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Sodexo’s Stumble on Benefits for Workers at Colleges
Sodexo USA provides food, health, and other services to client organizations. A school or hospital’s cashiers and cafeteria workers may work for Sodexo under a contract with the institution. Sodexo needs dedicated workers but has to keep an eye on costs so it can win business from organizations watching their own bottom lines.
Cost is therefore among Sodexo’s considerations in complying with the Patient Protection and Affordable Care Act (ACA). Sodexo must determine which workers are considered full-time, because full-time workers must receive health insurance benefits if the employer wants to avoid paying a fi ne. The ACA definition of “full-time” means the employee works on average at least 30 hours a week; the employer has some latitude in deciding the period over which it calculates the average.
In the past, Sodexo considered an employee full-time if he or she worked at least 30 hours a week for six or more weeks out of a quarter (12 weeks). In 2013, the company announced it would begin determining full-time status by averaging employees’ hours over a one-year period.
Some employees who met the quarterly requirement no longer qualified as full-time and lost their eligibility for health insurance and other benefits available to full-time workers, such as disability insurance and paid vacation and sick time. Employees in schools were hit particularly hard. Some worked full-time or more during the academic year but little during the summer. The ACA requires that employers count only the academic year in figuring the full-time status of teachers, but the rule does not mention contract workers. According to Sodexo, about 4,000 employees who had company-provided insurance lost it under the new formula.
Julie Peterson, Sodexo’s vice president of compensation and benefits, explained that in planning its benefits package, Sodexo must balance “the most economically feasible model” against concern for employees’ needs. She pointed out that part-time employees could “get access to benefits on the public [health insurance] exchanges in ways they couldn’t have before.” Peterson also noted that because the ACA requires individuals to have insurance, more employees were signing up for Sodexo’s health insurance options, driving up total benefits costs.
Despite these explanations, Sodexo’s decision caused a backlash. Backed by the Unite Here union, Sodexo workers launched protests and generated negative publicity. One school, Earlham College, insisted that its contract with Sodexo specify its workers be considered full-time. Peterson later announced that in a regular review, Sodexo had decided to revise its policy again. For school workers, its formula will use workers’ average hours during the academic year as their hours for the summer months. Most workers who had lost benefits coverage would regain it. Peterson said Sodexo could make the change and “remain competitive in the market.”
1. Which method of calculating full-time status do you think best supports Sodexo’s strategy? Why?
2. What else could Sodexo do to promote employee satisfaction while managing benefits costs?