Why Employers Need to Count Employees

It’s important to know how many full-time employees you have because two provisions of the Affordable Care Act – employer shared responsibility and employer information reporting for offers of minimum essential coverage – apply only to applicable large employers. Employers average the number of their full-time employees, including full-time equivalents, for the months from the previous year to see whether they are considered an applicable large employer.

Whether your organization is an ALE for a particular calendar year depends on the size of your workforce in the preceding calendar year. To be an ALE, you must have had an average of at least 50 full-time employees – including full-time-equivalent employees – during the preceding calendar year. So, for example, you will use information about the size of your workforce during 2016 to determine if your organization is an ALE for 2017.

In general:

  • A full-time employee is an employee who is employed on average, per month, at least 30 hours of service per week, or at least 130 hours of service in a calendar month.
  • A full-time equivalent employee is a combination of employees, each of whom individually is not a full-time employee, but who, in combination, are equivalent to a full-time employee.
  • An aggregated group is commonly owned or otherwise related or affiliated employers, which must combine their employees to determine their workforce size.

There are many additional rules on determining who is a full-time employee, including what counts as hours of service.

For more information, see the Information Reporting by Applicable Large Employers and the Employer Shared Responsibility Provisions pages on IRS.gov/aca.

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Source: IRS  |  2016 © Copyright Payroll Masters

Payroll Masters is not a licensed insurance broker or agent and does not provide professional or legal advice. This document has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please contact your employment attorney in connection with any fact-specific situation in which you intend to take significant employment action. Readers agree that they will hold Payroll Masters in indemnity and Payroll Masters assumes no liability. Payroll Masters is not engaged in rendering legal or accounting services. Therefore, Payroll Masters assumes no responsibility for claims arising from the use or implementation of the above information.