How do I calculate the number of full time equivalent (FTE) employees?”
Employers ask us all the time how the go about figuring how many FTE’s or Full Time Equivalents they have for ACA compliance purposes.
Because the Affordable Care Act’s Employer Mandate (Employer Shared Responsibility Payments or the Play or Pay ) only applies to “applicable large employers,” defined as employing 50+ FTE employees.
What if you don’t have 50 employees? So if you do not have 50 employees or anywhere close to it, you can rest assured, you don’t have to calculate. The employers who typically have the biggest challenges are the employers who have a large number of part time employees or a seasonal workforce. Many do not know that they may have to calculate, report or even may face fines or penalties.
The following steps will help you calculate the number of FTEs to determine if you are an applicable large employer.
Calculating the Number of FTE Employees
For the purposes of determining whether your company is an applicable large employer, you must include all full-time employees plus the full-time equivalent of part-time employees. Counting your full timers is easy. A full-time employee is defined as working on average at least 30 hours of service per week in a given month. How many full-time employees do you have?
For the majority of companies this is a simple calculation. For others, the calculation is more complicated
Next, count in part-time employees. To calculate the full-time equivalent of part-time employees, add the number of hours worked by part-time employees in a given month and divide the total by 120.
How many full-time equivalent part-time employees do you have?
The sum of the full-time employees and the full-time equivalent of the part-time employees is the number used to determine whether your company is an applicable large employer.
Your company is not an applicable large employer if you employed less than 50 full-time employees on average during the previous calendar year, or employed more than 50 full-time employees no more than 120 days during the previous calendar year due to a seasonal workforce.
Healthcare.gov does have a simple but effective calculator available right on their website. It can be accessed here.
Exception: Seasonal Workers
When determining if an employer is an ALE, the employer must measure its workforce by counting all its employees. However, there is an exception for seasonal workers.
An employer is not considered to have more than 50 full-time employees (including full-time equivalent employees) if both of the following apply:
- The employer’s workforce exceeds 50 full-time employees (including full-time equivalent employees) for 120 days or fewer during the calendar year, and
- The employees in excess of 50 employed during such 120-day period are seasonal workers.
A seasonal worker is generally defined for this purpose as an employee who performs labor or services on a seasonal basis. For example, retail workers employed exclusively during holiday seasons are seasonal workers. For more information about how seasonal workers affect ALE determinations, see the IRS Website Questions and Answers page. For information on the difference between a seasonal worker and a seasonal employee under the employer shared responsibility provisions see Q&A #26. And for the full definition of seasonal worker, see section 54.4980H-1(a)(39) of the ESRP regulations.
This information is intended as informational only and not legal or tax advice. You should consult with your accountant, attorney or payroll professionals for your specific situation
As always please contact your Total Benefit Solutions account manager at (215)355-2121 with questions.