You Don’t Have to Provide Health Insurance to Part-Time Employees, But You May Want To
Are you required to offer health insurance to part-time employees in California? No. Should you consider including part-timers in your group health insurance program? Absolutely.
Every California company has different needs, circumstances, values, and resources that will determine whether health insurance for part time-employees makes sense for them. But you should explore the possibility of expanding your health insurance offerings to include these hard-working folks. Rather than writing off the idea as too expensive or burdensome, you should understand that providing health insurance to your California employees who work less than full-time can provide your company with several financial and intangible upsides.
Tax Benefits of Offering Health Insurance to Part-Time Employees
Cost is the biggest reason many employers won’t even think about giving health insurance to part-time employees. But if California companies only look at what they pay out in premiums, they’re missing the bigger picture.
Remember, all expenses related to health insurance, whether for full-time or part-time workers, are 100 percent tax-deductible under both federal and state law. This holds true no matter what type of entity your company is, whether an S-corp, C-corp, LLC, or partnership. By expanding your health insurance program to cover more workers, you can create substantial tax savings.
And the burden of premiums won’t only fall on your corporate shoulders. You can have part-time employees pay a portion of the premiums with pre-tax dollars. You simply deduct the premium costs from their paycheck before calculating state and federal tax obligations. By doing so, you lower the amount of your employees’ taxable income and increase the amount that winds up in your workers’ pockets each pay period.
For small business owners, the tax benefits of providing health insurance to part-time employees are even more substantial. The Affordable Care Act (ACA) provides small business healthcare tax credits of up to 50 percent of your premium expenses for any two year period. Per IRS rules, companies can generally claim the small business health care tax credit if they:
- Have fewer than 25 full-time equivalent employees
- Pay average wages of less than $50,000 a year per full-time equivalent (indexed every year for inflation)
- Offer a qualified health plan to employees through Small Business Health Options Program Marketplace (or qualify for a limited exception to this requirement)
- Cover at least 50 percent of the cost of employee-only health care coverage for each employee
As with most things tax-related, the tax implications of providing health benefits to part-time employees can be nuanced and complicated. That’s why you should always consult with both an experienced health insurance broker and tax professional to understand how your insurance program impacts your tax obligations.
Attracting Top Talent
Whether you’re paying an employee for 40 hours of work each week or 20 hours, you want your people to be the best at what they do for your company. In a competitive part-time employment market, offering health benefits can separate you from others seeking to hire the same top people.
Not only do you want to attract the best talent, but you want to keep it as well. Recruiting, hiring, training, and onboarding new part-time employees can be expensive and time-consuming. Employees will be far less likely to look for greener pastures, and you’ll spend less time and money on hiring when your part-time workers have the security of employer-provided health insurance coverage.
Keeping Your Workforce Healthy and Productive
Of course, the fundamental point of health insurance is to keep plan participants healthy and get them better when they’re not. Employees who have coverage are less likely to get sick and more likely to get care when they need it. Offering health insurance to part-time employees means fewer sick days and improved productivity from your workers.
Helping Employers Throughout California During These Uncertain Times
Finding the right plan and implementing health insurance for part-time employees involves multiple considerations. Not all carriers in California offer such coverage for all employers, and your company’s specific needs and resources will play a significant role in your decision.
Helping small business owners navigate the complicated landscape of health insurance coverage is just one of the ways that Preferred Insurance helps employers throughout California ensure their workers stay healthy and covered.
As an experienced California small business and individual health insurance broker, we can answer your questions and provide practical, affordable solutions during these uncertain times. We strive to meet all of your coverage needs remotely and take care of everything via video conference, phone, or email.
Call Preferred Insurance to schedule a free consultation about your small business or individual health insurance needs.