The Headcount Thresholds That Change Your Obligations: 4, 10, 15, 20, 50

1 employee: the rules that start with your first hire

Most employer obligations do not wait for a headcount. The moment you put one person on payroll in Pennsylvania, you owe workers’ compensation coverage, unemployment compensation (UC) registration, income tax withholding, and a new hire report to the state.

Workers’ compensation is insurance that pays medical bills and lost wages when an employee is hurt on the job. Pennsylvania’s Department of Labor and Industry (L&I) requires it for nearly every employer with at least one employee. Unemployment compensation is the state fund that pays laid-off workers, and L&I requires you to register and pay into it as an employer.

New hire reporting is a report you send to the state each time you hire someone, so the state can enforce child support orders. The PA Business One-Stop Shop explains what to send and how. Your payroll provider usually handles it, but you are the one responsible.

If any of your employees live or work in Philadelphia, several city ordinances apply from day one too, at any headcount. The Philadelphia employer checklist walks through each of them. For the state-level setup steps in order, see how to set up as a Pennsylvania employer.

4 employees: the Pennsylvania Human Relations Act

The Pennsylvania Human Relations Act (PHRA) is the state’s anti-discrimination law. It bans discrimination in hiring, firing, pay, and other terms of employment based on protected traits such as race, sex, religion, age, and disability. The Pennsylvania Human Relations Commission (PHRC) enforces it and says it applies to employers with 4 or more employees.

This is the threshold that surprises small companies. Federal anti-discrimination law does not reach you until 15 employees, and many owners assume that is the first line. In Pennsylvania, the first line is 4.

Once you are covered, an employee can file a complaint with the PHRC, and the agency can investigate. That means you need a written policy against discrimination and harassment, a way for employees to complain, and a habit of documenting hiring and firing decisions. Those are good practices at any size, but at 4 employees they stop being optional.

10 employees: Philadelphia paid sick leave becomes paid

Philadelphia’s paid sick leave ordinance applies to employers with Philadelphia employees at any headcount. Below the 10-employee line, the leave you provide can be unpaid. At 10 or more employees, the ordinance requires the sick time to be paid. One exception: a chain establishment, meaning a location that does business under a trade name used by 15 or more locations, must provide paid sick time at any size.

The City’s paid sick leave resources page has the notice you must post, the City’s regulations, and a one-page summary of the rules. Section 9-4103(5) of the Philadelphia Code sets the count. An employer that employs fewer than 10 employees for at least 40 weeks in a calendar year does not have to provide paid sick time, though it must still provide unpaid, job-protected time. The code counts everyone working for pay in a given week, whether full time, part time, or temporary. The City’s 2016 regulations count only employees who work 40 or more hours a year in the city, and updated regulations proposed in 2026 are not final. Because of the 40-week test, the answer turns on the calendar year, not on the day you hire your tenth person. If you are close to 10, check your count with counsel. Our Philadelphia paid sick leave article walks through the rules step by step.

The practical shift at 10 is bookkeeping. You need to track sick time earned and used for each Philadelphia employee, tell each employee how much time they have (the City’s one-page summary says employers must), and pay for it when it is taken. Set up that tracking before you reach 10, not after.

15 employees: Title VII, the ADA, GINA, and the PWFA

At 15 employees, four federal anti-discrimination laws start to apply. Title VII of the Civil Rights Act bans discrimination based on race, color, religion, sex, and national origin. The Americans with Disabilities Act (ADA) bans disability discrimination and requires you to provide reasonable accommodations. The Genetic Information Nondiscrimination Act (GINA) bans the use of genetic information in employment decisions. The Pregnant Workers Fairness Act (PWFA), in effect since June 27, 2023, requires reasonable accommodations for a worker’s known limits related to pregnancy, childbirth, or related medical conditions.

The counting rule matters. The Equal Employment Opportunity Commission (EEOC), which enforces these laws, says an employer is covered if it had 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year.

Read that carefully. It is not 15 employees today. It is 15 or more employees on every working day of at least 20 weeks, and the look-back covers this year and last year. If you hit 15 for 20 weeks in 2025 and then drop back to 12 in 2026, you are still covered in 2026.

