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How to count employees for compliance purposes

By Higginbotham on June 05 , 2019

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Full-time. Part-time. Seasonal. The variety of work arrangements can make getting an employee count complicated – and that’s before you even deal with turnover rates. Despite the difficulty, knowing how many employees your organization has is important for legal reasons. Exactly how to count your employees depends on the legal purpose of the count.

ACA

The Affordable Care Act (ACA) employer mandate requires applicable large employers (ALEs) to provide insurance coverage to full-time employees and their dependents. Failing to do so can result in large penalties. An ALE is an employer with an average of 50 or more full-time or full-time equivalent employees in a calendar year, and there is a specific formula employers must use to determine if they are over this threshold. If they are, the ACA requires that the employer provide minimum essential coverage providing minimum value at an affordable price to its employees.

Further, employees are considered full-time if they work an average of 30 hours a week or 130 hours a month. The IRS allows two methods for determining full-time employee status: the monthly measurement method and the look-back measurement method.

COBRA

Under COBRA, employers must offer health care continuation to employees and their dependents after a qualifying event. The law applies to employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year.

According to the DOL, “Each part-time employee counts as a fraction of a full-time employee, with the fraction equal to the number of hours worked divided by the hours an employee must work to be considered full-time. For example, if full-time employees at Company A work 40 hours per week, a part-time employee who works 20 hours per week counts as half of a full-time employee, and a part-time worker who works 16 hours per week counts as four-tenths of a full-time employee.”

Medicare

To avoid late penalties, most Americans need to enroll in Medicare when they turn 65. However, individuals who are covered by an eligible employer-based plan can delay enrollment without a penalty as long as the employer has 20 or more employees.

For individuals with both Medicare and employer-based coverage, employee count also impacts Medicare’s secondary payer provision. According to Medicare, the employer plan will pay first if it has 20 or more employees. Additionally, if the employer participates in a multi-employer group health plan, it will pay first as long as one of the employers in the plan has 20 or more employees, although some exceptions may be granted.

FMLA

The Family and Medical Leave Act (FMLA) gives eligible employees the right to take unpaid, job-protected leave for certain family and medical reasons.

According to the DOL, the FMLA applies to private-sector employers with 50 or more employees in 20 or more workweeks in the current or previous calendar year. The weeks do not have to be consecutive, and the employee only has to work part of the week to be considered employed for the entire week. Part-time, full-time, seasonal and temporary workers must be counted. 

Additionally, even if an employer as more than 50 employees, an employee seeking to use FMLA will only be eligible for the leave if he or she works in an office of that employer that has 50 or more employees working within 75 miles of its location.

EEO

Federal Equal Employment Opportunity (EEO) laws protect workers against discrimination. Several separate laws are included in this group, and they use different employee counts.

According to the EEOC:

  • Title VII, the ADA and GINA apply to private employers, state and local governments and education institutes that employ 15 or more individuals.
  • The ADEA applies to private employers with 20 or more employees, as well as state and local governments, employment agencies and labor organizations.
  • The EPA applies to all employers covered by the Federal Wage and Hour Law, which means that it applies to virtually all employers.

When counting employees, the EEOC says workers should be counted if they have worked for the employer for at least 20 calendar weeks in the current or previous year. “That means some part-time workers can be covered as employees to show the employer is covered by the laws we enforce. People who are not employed by the employer, such as independent contractors, are not covered.”

Other Issues

In addition to the laws discussed above, other issues may impact your employee count.

  • Local laws: Employers also have to follow state laws, which may have their own employee count rules. For example, many states have their own COBRA laws. In Texas, the state COBRA law applies to companies with between two and 50 employees.

  • Misclassification: While independent contractors may be excluded from employee counts, misclassification of these workers could lead to trouble. Multiple lawsuits have challenged worker classification recently.

Counting employees is a surprisingly complicated task with high stakes. When in doubt, check with the relevant agency to ensure that your counts will agree with theirs.

Need help with HR compliance and administration? Higginbotham offers those services. Learn more here.

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Tags: Compliance

  
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