Sitting right at 50 employees: how to count
At about 50, the headcount is not the answer. The federal test counts full-time employees plus full-time equivalents, averaged over the prior year. Many groups at 51 people are below the line, and some at 48 are above it.
Four counting rules that decide which side you are on.
Run the count monthly, then average it. A single month proves nothing.
Count Full-Time and Equivalents
Count employees averaging 30 hours a week, then add part-time hours converted into full-time equivalents. Use the compliance checker to run the numbers.
The Prior Year Decides
The federal status for a year is set by the average of the monthly counts for the prior calendar year, not by today’s headcount.
Related Companies Count Together
Commonly owned or related employers are combined for the count, so a second entity can change the answer.
Shrinking Is Not Automatic Relief
Dropping below 50 does not by itself change a renewal. The rating rules and the carrier’s timing matter too.
Fifty-one people, fewer than fifty equivalents.
A group with 41 full-time employees and 10 part-timers averaging 15 hours a week. Each part-timer works about 65 hours a month, so together they equal about 5.4 full-time employees.
Illustrative figures. The real test averages the monthly count over the prior calendar year, and related employers are combined.
What the rules say.
The count is a federal rule. Michigan’s small employer definition uses a similar method.
Full-Time Equivalents Add Part-Time Hours
Part-time employees’ hours are combined and converted into full-time equivalents. See 26 CFR 54.4980H-2.
The Test Looks Back Over the Prior Year
Status is determined from the prior calendar year’s monthly counts. See 26 U.S.C. 4980H(c)(2).
Seasonal Workers Can Be Excluded
An employer whose count exceeds 50 for 120 days or fewer, because of seasonal workers, is not treated as a large employer. See 26 U.S.C. 4980H(c)(2)(B).
Sources: 26 U.S.C. 4980H · 26 CFR 54.4980H-2
We run the count with you, month by month.
We build the monthly full-time and equivalent count from your payroll data, flag related companies, and tell you which side of the line you are on.
Related pages.
Growing Past 50
What changes in pricing, mandate and reporting when you cross the line.
Employer Size Compliance Checker
A tool to run your own count.
Small Group vs Large Group
The full side-by-side comparison.
Questions that come up.
Short answers to the questions we hear most. Each links to the full page.
How do I know which side of the line I am on?
Count full-time employees and full-time equivalents for each month of the prior calendar year, then average. The compliance checker runs the same count.
Does a headcount of 51 make me a large employer?
Not necessarily. The federal count uses full-time equivalents, so 51 people with many part-timers can average below 50.
Do seasonal workers count?
They count in the monthly figures, but an employer whose count goes over 50 for 120 days or fewer because of seasonal workers is not treated as a large employer.
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General information, not legal or tax advice. Plan-specific questions belong with the plan documents, the carrier and counsel.
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