Part-time employees count as employees for this test. A person on your payroll for the full week counts, whether they work 10 hours or 40. Partners, officers, board members, and major shareholders usually do not count. The EEOC says that in most cases they are not employees, though a title alone does not decide it.

In practice, coverage at 15 means an ADA accommodation process. When an employee asks for a change because of a medical condition, you need a way to talk it through, document it, and decide. That is the piece most companies do not have ready.

20 employees: the ADEA and COBRA

Two more federal laws arrive at 20 employees, and they count differently from each other.

The Age Discrimination in Employment Act (ADEA) bans discrimination against older workers. The EEOC says it covers employers with 20 or more employees, using the same test as Title VII: 20 or more employees for each working day in 20 or more calendar weeks in the current or preceding calendar year.

COBRA is the federal law that lets employees and their families keep group health coverage for a time after they lose it, for example after a layoff or a cut in hours. It applies to group health plans, so if you do not offer health insurance, it does not apply to you yet.

COBRA counts employees differently. The Department of Labor’s Employee Benefits Security Administration (EBSA) says COBRA applies to plans of employers that had 20 or more employees on more than 50 percent of their typical business days in the prior calendar year. Part-time employees count as a fraction of an employee, based on the hours they work compared with a full-time schedule.

So a company with a handful of full-timers just under the line and a bench of part-timers might or might not be covered. You have to do the math for the prior year. Your health insurance broker or carrier should help. Pennsylvania also has its own continuation coverage law, called Mini-COBRA, for businesses with 2 to 19 employees. It lets workers keep coverage for up to 9 months, so ask about that as well.

Once COBRA applies, the deadlines and notices are strict. Plan administrators and carriers usually handle the paperwork, but the plan sponsor, meaning you, is responsible.

50 employees: FMLA, the ACA employer mandate, and Philadelphia’s commuter benefit

The 50-employee line is the biggest step. Three obligations arrive, and each has its own counting rule.

Family and Medical Leave Act (FMLA). FMLA gives eligible employees job-protected, unpaid leave for serious health conditions, a new child, and certain family needs. The Department of Labor’s Fact Sheet 28 says the law covers private employers with 50 or more employees in 20 or more workweeks in the current or preceding calendar year.

Being a covered employer is only half the test. For an individual employee to be eligible, DOL says they must have worked for you for at least 12 months, have at least 1,250 hours of service in the 12 months before the leave, and work at a location where you have 50 or more employees within 75 miles.

The 75-mile rule matters for companies with more than one office. If most of your people are in Philadelphia and a small team is in Pittsburgh, you are a covered employer, but the Pittsburgh employees may not be eligible if there are fewer than 50 employees within 75 miles of their worksite.

ACA employer mandate. The Affordable Care Act requires “applicable large employers” (ALEs) to offer affordable health coverage to full-time employees or face a penalty, and to file annual reports with the IRS. The IRS says you are an ALE if you had an average of 50 or more full-time employees, including full-time equivalents, in the prior calendar year.

The IRS defines full time as 30 hours a week or 130 hours a month. Full-time equivalents are your part-timers’ hours combined and converted into a number of full-time employees using the IRS method. So a company with 35 full-time employees and a large part-time staff can be an ALE even though it never had 50 people working full time.

Philadelphia commuter benefit. Philadelphia requires employers with 50 or more covered employees to offer a commuter transit benefit to those employees. A covered employee is someone who averaged at least 30 hours of work a week in Philadelphia for you over the prior 12 months. Government employers are not covered. A commuter benefit generally lets employees pay for transit with pre-tax dollars through payroll, or you can supply an employer-paid transit pass. If you have Philadelphia employees, this is the city’s own 50-employee step, and you should confirm the details in Chapter 9-6000 of the Philadelphia Code before you set it up.

What to set up six months before you cross each line

Every threshold in this piece is measured over a look-back period, so by the time you notice you are covered, you may have been covered for months. Plan ahead. Six months before you expect to cross a line, do the following.

One more habit helps at every stage. Keep a monthly headcount log that shows full-time and part-time employees separately, by worksite. Every counting rule above is easier when you can look at a spreadsheet instead of reconstructing the year from payroll runs.

Threshold table