Hours of Service
“Section 4980H(c)(4) provides that, for purposes of section 4980H, a full-time employee is an employee who was employed on average at least 30 hours of service per week.”
This section of the Internal Revenue Code (IRS), under the regulations of the employer mandate, specifically uses the word “service” to identify the full-time employee and to calculate their equivalent. Traditionally, employers define a full-time employee as a person who works 40 hours a week. However, the employer mandate is more specific on the number of hours and the type of hours that constitute a full-time employee (or their equivalent).
As defined by Section C. of the Internal Revenue Code, Hours of Service include every hour in which an employee is paid, or entitled to payment for performing duties for the employer. The Code further explains Hours of Service as periods of time when the employer is not performing duties, but is paid or entitled to payment. For instance, Hours of Service include vacation, holidays, illness, incapacity (including disability), layoff, jury duty, military duty, or leave of absence.
The definition provided by the IRS, in accordance with the employer mandate, should be applied to identify your full-time employees and to calculate their equivalent. Correctly determining your full-time employees (or their equivalent) will establish your Applicable Large Employer (ALE) status. Applying the incorrect definition of Hours of Service could activate a domino effect of errors. Those errors include miscalculation of employees and misclassification of your business. This could leave your business at risk of penalties or result in preparing for regulations that may not apply to your business.
Though it is easy to misinterpret the regulations of the employer mandate, it is a mistake that can be avoided if the proper guidance is provided. For more information on Hours of Service or the employer mandate, give us a call or check our website for future posts.
Mario K. Castillo