Business size is one of several important factors that determine which parts of the Affordable Care Act (ACA) apply to your business. Though it may seem like a straightforward topic, business size is defined and applied in multiple ways, so it’s not a cut and dry issue. Here are the general details to help you determine the number of employees your business has, and which parts of the law apply to your business.

Business size definition

How business size is calculated will vary based on one of two factors, the number of full-time employees that an employer has and the number of full-time equivalent (FTE) employees that an employer has. This is because some of the regulations are based on the Affordable Care Act’s (ACA) definition of business size, and others are aligned with how the Internal Revenue Service (IRS) defines business size.

  • Counts the average of the total number of all employees employed on business days during preceding calendar year.
  • Small employer definition is 1-100. States have the option to use 1-50 until 2016.
  • Each employee W-2 is considered one employee including part-time employees.
  • ACA provisions including MLR, SHOP, ACA benefits mandates and rating restrictions, etc. uses this definition.
  • Counts the sum of total full-time employees (30+ hours per week) and full-time equivalents (FTEs).
  • Small employer definition is 1-50.
  • Provisions such as the small-employer tax credit, and pay or play penalties use this definition.

How to calculate business size

To help you calculate business size, download the full article for examples.

For additional insights by employer size, see health care reform checklists for employers with ≤ 25 employees, 26-50 employees and 50+ employees, or visit

This material is intended to provide general information about an evolving topic and does not constitute legal, tax or accounting advice regarding any specific situation. Aflac cannot anticipate all the facts that a particular employer or individual will have to consider in their benefits decision-making process. We strongly encourage readers to discuss their HCR situations with their advisors to determine the actions they need to take or to visit (which may also be contacted at 1-800-318-2596) for additional information.