While the concept seems very basic, a full-time worker is defined differently in the eyes of the Affordable Care Act. A full-time worker no longer means someone who works 40 hours per week when it comes to the health care reform law. Small businesses should understand how many full-time staff they have to determine whether they are eligible for certain tax credits. Companies with fewer than 25 full-time equivalent employees can qualify for a health care tax credit, according to Healthcare.gov. They can put these credits toward employee health insurance coverage to comply with the health care reform.
Here are five FAQs about who counts as a full-time worker:
1. How Many Hours Per Work Week Is Full Time?
Although many would define a full-time worker to be someone who works 40 hours per week, this number is lower under the Small Business Health Options Program Marketplace definition. The SHOP marketplace considers employees who work an average of 30 or more hours per week for more than 120 days in a year to be full time.
2. Who is Not Accounted for FTE Calculations?
According to Healthcare.gov, people who should not be included in FTE calculations include owners of a sole proprietorship and partners or owners who have more than 5 percent stake in other businesses. Family-owned businesses can also discount family members or members of the household who are listed as dependents. They should be dependents on individual income tax returns of someone who is not accounted in FTE calculations, such as the owner of a certain percentage of a business.
3. Can Seasonal/Contract Employees Be Considered Full-Time Workers?
Since businesses often have seasonal staff who work holidays or other busy times of year, the SHOP marketplace also has regulations for these employees. Depending on how long they work per year, seasonal employees may not be full time. Healthcare.gov stated seasonal employees who are on the job 120 days or fewer per year should not be included for in FTE calculations. Independent contractors who use 1099 tax forms to report their income should also not be full-time workers.
4. What Year Should I Use to Record the Number of FTE Employees?
When business owners want to use the SHOP marketplace, they should use their most recent year. Carefully calculate this in case it impacts whether many seasonal employees are at work 120 days or more in this year.
5. How Do I Calculate FTE Workers?
While one worker who puts in 30 or more hours per week is exactly one full-time worker, there are other calculations business owners need to complete for part-time staff. They should add all hours worked by part-time employees and divide this by 30. After getting this number, add it together with the number of full-time workers. For example, if a small-business owner has 15 full-time workers and six part-time employees (who work a total of 150 hours per week), he or she has 20 FTE staff.
Therefore, the business owner is eligible for a small business tax credit to save money on health care coverage for employees when shopping for insurance in the SHOP Marketplace.