The Watercooler

Are You a Large or Small Employer?

This post is courtesy of Leavitt Group

HOW DO I CALCULATE HOW MANY “FULL-TIME EQUIVALENTS” I HAVE?

For purposes of the Employer Shared Responsibility provisions, the number of full-time employees (FTEEs) and “full-time equivalents” (FTEs) an employer has in one year (e.g., 2014) determines whether the employer is large or small for the next year (e.g., 2015). The final regulations provide a special transition rule for 2015 only: an employer can elect to use only six, or more, consecutive months in 2014, rather than all 12 months. A large employer for this purpose is one who employed on average 50 or more full-time employees and/or FTEs on business days in the prior year.

A “full-time equivalent” is two or more part-time employees whose hours total 120 hours in a month. For example, two part-time employees who each work 60 hours a month, or three part-time employees who each work 40 hours a month. An employer with fewer than 50 full-time employees could be a large employer if it employs a lot of part-time employees.

  • Full-Time: Any one person working 30 
  • Part-Time: Calculated by taking the total hours worked by all part-time employees in a month divided by 120.
  • Seasonal: Special rules apply if seasonal workers push an employer over the 50-employee threshold. Seasonal workers are not limited to agricultural or retail work

THE PROCESS TO CALCULATE TOTAL NUMBER OF EMPLOYEES
The process to determine employer size for a particular year is to count the number of employees for each month in the prior year, and then calculate the average number of employees per month. Specifically, the calculation is made as follows:

1. FOR EACH MONTH

  • Count regular full-time employees (those who work at least 30 hours/week).
  • Determine part-time employees (those who work fewer than 30 hours/week) and sum the total hours worked by part-time employees for the month.
  • Divide total part-time hours for the month by 120 to determine the count of FTEs for that month. Count thefractions and round to the nearest hundredth (for example: 30.544 FTEs would be rounded to 30.54).
  • Add full-time employees and FTEs to determine the total number for the month.


2. REPEAT FOR EACH MONTH OF THE YEAR (or for a period of at least six months in 2014, at employer’s option)


3. TOTAL THE MONTHLY NUMBERS
Total the monthly numbers to get an annual number, then divide by 12 (or by at least 6 in 2014). Ignore any fraction. For example, 49.8 employees would count only as 49 employees. If the average number of employees per month is at least 50, the employer is a large employer unless the seasonal employee exception applies.

4. SEASONAL EMPLOYEE EXCEPTION

  • If an employer has more than 50 full-time employees or FTEs for 120 days or fewer during the calendar year, and
  • During that 120 days (or fewer), the employees in excess of 50 were seasonal employees.
  • The employer does not count those seasonal employees in its count, so it would NOT be a large employer.
SEASONAL EMPLOYEE EXCEPTION