Ask the Expert, Benefits

Ask the Expert: Are 3 Different Benefit Payroll Deductions OK?

We would like to have 3 different payroll deductions for employee benefits—for employees who work under 30 hours per week, 30-39 hours per week, and 40 or more hours per week. What are the surrounding legal issues?

Your inquiry raises the following issues for consideration:
Under the FLSA, an employer may deduct the “reasonable cost” of providing health insurance, even if the employee’s cash wage drops below the minimum wage. The FLSA requires that a deduction for health insurance may cut into the minimum wage if the employee freely assents and if the employer derives no profit or benefit from the deduction.

Assuming that the deductions meet this requirement, the FLSA would allow the employer to do so. More information on deductions is available here.

Under the Affordable Care Act (ACA), cut-off for “full-time” is an average of 30+ hours per week over the course of a given month, or 130+ hours total for a given month. Depending on how the employer calculates hours for ACA purposes, this  could present an issue if there are employees on the borderline that could potentially fluctuate in  and out of full-time status, and the amount of the deduction is based on offering health insurance.

More information on the ACA is available here.