Growing your business to 50 employees is a great accomplishment, one that you’ve undoubtedly worked long and hard for and should be celebrated. As a mid-sized business, your company has outgrown its start-up struggles, but now faces a whole new set of HR challenges, including compliance with different employment laws.
Businesses with 50 or more full-time employees, or full-time equivalents, are looked at differently by the federal government than those with 10 or 15 employees, which can make human resources management a bit more complex. As your business approaches the 50-employee mark, be aware of compliance changes under the Affordable Care Act, Family and Medical Leave Act, and the Equal Employment Opportunity Commission.
Affordable Care Act (ACA)
Some provisions under the ACA only apply to applicable large employers (ALE), those with 50 or more full-time or full-time equivalent employees. Under the ACA, applicable large employers are required to provide health insurance to their full-time employees and their dependents. What’s more, the coverage must comply with the employer shared responsibility provisions of the ACA which work to encourage employers to offer their employees “affordable” health insurance that provides “minimum value.” Read more about employer shared responsibility provisions here.
To avoid penalties, employers with 50 or more employees must cover enough of the monthly premium costs for their company-provided health insurance to keep workers’ contributions below the maximum amount allowed by the ACA. Find out more in this blog post.
There are three methods that determine affordability using the shared-responsibility affordability percentage which is determined by the IRS and has been set at 9.86 percent for 2019. Health insurance coverage will satisfy the affordability requirement if the lowest-cost self-only coverage option available to employees does not exceed 9.86 percent of an employee’s household income. There are three safe harbor methods to calculate affordability to ensure your plan meets ACA requirements. According to the IRS, an ALE may choose to use one safe harbor for all of its employees or to use different safe harbors for employees in different categories, provided that the categories used are reasonable and the employer uses one safe harbor on a uniform and consistent basis for all employees in a particular category.
- The Rate of Pay Safe Harbor. When using the rate of pay, multiply the employee’s monthly salary by 9.86 percent to determine the maximum monthly amount that can be taken from the employee’s wages each month for health insurance. For hourly employees, assume 130 hours are worked each month and then use the lower figure of these two calculations to determine the maximum monthly amount allowed to be taken from the employee’s wages for health insurance:
- Employee hourly rate of pay on the first day of the plan year times 130 hours. The multiply by 9.86 percent.
- Employee’s lowest hourly page rate during the calendar month times 130 hours. Then multiply by 9.86 percent.
- The W-2 Form Safe Harbor. To determine affordability using the W-2 method, take an employee’s W-2 wages for the month and multiply by 9.86 percent. The result defines the monthly maximum your business could take from the employee’s wages each month to pay for a minimally qualifying health plan. W-2 wages for the entire or part of a calendar year may be used.
- Federal Poverty Line Safe Harbor. The simplest method of the three, the Federal Poverty Line method calculates 9.86 percent of the one-person household federal poverty figure for the previous year and divides that number by 12 to get the monthly employee premium. As long as your business offers a plan that costs less than that for employee-only coverage, you meet ACA affordability criteria. For example, the Federal Poverty Line for a one-person household for 2019 coverage was $12,140. Multiply this figure by 9.86 percent and then divide by 12 to get the maximum monthly amount. Using this safe harbor, an employee's premium payment in 2019 can't exceed $99.75 per month.
Family and Medical Leave Act (FMLA)
Under the FMLA, you won’t automatically be a covered employer subject to the law immediately upon reaching the 50-employee mark. Rather, once you’ve had 50 or more employees within a 75 mile radius for at least 20 workweeks then your private-sector business will be considered a covered employer and subject to the FMLA. Under the FMLA, eligible employees are entitled to up to 12 workweeks of unpaid, job-protected leave for certain family and medical reasons in a 12-month period.
According to the DOL, employers subject to the FMLA are required to make, keep and preserve certain records including:
- Basic payroll and identifying employee data;
- Dates FMLA leave is taken;
- Hours of FMLA leave used if leave is taken in increments of less than a day;
- Copies of FMLA notices provided by an employee to the employer and by the employer to its employees concerning the FMLA;
- Any documents, including electronic records, describing employee benefits or employer policies and practices regarding the taking of paid or unpaid leave;
- Premium payments for employee benefits; and
- Records of any dispute between the employer and an employee regarding the designation of leave as FMLA leave.
Equal Employment Opportunity Commission (EEOC)
The EEOC enforces anti-discrimination laws including Title VII of the Civil Rights Act, Pregnancy Discrimination Act, Equal Pay Act, Age Discrimination Act and the Americans with Disabilities Act. Some laws under the EEOC apply as soon as your business has one employee, like equal pay, others apply once your business has 15 employees and even more come into play at the 20-employee mark. However, once your business reaches 50 or more employees and has $50,000 in federal contracts, it must have a written affirmative action plan which clearly states which policies are in place at your organization that ensure compliance with anti-discrimination laws.
Additionally, businesses with 50 or more employees and $50,000 in government contracts must complete and file an annual EEO-1 Report. The EEO-1 Report is mandated by federal statute and regulations and collects employment data from businesses on race, ethnicity, gender and job category.
The DOL administers and enforces over 180 federal laws protecting U.S. workers. Additionally, each state has their own set of employment laws. Employer must comply with both federal and state laws. Contact your experienced Human Resources Consultant at Axcet HR Solutions to see if additional state laws in Missouri and Kansas will impact your business once you hit the 50-employee mark.