Determining the Number of Employees 
for Purposes of the Small Business 
Definition in Parts 117 and 507 (CGMP 
and Preventive Controls Regulations for 
Human and Animal Food): Guidance for 
Industry 
 
 
Additional copies are available from: 
Office of Food Safety HFS-300 
Center for Food Safety and Applied Nutrition 
Food and Drug Administration 
5001 Campus Drive 
College Park, MD 20740 
(Tel) 240-402-2166 
or 
Center for Veterinary Medicine HFV-200 
Food and Drug Administration 
7519 Standish Place 
Rockville, MD 20855 
(Tel) 240-402-6246 
http://www.fda.gov/FoodGuidances 
 
You may submit electronic or written comments regarding this guidance at any time. Submit 
electronic comments to https://www.regulations.gov. Submit written comments on the guidance to 
the Dockets Management Staff (HFA-305), Food and Drug Administration, 5630 Fishers Lane, rm. 
1061, Rockville, MD 20852. All comments should be identified with the Docket number FDA-
2018-D-0671. 
 
U.S. Department of Health and Human Services 
Food and Drug Administration  
Center for Food Safety and Applied Nutrition 
Center for Veterinary Medicine 
 
 
June 2019 Contains Nonbinding Recommendations 
 
 
 
Table of Contents 
 
 
I.  Introduction ........................................................................................................3   
II.  Background ........................................................................................................3   
III. Questions and Answers .....................................................................................4   
A.  Definitions .........................................................................................................4   
B.  Determining the Number of FTEs   ..................................................................5   
C.  Implications of Being a Small Business Under Parts 117 and 507 ................12 
 
   
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Determining the Number of Employees 
for Purposes of the Small Business 
Definition in Parts 117 and 507 (CGMP 
and Preventive Controls Regulations for 
Human and Animal Food): Guidance for 
Industry1 
 
 
 
This guidance represents the current thinking of the Food and Drug Administration (FDA or we) 
on this topic. It does not establish any rights for any person and is not binding on FDA or the 
public. You can use an alternative approach if it satisfies the requirements of the applicable 
statutes and regulations. To discuss an alternative approach, contact the FDA staff responsible 
for this guidance as listed on the title page. 
 
 
I.  Introduction 
The purpose of this guidance is to help industry subject to Title 21 of the Code of Federal 
Regulations (21 CFR) part 117 (part 117) or 21 CFR part 507 (part 507) determine the number of 
employees for purposes of the small business definition under parts 117 and 507.  
 
FDAs guidance documents, including this guidance, do not establish legally enforceable 
responsibilities.  Instead, guidances describe the Agencys current thinking on a topic and should 
be viewed only as recommendations, unless specific regulatory or statutory requirements are 
cited.  The use of the word should in Agency guidances means that something is suggested or 
recommended, but not required. 
II.  Background 
This guidance concerns two regulations that we have established in Title 21 of the Code of 
Federal Regulations (21 CFR) as part of our implementation of the FDA Food Safety 
Modernization Act (FSMA; Pub. L. 111353).   These two regulations are part 117 (published in 
                                                           
1 This guidance has been jointly prepared by the Office of Food Safety in the Center for Food Safety and Applied 
Nutrition, the Office of Surveillance and Compliance in the Center for Veterinary Medicine, and the Office of Food 
Policy and Response at the U.S. Food and Drug Administration.  
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the Federal Register on September 17, 2015, 80 FR 55907) and part 507 (published in the 
Federal Register on September 17, 2015, 80 FR 51670). 
 
Among other things, the rulemaking to establish part 117 amended our CGMP regulation for 
manufacturing, packing, or holding human food to modernize it and establish it in new part 117, 
primarily in subpart B, with associated requirements in subparts A and F.  Part 117 also includes 
new requirements for domestic and foreign facilities that are required to register under section 
415 of the Federal Food, Drug, and Cosmetic Act (the FD&C Act) (21 U.S.C. 350d), primarily in 
subparts C and G, with associated requirements in subparts A, D, E, and F, to establish and 
implement hazard analysis and risk-based preventive controls for human food (the human 
preventive controls requirements). The rulemaking to establish part 507 created new animal food 
CGMP and preventive controls requirements for domestic and foreign facilities that are required 
to register under section 415 of the FD&C Act.  Requirements for CGMPs are primarily in part 
507, subpart B, with associated requirements in subparts A and F (CGMP requirements).  
Requirements for establishing and implementing hazard analysis and risk-based preventive 
controls for food for animals are primarily in subparts C and E, with associated requirements in 
subparts A, D, and F (the animal food preventive controls requirements). 
 
