Struggling to fathom Health Care Reform’s Effect on staffing? Uncover how to swiftly and accurately figure out FullTime Equivalent! Do this to make the most of new laws. Now you can take strategic decisions for your biz with assurance!
Businesses must calculate their Full-time Equivalent (FTE) number to estimate if they are subject to the employer mandate. This means counting all part-time employees’ total combined hours for a given month and determining if the average is 30 or more hours per week or 130 hours for the month. Breaks in service less than 13 weeks continuous, and employees working 1 hour or more per day, must be included in the FTE calculation.
It is essential businesses accurately calculate their FTEs every month to determine if they are subject to ACA requirements.
Understanding the Health Care Reform Requirements
The Health Care Reform law, known as the Patient Protection and Affordable Care Act (ACA), states that certain employers must give their workers health insurance benefits or face potential penalties. The legislation includes a calculation of full-time equivalent (FTE). This can help small businesses figure out if they must offer a group health plan.
The FTE calculation takes into account the total amount of hours worked by part-time employees. This means an employee can become a full-time equivalent with just 30 hours per week or 130 hours per month, even if they only work 4 days a week.
Employers not subject to ACA’s employer mandate don’t need to calculate FTE when hiring employees. But, it can still be useful for managing labor costs and helping lower healthcare coverage costs. For instance, two part-time workers that accumulate more than 30 hours a week may be eligible for group coverage under ACA collectively.
Employers subject to the ACA requirement must also note that seasonal workers are not excluded from the FTE calculation. They must be included in the total. Otherwise, penalties may apply for not providing coverage to an employee population of over 50 FTEs—including any seasonal worker hour totals in any consecutive 12-month period.
Calculating FullTime Equivalent for Employees
Health care reform requires employers to calculate Full-time Equivalent (FTE) to determine if they are “applicable to large employers“. Full-time equivalent is a calculation of all employees, regardless of hours worked. It assigns part-time employees an equivalent number of full-time hours.
If an employee works 30 or more hours a week over three months, they are counted as one FTE.
To illustrate: 10 full-time employees and 10 part-time employees working 20 hours each per week.
- Total Hours per Week = 600
- Total Monthly Hours = 2400
- 2400 / 30 hrs/wk = 80 FTEs
This employer would be considered an “applicable large employer” with 80 Full-Time Equivalents per month.
Calculating FullTime Equivalent for Contractors
To know if your business meets the requirements of the Affordable Care Act (ACA), you must calculate the FullTime Equivalent (FTE). This is done by dividing the total hours worked each month for all part-time contractors by 120.
For example, if you have 20 part-time contractors who work 24 hours per week, your FTE calculation would be: (20 x 24) ÷ 120 = 8 FTEs. This means that these 8 employees are counted as ‘employees’ when checking your ACA compliance.
The ACA employer mandate states that any business with 50 or more full-time equivalents must comply with certain regulations. If you need help calculating your full-time equivalent employee count, contact a professional healthcare specialist or accountant that specializes in healthcare reform compliance issues.
Calculating FullTime Equivalent for Seasonal Workers
Calculating FullTime Equivalent (FTE) for healthcare reform can be tough for employers. It’s especially hard to figure out if a worker has enough hours to be considered an FTE according to the Affordable Care Act. And it’s different for seasonal workers vs. regular employees.
To calculate correctly, employers need to start with the 12 months before the hire date. They must look at each month and count the hours worked. If the hours vary or there are breaks between seasons, you must prorate the total hours.
To accurately determine FTEs:
- Count all employees who work 30+ hrs/week over the preceding 12 months.
- Count part-time workers whose combined monthly hours equal at least 120.
- Divide total monthly hours by 120. Sum the results.
- Multiply the sum by the number of FT & PT employees. Divide by the number of qualifying employees. This is your FTE figure.
Accounting for Part-Time Employees in FullTime Equivalent Calculations
Employers with fifty or more full-time employees must offer minimum essential coverage, or else risk a penalty, known as the ‘play or pay’ penalty. To determine if an employer is liable for this penalty, all part-time employees must be taken into account. This means employers must count the hours each part-time employee worked over the past twelve months. This makes sure their employees have access to health insurance plans.
To calculate the number of FTEs, you must add up all employee hours in a month, and divide it by 120. For example, if four part-time employees each work fifteen hours a week, they would have:
- (4 x 15 x 4) = 240 hours per month.
- This would be divided by 120, giving you 2 FTEs.
Additionally, if more than one employee shares one job, then you must multiply their hours. For example, two part-time workers sharing one position would be:
- 2 x 25 x 4 = 200 ÷120 = 1.67 FTEs.
Employers need to include their part-time workers when calculating requirements of Health Care Reform so that they are not surprised by penalties for not following the Act’s regulations.
Determining the Right FullTime Equivalent for Your Business
When it comes to healthcare reform law compliance, a key factor is figuring out how many FullTime Equivalents (FTEs) your business has. Calculating FTEs involves calculating the total hours of employees who work less than full-time.
It can be difficult to work out exactly how many people have part-time or irregular shifts. But it’s essential for working out if you meet the minimum FTE requirements for compliance. Not calculating FTE accurately can lead to financial penalties.
To calculate FTE for a month, you need to work out the total hours of all employees who work less than full-time. This includes part-time, seasonal, temporary, or other non-standard employees. Divide each employee’s total hours by 30 (the assumed number of full-time working hours). This fraction is their FTE equivalent for that month. Add up all the fractions to get the total FTE count.
Remember to keep your metric consistent over time. This stops tax liabilities or penalties due to changes in staffing levels from month-to-month or year-to-year. Calculating and tracking FTE numbers carefully is essential for businesses to remain compliant with healthcare reform regulations.
Conclusion
Calculating FullTime Equivalent (FTE) for staff under Health Care Reform can be tricky. But, there are some easy steps to make it less daunting.
- Identify who needs to be included. This includes those working an average of 30+ hours a week, ones with fewer hours that add up to full-time in a month, and seasonal workers with enough income to qualify as full-time.
- Calculate combined monthly hours by adding up the total hours worked each week in a given month. Then use this formula: 2,080 divided by monthly hours worked = FTE count.
- If pay periods differ from the calendar months, divide any extra days of working time across adjacent months before making the FTE calculation.
By following these steps you can help make sure your organization is compliant with Health Care Reform.
