Ask five people for a definition of a small business and you are likely to hear different answers. The responses may identify revenue or number of employees. My own career took me from Owens Corning and Hyatt Hotels to a start up where I swelled the ranks to 12. No one would describe the global organizations I worked for as small.The start up grew to almost 800 employees and inched into the medium size category. My clients with 12 or 70 employees consider this large company experience. Global employers I consult for view anything with fewer than thousands of workers as practically petite.
Business size matters when it comes to all kinds of regulations, programs, and access to products. It’s easy to agree that 25 or fewer employees makes a small business. But add additional workers and the equation becomes more complicated. The Small Business Administration generally uses a threshold of 500 employees for most industries but also publishes a list of other criteria.
Health reform has not made the definition any easier. The Patient Protection and Affordable Care Act (PPACA) identifies a number of regulations and benefits that specifically target small business and then goes on to indicate number of employer size. The definitions of small are not all the same.
Health reform content with requirements defined by employer size includes:
- A potential tax credit for small employers with the equivalent of fewer than 25 full time employees (2010)
- The ability to apply for grants for wellness programs for small employers with fewer than 100 employees who work 25 or more hours a week (2010)
- Shared responsibility or free rider penalties for employers with 50 or more employees (2014)
- Auto enrollment into available health benefit plans for large employers described as those with more than 200 employees (Effective date unclear.)
When does an employer count?
Health reform has just added to the list of employer size rules to track. It takes a chart to figure out whether you are required to offer Family Medical Leave Act (FMLA), submit an annual report to the EEOC, and offer COBRA coverage. Many employers choose to extend FMLA leave and COBRA when not required just as those with fewer than 50 employees will provide health benefits in 2014 even though they would not be subject to penalties. State laws often include additional criteria. The best response is to never assume that small means 25, 50, or 100 employees, and that large can be 200 or 2,000.
Checking employee count and applicable mandates is an annual exercise. The additional burden and tracking can trigger added requirements, but staying on top of your these numbers can also provide your company access to opportunities as business grows — or even as it shrinks.