Under parts 117 and 507, whether a business is a small business has two main implications.  
First, certain small businesses (i.e., farm mixed-type facilities, which are establishments that 
are farms, but also conduct activities outside the farm definition that require the establishments 
to be registered) are exempt from the human food preventive controls requirements and the 
animal food preventive controls requirements if they are engaged only in specified low-risk 
activity/food combinations.  Second, small businesses have later compliance dates for parts 117 
and 507 than larger businesses.   
III. Questions and Answers 
A. Definitions 
A.1  What does small business mean for purposes of part 117 and part 507? 
 
A small business means a business (including any subsidiaries or affiliates) employing fewer 
than 500 full-time equivalent employees (21 CFR 117.3 and 507.3).  The limit of 500 employees 
includes all employees of the business and is not limited to the employees at a particular facility 
(80 FR 55908 at 55962 and 80 FR 56170 at 56200). 
 
A.2  What does full-time equivalent employee mean? 
 
A full-time equivalent employee (FTE) is a term used to represent the number of employees of 
a business entity for the purpose of determining whether the business qualifies as a small 
business.  The number of FTEs 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 1 year, 2,080 hours (i.e., 40 hours  52 weeks).  If the result is 
not a whole number, round down to the next lowest whole number.  (21 CFR 117.3 and 507.3)  
 
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A.3  What is a subsidiary? 
 
A subsidiary means any company which is owned or controlled directly or indirectly by 
another company (21 CFR 117.3 and 507.3).  Note that only companies can have or be 
subsidiaries. 
 
A.4  What is an affiliate? 
 
An affiliate means any facility that controls, is controlled by, or is under common control with 
another facility (21 CFR 117.3 and 507.3).  Only facilities required to register can be affiliates. 
 
A.5  What is a facility? 
 
A facility means a domestic facility or a foreign facility that is required to register under 
section 415 of the Federal Food, Drug, and Cosmetic Act, in accordance with the requirements of 
21 CFR, part 1, subpart H (21 CFR 117.3 and 507.3).  
 
Under 21 CFR, part 1, subpart H, a facility means any establishment, structure, or structures 
under one ownership at one general physical location, or, in the case of a mobile facility, 
traveling to multiple locations, that manufactures/processes, packs, or holds food for 
consumption in the United States (21 CFR 1.227). 
 
B. Determining the Number of FTEs 
B.1  How should you determine the number of FTEs in a business? 
  
FDA uses the following method to calculate the number of FTEs in a business: 
 
1.  Start with a food facility required to register.   
2.  Determine the legal entity that the food facility is a part of. 
3.  Calculate the total number of FTEs in this legal entity.  (See B.5 for help with calculating 
FTEs.) 
4.  Determine whether the legal entity has any subsidiaries and calculate the FTEs of all the 
subsidiaries. 
5.  Determine whether the legal entity has any affiliates and calculate the FTEs of all the 
affiliates. 
6.  Add the number of FTEs calculated for the legal entity, any subsidiaries, and any 
affiliates to get the total number of FTEs in a business. 
 
B.2  How should you determine the extent of a business? 
 
For the purpose of the small business calculation, we consider a business to consist of the legal 
entity that the relevant facility is part of, along with any affiliates and subsidiaries 
determined from the perspective of the relevant facility.  Therefore, depending on your business 
structure, your business size calculation may not be the same for all of your facilities.  For 
example, the business size calculation may be different for a facility that is part of a subsidiary 
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than for a facility that is part of a parent company because the employees in the parent company 
are counted differently, depending on whether the relevant facility is part of the subsidiary or 
part of the parent company.  The facility in the parent company should count all employees in the 
parent company.  In contrast, the facility in the subsidiary should count only employees in the 
parent company that work for affiliates of the subsidiary facility (i.e., facilities required to 
register).  Note that both facilities should count all of the employees in the subsidiary either 
because they work for a subsidiary (from the perspective of the facility in the parent company) or 
because they work for the legal entity that the facility is a part of (from the perspective of the 
facility in the subsidiary). 
 
