An employee is an individual who is hired by an employer to contribute services to the employer in exchange for compensation. Although this definition of “employee” may seem obvious and intuitive, it carries potentially extensive liability or obligations for an employer under PPACA, particularly when employees are distinguished from independent contractors
Independent contractors are workers who exchange services for compensation with employers without an employment relationship. PPACA’s employer mandates do not apply to independent contractors.
Employees are typically distinguished from independent contractors through an analysis of the employment relationship, the level of control an employer has over the employee, and definitive documents such as employment agreements.
Under PPACA, many classifications of employees exist. These classifications include full-time, part-time, seasonal, and variable hour employees. Depending on an employee’s classification, the employer faces different regulations and obligations under PPACA. Thus, proper classification of employees is critical to maintaining PPACA compliance.
LBMC can help you navigate through the extensive ACA requirements, determine any penalty exposure, and develop strategies to eliminate or reduce future penalty exposure.