Retailers, food establishments, and some other types of businesses routinely take on more help to handle customers during the holiday season. These extra workers can go a long way in making your holiday season a success. Of course you need to treat them with the same care and respect as you do your permanent staff, such as avoiding any discriminatory practices and providing sufficient training. Also, be sure you consider the following special tax, financial, and legal concerns.
The Fair Labor Standards Act (FLSA) requires employers to pay the minimum wage rate, as well as overtime, for hourly employees (nonexempt employees). This applies, for example, to salespeople hired for the holidays. The applicable rate you must pay is the federal minimum wage rate of $7.25 per hour, or higher, depending on your state or local hourly rate. Of course, you can pay more, and likely will if the competition demands it and your budget allows it.
There is an exemption from minimum wage rules for workers at seasonal recreation or amusement establishments, but this clearly would not apply to retail establishments. Find more information about employing seasonal workers from the U.S. Department of Labor.
Federal employment laws
Besides the FLSA, there are a number of other laws to which an employer becomes subject when the size of the state exceeds a set amount:
- Title VII of the Civil Rights Act: 15 or more employees
- Americans with Disabilities Act (ADA): 15 or more employees
- Age Discrimination in Employment Act (ADEA): 20 or more employees
- Family and Medical Leave Act (FMLA) applies when a company has 50 or more employees on your payroll for 20 or more workweeks in the current or preceding calendar year.
While independent contractors are not counted, there are no specific exemptions for seasonal workers. While you wouldn't want to do anything wrong, regardless of the number of people on your staff, having more than the requisite per law exposes you to claims by workers, so beware.
Affordable Care Act
The Affordable Care Act (ACA) requires employers with 50 or more full-time and full-time equivalent employees to provide minimum essential health coverage or pay a penalty. It also subjects you to annual information reporting obligations. In determining whether you are an applicable large employer under ACA, seasonal workers are excluded from the count. According to the IRS, seasonal workers are defined as those who work fewer than 120 days per year. The IRS says “retail workers employed exclusively during holiday seasons are seasonal workers.”
When an employee is laid off (other than for a serious cause), he or she may be eligible for unemployment benefits. The rules differ by state. For example, in Pennsylvania, anyone who earns at least 50.5% of annual income in any 3-month period is ineligible for benefits. In many other states, a seasonal worker is not barred from collecting benefits.
If seasonal workers collect benefits, it may impact what you pay for state unemployment taxes. Usually your rate is fixed on the experience of claims made against you, and having a number of layoffs can increase the number of claims and hike your rate. This may be a small price to pay for adding personnel during a busy time of year in order to keep your customers happy.
Federal laws are not your only concern when taking on seasonal help. Be sure to check with your state labor department to learn your obligations at the state level. In many cases the rules are stricter than under federal law. If you have any questions, talk with an employment law attorney.