penalty increases to $3,750 per employee.

Employers with fewer than 50 full-time employees may not be subject to these federal penalties but could still face state and local regulations that require offering benefits to temporary employees. It's essential to remain in compliance with all applicable laws, which can vary based on location and employee classification. Speak with one of KBI’s compliance experts today for personalized assistance.

Navigating the Complexities of Employee Classification

The process of determining benefits eligibility is complex, particularly when dealing with temporary, variable-hour, and seasonal employees. The IRS generally prevents exemptions for penalties unless specific criteria are met, which means employers must be diligent in tracking hours and understanding the various classifications of their workforce.

One common approach for businesses is to use a look-back measurement period—such as six or 12 months—to calculate the average weekly hours worked by temporary employees. This allows employers to assign a status to these employees based on actual work patterns, rather than projected hours. Once a status is assigned, it can be locked in for a subsequent stability period, during which the employee's benefits eligibility remains unchanged, even if their hours fluctuate.

Given these complexities, many business leaders choose to work with benefits brokers, legal counsel, and benefits administrators. These experts can help navigate the intricacies of employee classification and ensure compliance with federal, state, and local regulations. By partnering with professionals, businesses can avoid costly penalties and ensure that all employees, including temporary ones, are categorized correctly for benefits eligibility.

Benefits Brokers Can Help Define Employee Categories and Eligibility

Determining which temporary employees should receive benefits requires careful consideration of legal requirements and your company’s goals. A well-structured employee benefits package, even for temporary staff, can improve productivity, foster loyalty, and create positive word-of-mouth about your organization. But categorizing employees can be a complex process, particularly when dealing with regulations that vary by jurisdiction and employee classification.

Working with an experienced benefits broker can simplify this process. They can help ensure that your company remains in compliance with all applicable laws while crafting benefits packages that meet the needs of both your temporary and permanent employees. If you’re unsure about how to proceed or need assistance in defining your employee categories and benefits eligibility, contacting a broker can be the first step toward ensuring your business is on the right track. Speak with a KBI Benefits agent today to get started.

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Employee Benefits Education for Younger Employees

by Chris Freitas • 23 January 2025

For younger employees stepping into the workforce, navigating employee benefits can feel like deciphering a foreign language. This lack of understanding often results in missed opportunities to maximize benefits and unnecessary expenses for both employees and employers. The solution? Comprehensive education. By helping younger employees understand their benefits early and effectively, employers can empower them to make informed decisions, leading to improved satisfaction, cost savings, and overall well-being. Here’s how employers can take actionable steps to educate their younger workforce on employee benefits. 1. Start with the Basics Young employees, particularly those new to the workforce, often lack foundational knowledge about insurance and benefits. Start with a "Benefits 101" approach, covering essential topics such as common insurance terminology, how group health coverage works, and the importance of enrollment deadlines. Breaking down these concepts into digestible pieces will give employees the confidence to engage with their benefits plans. Providing user-friendly resources like glossaries of key terms, FAQs, and introductory guides can make this foundational education accessible and engaging. 2. Highlight the Value Younger employees are more likely to engage with benefits education when they see personal value. Explain how understanding their benefits can lead to smarter healthcare decisions, financial savings, and even long-term investment opportunities. For instance, show how researching provider networks can significantly reduce out-of-pocket costs or how contributing to a 401(k) early can yield substantial retirement savings. Focusing on tangible benefits helps employees connect the dots between learning about benefits and improving their overall quality of life. 3. Use Varied, Engaging Formats Gone are the days when lengthy handouts and dense white papers were the only options for benefits education. Younger employees respond better to diverse and interactive formats. Consider using: Videos to explain complex topics in a simple, visual manner. Infographics to break down key points. Email series to provide regular, bite-sized education. Interactive webinars for live Q&A sessions. Posters and flyers for quick reminders in shared spaces. By diversifying your approach, you can keep employees engaged while reinforcing important messages. 4. Make It a Continuous Process Benefits education shouldn’t be limited to onboarding or open enrollment periods. Make it an ongoing effort throughout the year. Create a communication calendar to share relevant topics each month, such as how to use telemedicine, when to visit urgent care versus the ER, or how life events affect benefits. Regular education keeps benefits top of mind and helps employees feel supported as their needs evolve over time. 5. Encourage Questions and Provide Support Even with robust educational efforts, employees will still have questions. Ensure your HR team is equipped to answer these inquiries promptly. Designate a dedicated benefits specialist who can respond to emails, attend meetings, and offer personalized guidance. Additionally, consider scheduling one-on-one meetings before open enrollment. These private sessions provide a safe space for employees to ask questions they might hesitate to bring up in larger group settings. Why Benefits Education Matters Educating younger employees about their benefits isn't just about helping them understand health insurance jargon; it's about equipping them to make informed decisions that positively impact their lives and your organization. Employees who understand and value their benefits are more likely to utilize them effectively, reducing unnecessary costs and increasing overall satisfaction. Build a Better Benefits Plan with KBI Benefits At KBI Benefits, we understand the importance of a well-designed benefits plan paired with effective education. Our team can help you craft an attractive benefits package that meets your employees’ needs while providing the resources and support to ensure they know how to make the most of it. Investing in benefits education not only improves employee satisfaction but also boosts productivity and loyalty. Speak with a KBI Benefits agent today to take your team’s performance and well-being to the next level!