The U.S. Food & Drug Administration has finalized guidance to help facilities determine their business size under the Preventive Controls for Human Food (PC Human Food) and Preventive Controls for Animal Food (PC Animal Food) rules issued in response to the FDA Food Safety Modernization Act (FSMA).

Under the PC Human Food and PC Animal Food rules, a facility that is a “small business” may have a later compliance date, and certain activities performed by a mixed-type farm facility that is a “small business” are exempt from the preventive controls requirements of the PC rules.

The rules define a “small business” as a business (including any subsidiaries and affiliates) employing fewer than 500 full-time equivalent employees. The limit of 500 employees includes all employees of the business and is not limited to the employees at a particular facility.

What, however, does “full-time equivalent employee” mean? Also, if you have a business with subsidiaries or affiliates, how should you go about determining your number of employees?

The final guidance issued is designed to answer these questions. The guidance explores key definitions such as “subsidiary,” “affiliate” and “full-time equivalent employee.” It also offers a method for calculating full-time equivalent employees and gives examples of the types of situations facilities might experience when trying to decide which employees to count to determine whether they are a small business.

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The number of full-time equivalent employees is determined by dividing the total number of hours of salary or wages paid directly to employees of the business entity and of all of its affiliates and subsidiaries by the number of hours of work in one year, 2,080 hours (i.e., 40 hours x 52 weeks). If the result is not a whole number, round down to the next lowest whole number.