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Calculate number of employees, and determine your small business status

The agency that sets size standards, or size caps, based on either a company’s number of employees (“employee- based” size standard) or a firm’s annual receipts (“receipts-based size standard) is the U.S. Small Business Administration (SBA). Generally, the size status for manufacturing industries is employee-based in that a company’s size is determined by calculating the average employment of the company, including the employees of its domestic and foreign affiliates, based on the number of persons employed on a full-time, part-time, temporary, or other basis, during each of the pay periods of the preceding 12 months.

For service and construction companies, the SBA, for the most part, uses a receipts-based standard whereby it determines size by averaging a firm’s annual receipts, including the receipts of its domestic and foreign affiliates (less returns and allowances, sales of fixed assets, and inter-affiliate transactions) for the previous three years.

With regard to the employee-based standard, the SBA recently proposed a change in how the number of employees in a firm would be calculated. The proposal was soundly criticized by the small business community, however, and the SBA abandoned the proposal and is now re-thinking its options. As this article suggests, the SBA’s basic idea in seeking a new way to calculate employees was a good one and should be pursued.

With just a few simple adjustments as outlined in this article, the SBA can have a new, workable approach to the problem, while muting criticism from the small business community, and having a system in place that will benefit both the government and industry.

A PEO can best help your company put in place an employee incentive program. To find the right PEO for your company, please visit our directory or fill out this form www.peo7.com/form 

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