Variable Hour Employees

The number of hours worked is a determining factor for whether or not the employee is eligible for benefits. If an employee works unpredictable hours they could be considered a variable hour employee (VHE). However, if they work unpredictable hours but an employer knows that they will work on average more than the minimum hours for benefits eligibility, then they are not a VHE.

Example: A restaurant has 5 employees who work floating schedules. While hours from week to week may vary for any given employee, all employees are expected to work at least 20 hours per week (excluding approved vacation, etc). Eligibility for benefits is 20 hours or more per week. This means the employees are not VHEs because while they work unpredictable hours, they’re still working enough to meet the eligibility requirements.

There are a number of other factors to consider, including but not limited to:

  • Whether or not the employee is replacing a full-time employee.
  • The extent to which employees in the same or comparable positions are full-time employees.
  • If the job was advertised, communicated to the new hire, or otherwise documented (i.e. contract or job description) as requiring hours of service that will average more or less than 30 hours per week.

Note: No single factor is determinative, and other factors may be considered. When in doubt, remember that this is a tricky classification. Use it sparingly.

Look-back period

This refers to the designated period of time when the employee will be evaluated for average hours worked in order to determine eligibility for benefits in a future stability period. The employer will look back on the employee's hours to figure out the employee's eligibility. If they work over 20-30 hours (depending on the state and contracts with the insurance company), they may be eligible for benefits.

Note: Customers who have benefits with Gusto will have a 12 month look-back period.

Stability period

If a variable hour employee is deemed eligible for benefits according to the hours worked during the look-back period, they’ll be able to participate in the company benefits during the stability period regardless of the amount of hours worked during that subsequent stability period. The stability period is the same amount of time as the lookback period.

Example: If the look back period is 12 months and the employee is deemed eligible for benefits, the employee will be entitled to have coverage for the following 12 months. The 12 months during which the employee is covered will simultaneously serve as the employee’s lookback period for coverage the following year.

Note: Customers who have benefits with Gusto will have a 12 month stability period.

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