The question of who is and who is not considered a full-time employee has recently become a lot more important. This is due to the looming deadline concerning the employer mandate (part of the Employer Shared Responsibility Provision) of the Affordable Care Act (ACA), or Obamacare. The law basically states that any business employing fifty or more full-time equivalent (FTE) employees is considered a large employer (as opposed to a small business employing fewer than fifty full-time employees). Under Obamacare, all large employers will be required to provide health insurance benefits to 95% of their FTE employees. Not only that, but they will also have to provide benefits that cover the dependent children of those employees up to the age of 26.
This mandate, originally scheduled to take effect in 2014, was pushed back to 2015/2016, but if affected businesses are not in compliance by 2016, they could find themselves facing serious penalties. This makes the issue of determining what qualifies as a FTE employee very important for businesses on the cusp. Once a company reaches this level, employing 50+ employees full time, it is just starting to make the transition from a small company to a larger one. With government regulation in play, there has to be some set number at which employers are required to begin providing benefits, but that doesn’t necessarily mean that a company employing fifty FTEs has the same capital on hand to cover health benefits as, say, a well-established mega-corporation employing thousands.
So what exactly qualifies as a full-time equivalent employee? If you asked the average person, most would probably say that full-time work is 40 hours per week. Up until recently, an average of 32 hours per week generally made employees of larger businesses eligible for benefits. However, in consideration of the employer mandate portion of the ACA, the government set up guidelines for determining which employees are considered FTE and thereby must be counted in establishing the size of the company.
Employees that work (or can reasonably be expected to work) 30 or more hours each week or 130 hours each month are considered to be full-time employees. However, in addition to year-round employees, many businesses also hire temporary or seasonal help during the busiest times of the year. If these employees work more than 30 hours per week, do they have to be included in the count? Perhaps. Only employees that work more than 120 days per year need be included when determining company size. So if you only hire these employees for the 60-90 days leading up to the holidays, for example, after which they are let go, you needn’t include them in your FTE head count.
You may also have employees whose work hours are considered variable (they work 30+ hours for a portion of the year but fewer hours for another portion). Again, you’ll have to average out hours worked and add up days worked to determine eligibility for FTE status. To do this, you’ll also need to create a measurement period and a stability period; but don’t worry if this is sounding too confusing – there are guidelines available to help you calculate these periods. If you own a business and you have yet to make a determination concerning whether or not you fall into the “large employer” category, now is the time. Once 2016 arrives, you’ll be expected to comply with the Employer Shared Responsibility Provision of the ACA or face penalties, so you need to be prepared.
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