Company size is important to think through when it comes to running a business. When I was a kid, these are the numbers I memorized: 2222 and 355-5025. The first was my address (I was not allowed to leave the neighborhood unless I could recite the specific digits), and the other was my home phone number. We all have numbers that are significant and worthy of memorizing. But as the season of life changes, so do the numbers. I no longer need to memorize phone numbers, but I certainly do need to remember anniversary and birthday dates. And if I owned a business, the numbers 1, 15, 20, 50, and 100 would most definitely be part of my new magic number list.
Size Matters for staff numbers
If running a business is the season of life you find yourself in, then these are the five new magic numbers I highly encourage you to commit to memory so you can stay compliant and out of legal trouble. This article will focus on the federal requirements that align with the number of employees on your payroll—NOT the state requirements (so when you finish reading, make sure you check in on the unique requirements your state might have!) The U.S. Department of Labor administrates many of the federal labor laws that employees and employers must follow.
One is the loneliest number
The federal Fair Labor Standards Act (FLSA)—which sets the federal minimum wage, overtime requirements, child-labor rules, and record-keeping laws – applies to all businesses with 1 worker. This means that if you have a small business and you have 1 employee, you must be aware that the federal government expects you to pay fairly, track overtime correctly, understand how many hours a week a 16-year-old can work during a school week, and keep solid records of how many hours they worked and what you paid them.
Please do not think just because you have 1 employee that you do not need to adhere to FLSA because the federal government has teeth with this law. Penalties for violating federal minimum wage and overtime laws are quite large. Alongside requiring employers to pay the back wages they owe to workers, the Department of Labor can levy civil monetary penalties against employers that willfully or repeatedly break the law of up to $2,014 per employee, per week of wages owed.
The magic number: 15
The following laws apply to employers with at least 15 employees. This magic number is what you should consider when counting heads. It is not always straightforward. If you have less than 15 employees at the time a lawsuit is filed against you, you might still be liable if you had 15 or more employees at any point in the twenty weeks prior.
This new number on your list has multiple rippling effects associated with it. The first cause and effect is Title VII of the Civil Rights Act of 1964 which prohibits employment discrimination based on race, color, religion, sex (including sexual orientation and gender identity), pregnancy (including childbirth, lactation, and related medical conditions), or national origin. Again, penalties for non-compliance are hefty: when intentionally ignored, you could owe up to $50,000. For other offenses, you could find yourself responsible for back pay, reinstatement, and retroactive seniority when discrimination is present.
Cobra at 21
“The more people you have, the more problems you have” is not just a reoccurring quote in small business, but a true statement for employer laws. The next digit on your list deals with health insurance and age. If you have 20 to 49 employees, COBRA and Age Discrimination are in effect. COBRA requires employers to extend group health insurance to employees after a qualifying event, such as termination.
How old do you have to be to be considered old?
In casual conversation, the answer to this question will vary greatly depending on who you ask. But as a small business owner subject to government regulations, the answer is 40. The age of your employees can greatly affect business decisions dealing with employment and normal business operations. The Age Discrimination Act protects certain applicants and employees from discrimination that could occur during hiring, promotion, discharge, compensation/terms discussion, and the conditions of employment. The next time you decide to promote a less-qualified, younger employee, make sure you have documentation of the specific reasons you gave them the promotion, or you could be in a whole lot of trouble.
50 for FMLA and ACA compliance
If you find yourself in a growing industry, there are two main areas you become responsible for as soon as you have 50 or more employees: Family and Medical Leave Act (FMLA) and Affordable Care Act (ACA) compliance.
FMLA provides certain employees with up to 12 weeks of unpaid, job-protected leave per year. It also requires that their group health benefits be maintained during the leave.
FMLA is designed to help employees balance their work and family responsibilities by allowing them to take reasonable unpaid leave for certain family and medical reasons. It also seeks to accommodate the legitimate interests of employers and promote equal employment opportunities for men and women.
Employers subject to FMLA must provide an eligible employee with up to 12 weeks of unpaid leave each year for any of the following reasons:
- For the birth and care of the newborn child of an employee;
- For placement with the employee of a child for adoption or foster care;
- To care for an immediate family member (i.e., spouse, child, or parent) with a serious health condition; or
- To take medical leave when the employee is unable to work because of a serious health condition.
Employees are eligible for leave if they have worked for their employer for at least 12 months, at least 1,250 hours over the past 12 months, and their work has been completed at a location where the company employs 50 or more employees within 75 miles.
The Affordable Care Act (ACA) was designed to encourage employers to provide timely, affordable, and appropriate health benefits to eligible employees.
ACA applies to employers with 50 or more full-time and full-time equivalent (FTE) employees on average during the previous year. For ACA purposes, 30 hours a week is considered full-time. Example: 1 employee working 40 hours a week counts as 1 FTE. Example 2: 1 employee working 15 hours a week counts as 0.5 FTE.
Businesses that are subject to the ACA must offer affordable health insurance that provides minimum essential coverage and minimum value to at least 95% of their full-time employees (including dependents). They’re also required to provide employees with the following information:
- Notice of coverage and available benefits
- Summary of Benefits and Coverage (outlines offered plans and employee cost)
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage (annual confirmation of offered benefits)
100…Now We’re Talking
100 employees or more require an additional level of restriction and rules for the average business owner. Once your business hits the top of our threshold, all laws, regulations, and practices are in play. Here are two important ones I would like to help you understand: the EEO-1 Reporting requirement and the Workers Adjustment and Retraining Notification Act (WARN).
The EEO-1 report is a government form that requests information about your employees’ job categories, ethnicity, race, and gender. It must be submitted every year to the EEOC and the U.S. Department of Labor by April.
More information can be found by going to their website: www.eeoc.gov/data
The WARN Act helps ensure advance notice to employees in cases of qualified plant closings and mass layoffs. It requires employers to provide written notice at least 60 calendar days in advance of covered plant closings and mass layoffs.
A WARN notice is required when a business with 100 or more full-time workers (not counting workers who have less than 6 months on the job and workers who work fewer than 20 hours per week) is laying off at least 50 people at a single site of employment or employs 100 or more workers who work at least a combined 4,000 hours per week, and is a private for-profit business, private non-profit organization, or quasi-public entity separately organized from regular government.
A Tip That Whirks: Outsource your Brain
If you are at the point where having one more thing on your mental list is just too much, consider making someone else responsible for keeping up with the laws and regulations you are currently responsible for based on your employee count. Our Whirks Core package sets you up with a user-friendly payroll software that will automate many of these regulation-based practices when you hit the appropriate employee counts. Learn more about how we can help relieve your burden here.
A Tip That Whirks: Start Now
If you are close to one of those magic employee numbers, begin to implement the new law or regulation into the business operations now. This will ensure you have ironed out your processes before you are required to implement them for compliance purposes.
A Tip That Whirks: Do a Risk Assessment
Conduct an HR risk assessment to understand where you are now and where you need to get to once you reach the next plateau of people. The Whirks People Essentials package supports you in all things HR compliance so you can keep your focus on growing your business.
Numbers are great and numbers are not—plan now for growth, and then keep growing. Size really does matter. Remember these numbers: 1, 15, 20, 50, and 100 employees. You must commit them to memory, build systems and processes, and educate your workforce. I know we all have a list of numbers we need to know—account numbers, passwords, etc. – but adding 5 more numbers might just save you more “numbers” from coming out of your bank accounts.