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Health Care Reform: Pay or Play Rules: Calculating Hours of Service for Non-Hourly Employees

Employer Options: Calculating your responsibility under the Pay or Play rules within Health Care Reform for non-hourly employees.For many employers — including those who are quickly growing and those who are well-established as “large employers” — the impending impact of the Pay or Play rules under the Affordable Care Act has been on their radar for quite a while. Recently, the IRS published clarification on the definition of “hours of service” in respects to how employers can count their full-time employees.

To help companies understand how this may impact their business, here is an overview of how employers may count non-hourly employees.

Three Methods Available

There are three methods available to help employers calculate the hours of service of non-hourly employees. These are:

  • Counting actual hours of service from records of hours worked and hours for which payment is made or due
  • Using a days-worked equivalency method under which an employee is credited with eight hours of service for each day with at least one hour of service
  • Using a weeks-worked equivalency method under which an employee is credited with 40 hours of service per week for each week with at least one hour of service

Flexibility to Employers

Along with having these options, employers may use different methods for non-hourly employees based on different categories of employees. This is the case as long as the categories are reasonable and consistently applied.

Also, employers have the ability to change methods each calendar year.

However, there is a note of caution to employers: The days-worked or weeks-worked equivalency methods may not be used if they would substantially understate the hours of service. The number of hours of service calculated using the days-worked or weeks-worked equivalency must reflect generally the hours actually worked and the hours for which payment is made or due.

Additional Guidance

I hope that you find this summary helpful as you seek to understand how Health Care Reform may impact your business.

Of course, the recent rule clarifications extend far beyond the overview provided in this article. To receive a copy of our full Compliance Bulletin on this topic, please give me call at 781-759-1222.


Image courtesy of Grant Cochrane / FreeDigitalPhotos.net

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Posted in: Benefits and Insurance, Human Resources, Legislation

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