Handling the ACA Cost Impact: Staffing Suppliers vs. EOR


With all the changes wrought by the implementation of the ACA aka Obamacare, many organizations that engage a contingent workforce management strategy are being forced to reassess the ways in which they approach this practice.  As we’ve discussed in past posts, there is a debate under way about who should ultimately shoulder the responsibility for absorbing the new costs associated with ACA compliance. 

As we’ve learned to date, every staffing supplier is grappling with their own calculations surrounding how much the ACA will add to their cost of doing business.  Once they’ve determined how much estimated cost will be incurred, they’re then working through how to deal with it. The following options exist for dealing with the new costs.  

Suppliers can:

  • Add a dollar value increase to bill rates — i.e., $0.40 increase to bill rates across the board
  • Add a percentage increase to bill rates — i.e., 1.5% increase to bill rates across the board
  • Include a separate line item on invoice to account for actual costs associated with providing ACA-compliant benefits coverage for participating employees

The problem with any of these approaches if you’re a staffing suppliers’ customer is the methods for recovering costs vary widely with no clear standard. Thus, each supplier will arrive at their own calculation making it especially difficult for the customer to perform apples-to-apples comparisons and make selections accordingly. If the customer has the personnel and bandwidth to validate each suppliers’ calculation, then this could be a way forward.

Alternatively, the customer could elect to engage an Employer of Record service and source all their contractors internally. While this would return some of the onus of sourcing candidates to the customer’s HR function, it would eliminate the broad variability in cost calculations. Since the Employer of Record would be responsible for providing ACA compliant coverage to it’s employees, the cost would be fixed and baked into the equation. The customer would only need to perform due diligence on one company’s cost calculation to determine if it seemed equitable.  Once they had found an acceptable EOR arrangement, their exposure to ACA related uncertainty would be greatly diminished.

Everyone is being exposed to some degree of pain/discomfort as the new law is fully implemented and every organization will be required to reach a determination as to what is best for their own operations with respect to health insurance. Workforce management experts like nextSource are standing by to help customers determine their best course forward and have performed a good deal of research in order to aid the decision-making process. See our latest eBook on ACA compliance for more detailed information critical to deciding whether to rely on a base of staffing suppliers or to repatriate HR and leverage an EOR.

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