What’s the significance of a number? These days 29 has become a magical number for many employers of lower wage labor. Sticking with 29 can save many employers quite a bit of money. If they employ more than 50 people, 29 is a very important number indeed. Does it mean you should employ people 29 and younger? Should at least 29 people have college degrees? What’s the point of the number? We can ask Obama since his name is all over our healthcare reform. He’d probably tell you 29 doesn’t matter. If you ask an employer, it means a lot. Under the rules of Obamacare, if your employee works less than 30 hours a week, you don’t have to face any penalties for not offering health insurance.
Thus in 2013 we’ve entered a world where many employers are now working their “part-time” staff 29 hours a week. If they work 30 hours, and the business employs 50 or more people, then they must offer health coverage or pay a $2000 fine per person over 30 employees. Thus, in addition to working people 29 hours a week, they’re trying to employ no more than 49 people. Here’s how the math looks to a business owner.
Say they employ 49 people at $10/hr for 40 hours a week. That’s a total labor cost of $19,600 per week ignoring taxes and other benefits. Adding a 50th employee would increase labor costs by $400 to $20,000 a week. But, that would also trigger the $2,000 fee for employees 31-50 if they don’t offer health insurance. So that 50th employee costs the company not just $400 a week, but an additional $40,000 in fees. Every employee afterward costs $400 a week plus another $2000 fee.
But, the requirement for health insurance is simply for full time workers. The calculation is based on FTE, or “full time equivalent” workers. For example: one person can work 40 hours or two can work 20 each. Either way that’s an FTE. So the fee is triggered when you hit 50 FTE, but the insurance only has to be offered to a full time employee. Take a deep breath…..
Obamacare defines a full time employee as someone working 30 hours or more per week. So you can break the 50 FTE threshold and if you don’t employ any full time employees then you don’t have to pay the $2000 fine or offer the insurance. So, you could employ 50 full timers at 40 hours per week and pay $20,000 in fines, or you could work 69 workers at 29 hours a week each and get the same labor without the fines. The choices look something like this:
Which option do you think small businesses are choosing? They may be going to great lengths to work these part-timers too. According to the Wall Street Journal article linked below, competing fast food franchises are hiring each other’s part time workers for the other shift. So you may work your morning shift taking orders for egg McMuffins and spend your afternoons saying “welcome to Burger King”. Is this the best decision in the world? Maybe. We’ll explore that tomorrow.
Read: ObamaCare and the ’29ers’ (WSJ)