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Compliance Considerations for When Your Company Reaches 50 Employees

by Tim AustinMay 10, 2019 8:00 AM

The 50-employee mark is more than just a milestone; it’s also an important number for some major regulation requirements. Once your business has 50 full-time employees, various federal and state laws become mandatory, which can wreak havoc on your business if you don’t prepare for them. Here’s what your business needs to do to stay compliant once it reaches 50 full-time employees. 

Multiple employees during a training session at an applicable large employer. 

Health Insurance

While smaller businesses can choose to offer health insurance, it becomes a requirement once your business reaches 50 or more full-time or full-time equivalent employees. At that point, the Affordable Care Act designates your business as an applicable large employer (ALE).

Any ALE is required to meet the employer shared responsibility provisions found in the Affordable Care Act. These provisions give ALEs two options:

  • Offer health coverage that the ACA deems “affordable and provides “minimum value” to full-time employees and their dependents
  • Make a payment to the IRS any of the ALE’s full-time employees receive a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace

In addition to offering coverage – or opting to not offer coverage and pay penalties – ALEs are required to report to the IRS about their health care coverage. This means every ALE must file both Form 1095-C and Form 1094-C to the IRS, as well as a similar statement for each full-time employee.

Determining full-time equivalent employees

You may have noticed that threshold to be considered an ALE was set at 50 full-time or full-time equivalent employees. This means that you don’t need 50 strictly full-time employees to meet ALE designation if you have enough part-time individuals to qualify.

Full-time employees include any worker who averages at least 30 hours of service per week in a calendar month. Full-time equivalent employees are a combination of individuals who do not meet full-time specifications, but whose combined work is determined to equate to that of a full-time worker.

Per the IRS, there is a two-step process to determine the number of full-time equivalent employees at your business.

  1. Combine the number of hours of service of all non-full-time employees for the month (do not include more than 120 hours of service per employee)
  2. Divide the total by 120

The total number represents a company’s number of full-time equivalent employees. That total would then be added to the number of regular full-time employees. If the combined number is at least 50 – for example, 40 full-time employees and 10 full-time equivalent employees – your business is considered an ALE.

Family Medical Leave Act (FMLA)

Unlike the Affordable Care Act, the Department of Labor (DOL) does not look to full-time and full-time equivalent employees to determine which businesses must comply with FMLA. Instead, the DOL simply writes that “private employers with at least 50 employees are covered by FMLA.” FMLA also applies to businesses with fluctuating workforces as long as they had at least 50 employees for 20 or more total workweeks in the current or previous year. These employees must then meet the following stipulations to be eligible for FMLA:

  • Work for the employer for at least 12 months
  • Work at least 1,250 hours during the 12 months before the start of leave
  • Work at a jobsite where the employer has at least 50 employees within 75 miles

If eligible, employees are entitled to take unpaid, job-protected leave for various permissible reasons. These include taking up to 12 weeks of leave in a 12-month period for the following:

  • The birth of a child and to bond with the newborn child within one year of birth
  • The placement with the employee of a child for adoption or foster care and to bond with the newly placed child within one year of placement
  • A serious health condition that makes the employee unable to perform the functions of his or her job
  • To care for the employee’s spouse, son, daughter, or parent who has a serious health condition

FMLA Compliance requirements

Covered employers must also take steps to notify employees about FMLA rights. The first step is to display an FMLA poster prepared by the DOL at all locations. The next is to provide general notice with the same information as the poster in the employee handbook. If no handbook exists – and it absolutely should – employers must distribute a general notice to all employees and any new individuals when hired.

As expected, the FMLA has penalties in place for any employers who meet the 50-employee threshold who deny or interfere with permitted leave or fail to meet notification requirements. Updated penalty amounts can be found on the DOL website.

Miscellaneous State Laws

Only looking to federal requirements can land your business in hot water. Certain states have their own regulations for businesses once they reach the 50-employee threshold. One of the more notable examples is that New York employers with 50-plus full-time employees must give at least 90 days’ written notice for mass layoffs, employment losses, or relocations. This law is a variation of the federal Worker Adjustment and Retraining Notification Act (WARN), which only applies to businesses with at least 100 employers. As a result, you’ll want to consult with your state government’s site to review any local laws that go into effect at the 50-employee threshold.

Prepare Your Growing Business

Growth is great, but it can become a major problem if you aren’t prepared for the additional compliance concerns and internal responsibilities. More employees mean more time spent handling payroll managementbenefits administration, and other key HR needs – unless you find a partner that can manage these critical functions and save you much-needed time.

Whether you’re a startup or a 50-plus employee business, Group Management Services provides professional HR management to help you make your business simpler, safer, and stronger while you focus on ways to grow your company. Contact us today to talk to one of our experts about what we can do to help you protect your company now and prepare for the future.

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