How is the average number of employees calculated?

The formula is:

For example, a company has 150 employees and pays them twice a month (on the 1st and the 15th). This means the company has 24 “pay periods” each year. In this example, a total of 3600 employees were paid in all pay periods. It may help to think of this total as the number of paychecks issued throughout the year. This total is then divided by the number of pay periods (3600 ÷ 24) which gives an annual average of 150 employees.

A common mistake in this case would be to list 150 employees on OSHA’s worksheet and divide by 24 pay periods. This gives an average of only about six employees. The error is failing to add up the total number of employees paid in all pay periods.

This calculation is important when the number of workers changes from month to month. Some companies increase their workforce during the summer, or use a temporary workers to meet production demands, and need to calculate their average for the year.