If an employer has 50 or more full-time equivalent employees, that employer is recognized as an applicable large employer.
An applicable large employer’s main aim is to provide health insurance to the employees working in his company.
The question is, what counts as a full-time equivalent employee (FTE)?
If you own a company and have employees who work for you at least 30 or more hours per week, they are known as the standard full-time employees of your organization, and that each person is counted as Full-Time Equivalent Employee (FTE).
The company also has some part-time employees. To calculate them as full-time equivalent employees, you have to combine the hours of service each part-time employee invests for a month in your organization and divide those hours by 12.
And if you are an applicable large employer, you have to calculate the total full-time equivalent employee count for each month of the prior year.
Every month you will count the full-time equivalent employees based on the hours they’ve worked and added the FTE from both part-time and full-time employees to get the actual count of that month and divide it by 12 and an average is obtained.
If your full-time equivalent employees are 50 or more than that in the last year, you will be an applicable large employer for the next year as well.
But all these calculations only apply when you qualify to be an applicable large employer.
Companies also hire some seasonal workers, and as the name suggests, they work for a particular season, i.e., for some specific months. For example, in February for Valentine’s day, a flower shop owner appoints extra workers to complete the customers’ demand.
These seasonal workers are counted in the full-time equivalent calculations. But they are only excluded if the employer has 50 or more full-time employees for 120 days every year.
But again, all these calculations for counting your employees is valid if you are considered as an applicable large employer.
Criteria for common owners of different companies
Sometimes different companies that are related to each other are owned by a common person. For example, suppose someone has two separate companies. In that case, one has 25 FTE employees, and the other has 35 FTE employees, so both are combined and treated as a single company for determining whether you are an applicable large employer or not.
Moreover, if someone owns 4-5 different companies that are not even related to each other, still, they will be combined together when determining the employee’s count.
There is also a scenario when a company is owned by a group of people who are in partnership. And if that group of owners also have shares in any other company, those companies are combined together during the employees’ counting.
The Wrap Up
There are a lot of chances that many changes have come into your business and the number of employees working for your company. Therefore it is essential to reevaluate your workforce every year.