Will the ACA Affect Employee Turnover Rates?

As the first month of 2014 comes to a close, the Affordable Care Act (ACA) is making its way through the American employment system. Concern has grown in human resources departments about the way the ACA may impact employee turnover. If you are in charge of hiring and training, it is crucial to understand how your company will be affected by the new laws. In doing so, you can prepare for turnover and make adjustments to your HR process as needed.

For human resources professionals, employee turnover is a significant issue. Each time an employee leaves, you must go through the long and costly process of finding candidates, interviewing, hiring, and training. If the ACA affects turnover rates, it may have significant financial ramifications for your company.

Companies that are likely to experience a change in employee turnover as a result of the Affordable Care Act are those that depend on low-wage seasonal or temporary workers. Under the ACA, companies must provide health insurance for employees within the first 90 days of employment. The 90 days includes weekends and holidays, which means that the period may end in the middle of a week or month. Many insurance providers only offer coverage that starts at the beginning of a month. If the end of the 90-day period falls on the 15th, an employer must start providing coverage on the first of the month to ensure that the employee is covered by day 90.

If your company works with low-wage temporary workers, the cost of providing insurance—even just for a month—can have a significant impact on your bottom line. To avoid paying insurance costs, you may need to hire temporary workers for periods of 90 days or less. As a result, employee turnover will increase. For many businesses, the need to hire and train new workers every three months may prove to be cost-prohibitive. You may decide to stop temporary hiring and transition to a larger full-time staff, which may decrease employee turnover.

According to a recent story from The Hill, other companies will avoid ACA health insurance costs by cutting hours. Because the ACA mandates coverage for employees who work 30 hours or more per week, some companies will be forced to cut staff members' hours to 29 or lower. As a result, turnover may increase as some employees leave to seek full-time employment and others are hired to fill in the gaps left by the decreased hours.

For most companies, the effect of the ACA on employee turnover is yet to be seen. As the year unfolds, HR departments will need to stay alert and ready to make the changes that are necessary for long-term business survival.

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