As a small business owner, you may feel overwhelmed by multitasking when it comes to addressing various compliance needs like the Affordable Care Act (ACA). I recall my experience while starting my small café. My focus was on cooking food and serving customers while generating profits. However, I almost forgot about something very important: counting employees in regard to ACA compliance. Spoiler alert: with a little help and a nice checklist, I learned from my mistakes, as most of us do.
Why Counting Employees Matters for ACA Compliance
Counting your employees isn’t merely an administrative task that is boring or routine in nature. Rather, it forms the bedrock of understanding your business obligations under the ACA law. If proper considerations are not made, there is a possibility to not only miss favorable benefits but also face penalties or trigger unwanted audits. Business costs are indeed overwhelming for any small business trying to survive in today’s economy, but these ACA requirements do not have to be burdensome if approached smartly.
Who Is an Applicable Large Employer (ALE)?
The ACA legislation has unique provisions for “Applicable Large Employers,” also referred to as ALEs. If in the previous year your business had an average of at least 50 full-time employees, including full-time equivalent employees (FTEs), then you are considered an ALE in the current year. As such, you will be required to provide health coverage to your full-time employees or face penalties.
When I first did my calculations, I noticed that I was slightly under the threshold, but I knew that with the growth of my business, it would become a concern. For those who are hovering around that number, it is advisable to monitor employee numbers frequently—perhaps set a reminder in your favorite productivity app like Controlio.
How to Define a Full-Time Employee
A full-time employee of the business for purposes of ACA is anyone who works an average of more than 30 hours a week or 130 hours monthly. It includes everyone from baristas and bakers to managers and office employees.
What happens for part-timers? Their hours are summed up and calculated into full-time equivalents to determine if you hit the ALE threshold. For instance, having two part-time workers each with 15-hour workweeks totals one full-time equivalent.
Calculating Full-Time Equivalent Employees (FTEs)
Here’s an easy method to calculate FTEs:
- Track the total hours worked by all your part-time employees over a monthly period.
- Divide that amount by 120.
- Combine this figure with your number of full-time employees.
You gain the workforce size for ACA purposes. If the average over the year is 50 or more, you’re classified as an ALE.
Like many others, I made my first mistake by solely counting my full-time staff and forgetting about my part-time helpers. It was fortunate I did not cross that threshold. Now, I have in place basic spreadsheets or at times use the Controlio Tool, which allows me to effortlessly track everyone’s work schedules.
Importance of Prudence in Record Keeping
A detailed paper trail is required during audits where precise payment records such as timesheets are needed alongside documentation that backs your figures, supporting employee numbers, stored payslips, and paycheck stubs. This accuracy safeguards against errors, preserves pennies, and provides flexibility for best practices moving forward.
I learned this the hard way when a previous employee argued they worked more hours than I had noted. Thankfully, I had my timesheets and schedules readily available, so I could defend myself. It sure was a wake-up call to be more organized.
What Could Go Wrong?
There is always a risk of incurring penalties, owing back taxes, mishap fines, and grinding stress from miscalculating employees or understaffing your business. Under the Affordable Care Act (ACA), compliance is taken very seriously by the IRS, and even innocent blunders can prove to be expensive in the long run. This emphasizes just how crucial getting it right—or at least identifying mistakes early before they spiral out of control—is.
How Technology Can Help Avoid Non-Compliance Issues
Tracking employee work hours becomes increasingly complicated with every new hire you bring onto your team. This is where technology comes in handy. For instance, Controlio software offers services for tracking work hours and schedules, facilitating maintenance of legal and regulatory obligations.
If you wish to learn more about what qualifies as part-time or full-time employment, click here.
Final Note: You’re Ready To Go!Though managing employee counts for ACA compliance may appear challenging at first, it can be handled with some structure. Just like any other process, keeping everything organized and seeking assistance when required can make the task easier. Remember, you are not the first small business owner to go through this, and there is always light at the end of the tunnel.
Whenever you feel anxious or overwhelmed about something, take a deep breath and deal with one thing at a time. The result will surprise you! Before long, you will be sharing your ACA compliance wisdom with other small business owners—and perhaps providing them your customized checklist too!