Temporary Relief? What to Consider When Turning to Temporary Workers This Season

Given these circumstances, plan sponsors may want to review their policies with counsel to ensure they are clear on what benefits temporary employees may qualify, what regulations may be involved, and to generate the best way to track those employees’ hours.

New research from the Center for Retirement Research indicates a significant retirement risk for half of the American population. At the same time, data from the Bureau of Labor Statistics (BLS) shows that employees are also continuing to quit in 2023 at a rate similar to 2022. Some employers may be turning to long term temporary employees to fill these gaps. Those employers may be wondering if they can roll temporary employees into systems set up for seasonal workers in terms of benefits. Plan sponsors should exercise caution in that area. Here’s why.

The job market’s consistent trait of late is its inconsistency. First, it was hotter than Taylor Swift tickets. Then, like your seventh-grade crush, it suddenly turned icy. Both workers and employers seem to be caught in the middle. While there are a variety of factors underlying the rapid ups and downs of the job market, many have turned to temporary work to ride out the storm. Surveys throughout the Fall of 2022 showed that large numbers planned to work more than one job to keep up with inflation.  

Just a year ago, many labor market and human resource commentators were grappling with the result of the so-called Great Resignation, where large numbers of employees left their jobs due to Pandemic Stress. That created stress on employers to find candidates quickly. But now, according to new data from the BLS, the Great Resignation seems to have quieted down in most industries, except those notable for seasonality.[1] Aside from health care and social assistance, which had a rate of employee quitting almost equal to data from 2022, the data seems relatively constant across the industries with retail quitting rates are down, and food services is slightly up.

But the sheer number of those quitting in food services and retail dwarfs the other sectors. For retail, 560,000 employees quit in March of 2023(down from 641,000 in March of 2022). In accommodation and food service 839,000 quit in February of 2023 and 661,000 in March of 2023. In comparison, 818,000 quit in March of 2022. February’s quit rate for accommodation and food service was 6% of the total workforce. Those industries most often are the source of secondary income or seasonal work. The BLS’s data also shows that the total number of job openings decreased in the last reporting period, down 384,000 to just 9.6 million.

In other economically rough patches, seasonal work that may have been done by students is sometimes filled by adult job seekers. In 2010 articles about students unable to find summer employment because adults had taken those seasonal or temporary positions were common. “Summer positions in recreation, retail and fast food may have traditionally been filled by teens, but adults with more work experience are seeking these same positions.”[2] Is that pattern repeating now that inflation is causing a drop in job openings? It’s unclear. One report noted that “last year, more than half of the country’s 300,000 public pools had to limit operations because they couldn’t find staff…. This year... it’s likely to be worse.”[3]

Employees may search for temporary or seasonal work to supplement income or cover an unexpected cost, like a family member’s medical needs. Job search engine Indeed recommends that unemployed folks look to temporary work to prevent employment gaps on their resume.[4] Some may look to temporary employment to explore career options before spending money on retraining programs or additional degrees.

Employers may look to temporary employees to fill in for more permanent roles while a volatile market makes hiring harder. Employers who regularly hire seasonal workers may think they can rely on their policies for those workers when hiring temporary workers. But temporary and seasonal workers aren’t the same.

Seasonal workers may be eligible for benefits under the Affordable Care Act. New legislation like the Secure Act 2.0 may also make seasonal workers eligible for retirement benefits, depending on the details of their retirement plan. Best practices in the human resources field include ensuring seasonal workers are clear on their benefits eligibility by adding that information to their employment contracts.

Calculating hours for temporary workers is essential. For those not employed through an agency (rendering them employees of the agency, not the plan sponsor’s organization), employers should note when the temporary employee hits important milestones like the fourth month (when they may be eligible for health care benefits). And temporary employees who work remotely may also need extra care when it comes to calculating their hours. Since hours count towards benefits and sometimes in eligibility of retirement plan participation, many human resource experts urge employers to create systems that will accommodate these employee’s work.

Additionally, seasonal employees and temporary employees are defined differently by important regulations. For example, the ACA defines a seasonal employee as one who works for six months or less at around the same time each year. But interns, consultants, or IT specialists who are hired for specific projects wouldn’t be considered seasonal.[5]

Given these circumstances, plan sponsors may want to review their policies with counsel to ensure they are clear on what benefits temporary employees may qualify, what regulations may be involved, and to generate the best way to track those employees’ hours.

[1] https://www.bls.gov/news.release/jolts.nr0.htm

[2] https://www.theledger.com/story/news/2010/06/28/typical-summer-jobs-for-teens-more-scarce-this-year/26274520007

[3] https://www.marketplace.org/2023/04/14/labor-shortages-make-seasonal-hiring-tough-summer

[4] https://www.indeed.com/career-advice/finding-a-job/seasonal-work

[5] https://www.experian.com/blogs/employer-services/aca-and-seasonal-employees

These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.

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