How to Count Full-Time and Full-Time Equivalent Employees

By Mickey Matran / January 20, 2015 / Uncategorized No Comments

The Affordable Care Act has made it necessary for more companies to pay more attention to accurately counting their full-time and full-time equivalent employees. But it can be confusing because under the ACA there are different methods for counting employees depending on the provision of the law: the Employer Shared Responsibility, Small Business Health Care Tax Credit, or Small Business Health Options Program.

Here’s how to count full-time and full-time equivalent employees for the different provisions.

Employer Shared Responsibility

Under this provision, a full-time employee is one who is employed at least 30 hours a week on average. A full-time equivalent employee is a combination of employees’ hours worked that equals 30 hours a week. For example, if one employee works 20 hours a week and another works 10 hours a week, the two together are a full-time equivalent.

The Employer Shared Responsibility comes into play if a company averages a combination of full time employees (including seasonal employees) and full-time equivalent that equals or is more than 50 in the past calendar year.

There’s an exception for employers whose workforce is at least 50 full-time employees or full-time equivalent for 120 days or fewer in a calendar year only because of seasonal workers. Those employers are exempt from the Employer Shared Responsibility requirement.

Small Business Health Care Tax Credit

Combine total hours of service for employees, not including seasonal employees who work fewer than 120 days, and don’t exceed 2,080 hours of work for any employee. Then divide by 2,080. Round down to the next lowest whole number. That is the number of full-time equivalent employees. If the number is less than one, round up to one.

SHOP

Small businesses can find ways to cover their employees through the SHOP Marketplace. It’s open to employers with 50 or fewer full-time employees (100 or fewer starting in 2016).

Calculating full-time employees and full-time equivalent employees for the SHOP Marketplace is similar to counting for the Employer Shared Responsibility provision: two half-time employees will generally equal one full-time equivalent. You may also count the number of people who worked an average of 30 or more hours a week in the past year, and add the number of hours worked per week by non-full-time employees divided by 30. The result is your full-time equivalent.

Calculation Challenges

As you can see, it’s important to understand why you’re calculating full-time and full-time equivalent employees before you do so, and the numbers may vary by provision. It’s important to know that details such as definitions of hours of service and exceptions vary by provision as well, and as different provisions and regulations go into effect, things may change.

Getting your calculations incorrect can put you at risk for investigations, fines and penalties down the road. If you’re in doubt, check with a trusted partner to ensure you’re counting your full-time and full-time equivalent employees correctly — especially as the situation changes.

Contact us if you need help calculating your company’s full-time and full-time equivalent employees, or navigating the process of buying health insurance for your employees under the ACA.

HR Solutions is a human resources outsourcing firm based in Baton Rouge, Louisiana. We eliminate human resources headaches for businesses with 10 to 1,000 employees by handling their payroll, employee benefits, regulatory compliance and other staffing needs. Contact us to learn how we can streamline your company’s human resources function to save money and reduce risk.

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