The maximum number of hours a seasonal employee can work in a year is not governed by a single annual cap, but rather by federal definitions and hour thresholds tied to benefit eligibility. Determining this limit is a regulatory exercise for employers seeking to manage costs and avoid penalties related to health care coverage and retirement plans. The calculation centers on preventing a temporary position from being legally reclassified as a full-time role, which triggers significant compliance obligations. This requires understanding how different government agencies define a seasonal worker based on hours of service.
Defining the Seasonal Worker
Federal rules establish two distinct concepts for a temporary workforce: the seasonal employee and the seasonal worker. The Affordable Care Act (ACA) defines a seasonal employee as one hired for a position that customarily lasts six months or less, generally expected to begin in the same part of the calendar year. This definition determines an individual’s eligibility for employer-provided health coverage.
A “seasonal worker” has a separate meaning used to determine if an employer qualifies as an Applicable Large Employer (ALE) subject to the ACA’s employer mandate. If a small employer’s workforce temporarily exceeds the 50 full-time equivalent employee threshold for 120 days or less, and the employees over the limit are seasonal workers, the employer maintains its non-ALE status. This provision acts as a safe harbor, allowing businesses like holiday retailers or summer resorts to staff up briefly without triggering the mandate.
The Primary Hour Threshold: Affordable Care Act (ACA) Rules
The most immediate concern for a seasonal employee’s hours is the threshold established for full-time employee (FTE) status under the ACA. An employee is considered full-time if they average 30 hours of service per week, which the IRS equates to 130 hours of service in a calendar month. For an employer that qualifies as an ALE, exceeding this threshold obligates the business to offer minimum essential health coverage or face penalties.
Employers must track the hours of all seasonal staff to ensure they do not cross the 130-hour monthly average. Once an employee is determined to be an FTE, they retain that full-time status for a defined period, regardless of future hour fluctuations. The ACA mandate requires a systematic method for this hours calculation, making the actual limit dependent on the measurement period chosen by the employer.
Measurement Methods for Seasonal Employees
Employers have two primary systems for tracking hours and determining if a seasonal worker has crossed the ACA’s full-time threshold. The Monthly Measurement Method requires a month-by-month assessment, classifying an employee as full-time for any month they record 130 or more hours of service. This approach is highly volatile and administratively complex for a workforce with unpredictable schedules.
Look-Back Measurement Method (LBMM)
The LBMM is generally preferred for seasonal and variable-hour staff because it provides a protective buffer. Under the LBMM, an employer tracks hours over a defined Measurement Period, which can range from 3 to 12 months. If the employee averages 130 hours per month during this period, they are classified as full-time for a subsequent Stability Period, which must be at least six months long. An optional Administrative Period of up to 90 days can be used between the measurement and stability periods to process paperwork, which provides predictability for the employer.
IRS Rules and Other Federal Considerations
Beyond health care, annual hour totals for seasonal employees interact with federal retirement plan eligibility requirements. For 401(k) plans, the traditional service requirement to establish eligibility is 1,000 hours worked within a 12-month period. Employers historically structured plans to exclude employees who consistently work fewer than this annual hour threshold.
Recent legislation, known as the SECURE Act, established a new category for Long-Term Part-Time (LTPT) employees. This rule requires employers to allow employees to make elective deferrals to a 401(k) plan if they record at least 500 hours of service in a specified number of consecutive 12-month periods. This lower hour count means that seasonal staff who return year after year may eventually become eligible for retirement plan participation.
Risks and Consequences of Misclassification
Failing to accurately track a seasonal employee’s hours and determine their full-time status can lead to significant financial and legal liability. Incorrectly classifying a worker or exceeding hour limits without offering required benefits can trigger substantial penalties under the ACA’s employer mandate. These fines are levied by the IRS and can apply retroactively for each month coverage was not offered to an eligible employee.
Misclassification can also lead to legal exposure under the Fair Labor Standards Act (FLSA), particularly concerning wage and hour violations. If a seasonal employee is misclassified as an independent contractor, the employer may be liable for back wages, unpaid overtime, and liquidated damages. Employers can also face retroactive liability for federal payroll taxes, such as the employer and employee portions of FICA.