Example Calculations for Applicable Large Employers
It's important to calculate hours to determine whether a company is considered an Applicable Large Employer under IRS rules and thus subject to the employer mandate.
Below are some examples of calculations for companies that are or are not considered Applicable Large Employers under IRS rules.
The information in this Help Center article is intended to serve as a general guideline and should not be considered legal or tax advice. Actual classification can be much more complex, particularly if a company has a seasonal workforce, if a company is part of a controlled group, or if a company employs workers whose hours are especially difficult to track. Visit the IRS website for more detailed information about making ALE determinations. Companies should consult with experienced legal counsel if they have questions. Zenefits cannot and does not provide legal or tax advice.
* 120 Service Hours Maximum: Even if a non-full-time employee worked over 120 hours in a given month, do not include more than 120 hours in the calculations.
Example 1: Employer Does Not Qualify as Applicable Large Employer
The numbers below show over the course of a year that this employer is not considered an Applicable Large Employer.
| JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEPT | OCT | NOV | DEC | |
|
Full-Time (FT) Employees |
43 | 43 | 43 | 46 | 46 | 50 | 52 | 53 | 53 | 55 | 53 | 55 |
| Part-Time (PT) Employees | 5 | 6 | 5 | 5 | 5 | 5 | 5 | 0 | 0 | 3 | 3 | 3 |
| Hours of Service per PT Employee | 15 | 35 | 25 | 20 | 12 | 15 | 20 | 0 | 0 | 25 | 20 | 0 |
| Total PT Employee Hours of Service | 75 | 210 | 125 | 100 | 60 | 75 | 100 | 0 | 0 | 75 | 60 | 0 |
| Total Full-Time Equivalent (FTE) Employees: Total PT hours/120 rounded to the nearest 100th |
0.6 | 1.8 | 1.0 | 0.8 | 0.5 | 0.6 | 0.0 | 0.0 | 0.0 | 0.6 | 0.5 | 0.0 |
| FT + FTE Employees | 43.6 | 44.8 | 44.0 | 46.8 | 46.5 | 50.6 | 52.8 | 53.0 | 53.0 | 53.5 | 53.5 | 55.0 |
| Employer Size (January - December) | 599.3 | |||||||||||
| Divided by 12 months | 49.94444444 | |||||||||||
| Round down to the nearest whole number | 49 |
Example 2: Employer Qualifies as Applicable Large Employer
The numbers below show over the course of a year that this employer is considered an Applicable Large Employer.
| JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEPT | OCT | NOV | DEC | |
|
Full-Time (FT) Employees |
45 | 49 | 50 | 51 | 55 | 55 | 53 | 53 | 55 | 60 | 61 | 61 |
| Part-Time (PT) Employees | 15 | 15 | 15 | 16 | 17 | 17 | 18 | 16 | 18 | 20 | 20 | 20 |
| Hours of Service per PT Employee | 100 | 120* | 120* | 90 | 80 | 90 | 90 | 100 | 120* | 75 | 100 | 100 |
| Total PT Employee Hours of Service | 1500 | 1800 | 1800 | 1440 | 1360 | 1530 | 1620 | 1600 | 2160 | 1500 | 2000 | 2000 |
| Total Full-Time Equivalent (FTE) Employees: Total PT hours/120 rounded to the nearest 100th |
12.5 | 15.0 | 15.0 | 12.0 | 11.3 | 12.8 | 13.5 | 13.3 | 18.0 | 12.5 | 16.7 | 16.7 |
| FT + FTE Employees | 57.5 | 64.0 | 65.0 | 63.0 | 66.3 | 67.8 | 66.5 | 66.3 | 73.0 | 72.5 | 77.7 | 77.7 |
| Employer Size (January - December) | 817.3 | |||||||||||
| Divided by 12 months | 68.10416667 | |||||||||||
| Round down to the nearest whole number | 68 |