Franchises to face a potential struggle from burden associated with health insurance tax

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Small Business Health Insurance TaxesFranchise owners who are struggling to come through the economic crisis in an environment where poverty is rampant, and are starting to wonder if their ability to improve the employment situation may be related to the health insurance tax that was established as a part of the 2010 Patient Protection and Affordable Care Act, and which will begin as of 2014.

The health insurance tax will require employers with 50 or more employees to pay a tax of $2,000 per worker, if the company chooses not to offer health insurance or adequate health insurance to meet the new federal government standards.

As a result, some are claiming that this is leading businesses, such as franchises, to feel disinclined to hire additional workers beyond the 50-person mark. This is because there would be no additional tax on a company that has 49 employees, but companies with 50 employees would be taxed $40,000 (as the tax does not apply to the first 30 workers). Equally, a company with a staff of 75 would face a tax of $90,000, and one with 150 employees would need to pay $240,000.

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Companies are seeing that the more employees they have, the greater their taxes will be.

That said, it is possible for businesses to minimize their costs by using part-time employees instead of full-time workers, as the tax does not apply to those who are hired part-time. It is anticipated that many companies will strategically keep their full-time workers to 49 or under, and replace the rest of the hours with part-time workers.

Franchises, though, will not be able to accomplish this same goal, as a single owner of multiple establishments are all considered to be the same organization. Therefore, if there are 15 full-time employees at four locations, then there are already 60 full-time employees and the employer will be required to either provide health care benefits or pay a $2,000-per-worker tax.

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