An example is shown below in Figure 1.  Company A owns Company B, Company C, and 
Company D.     
  For Facility X, the business comprises all of the employees of Company A (including the 
employees working at Facility X and the other employees of Company A), plus all of the 
employees of Companies B, C, and D, which are subsidiaries of the legal entity that 
Facility X is part of (Company A).    
  For Facility Y, the business comprises the employees of Company B (i.e., the employees 
of Facility Y) and the employees working at Facilities X, Z1, and Z2, which are affiliates 
of Facility Y.  No employees of Company C are counted because Company C cannot 
include any affiliates because it does not have any facilities.  Employees of Company A 
that are not working at Facility X are not counted because Company A is not a subsidiary 
of Company B (Company B does not own or control Company A), nor can all of 
Company A be considered an affiliate because Company A has employees who do not 
work at a facility.  Employees of Company D that are not working at Facilities Z1 or Z2 
are not counted because Company D is not a subsidiary of Company B, nor can all of 
Company D be considered an affiliate because Company D has employees who do not 
work at a facility. 
  For Facility Z1, the business comprises the employees of Company D (including the 
employees working at Facilities Z1 and Z2 and the other employees of Company D) plus 
the employees working at Facilities X and Y, which are affiliates of Facility Z1.  No 
employees of Company C are counted because Company C cannot include any affiliates 
because it does not have any facilities.  Employees of Company A that are not working at 
Facility X are not counted because Company A is not a subsidiary of Company D 
(Company D does not own or control Company A), nor can all of Company A be 
considered an affiliate because Company A has employees who do not work at a facility.  
The business size calculation would be the same for Facility Z2. 
  
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COMPANY A 
 
 
 
  Facility X 
 
 
 
Note: Company A has no other facilities.   
 
Company A has employees who do not 
 
work at Facility X.  
 
 
 
 
 
COMPANY B  COMPANY C  COMPANY D 
 
     
 
  Facility Y  Note: Company C    Facility Z1  Facility Z2 
 
  has no facilities.    
 
   
 
Note: Company B  Note: Company D has no other 
 
has no other  facilities.   
 
facilities.    Company D has employees who do 
 
All of Company Bs  not work at facilities.   
 
employees work at 
 
Facility Y.   
 
 
 
 
Figure 1 
 
B.3  What food facilities are required to register? 
 
Section 415 of the FD&C Act (21 U.S.C. 350d) requires domestic and foreign facilities that 
manufacture, process, pack, or hold food for human or animal consumption in the United States to 
register with FDA.  See 21 CFR 1.225 (Who must register under this subpart?) and 21 CFR 1.226 
(Who does not have to register under this subpart?) and generally Registration of Food Facilities 
at https://www.fda.gov/food/guidanceregulation/foodfacilityregistration/default.htm. 
 
B.4  What are examples of legal entities that the food facility may be a part of? 
 
Examples of a legal entity include limited liability companies, corporations, S corporations, sole 
proprietorships, partnerships, and cooperatives.  A facility can be part of any legal entity.  For 
example, a facility may be a division (or part of a division) of a corporation. 
B.5 How do you calculate the number of FTEs? 
As noted in Question A.2, the number of FTEs is calculated by dividing the total number of 
hours of salary or wages paid directly to employees by 2,080 hours (the number of hours of work 
in one year).  If the result is not a whole number, round down to the next lowest whole number.   
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Example B.5.1:  Calculating the number of FTEs and rounding down 
Your facility is part of a corporation. The corporation has 100 full-time employees who each 
work 40 hours per week (2,080 hours per year).  It also has 150 part-time employees who each 
work 30 hours per week (1,560 hours per year) and 200 part-time employees who work 20 hours 
per week (1,040 hours per year).  The corporation also has 100 seasonal workers that each work 
40 hours per week for 13 weeks (520 hours per year). 
Step 1.  Calculate the hours for all your full-time employees.   
100 x 2,080 hours = 208,000 hours 
Step 2.  Calculate the hours for all your part-time employees. 
(150 x 1,560 hours) + (200 x 1,040 hours) = 234,000 + 208,000 = 442,000 hours 
Step 3.  Calculate the hours for all your seasonal employees.  
  100 x 520 hours = 52,000 hours 
Step 4.  Add all the hours of your full-time, part-time, and seasonal employees. 
  208,000 hours + 442,000 hours + 52,000 hours = 702,000 hours 
Step 5.  Divide the total number of hours by 2,080 hours. 
  702,000 hours  2,080 hours = 337.5 FTEs 
If the corporation has no subsidiaries and/or affiliates, you are done with the FTE calculation.  
Round down to the next whole number.  Since your facility is a business with 337 FTEs, it is a 
small business for purposes of part 117 and part 507. 
B.6 Which employees should you count? 
Example B.6.1:  Counting FTEs when your facilitys parent company is not a facility 
Your facility is a company that manufactures food ingredients and is a subsidiary (Subsidiary A) 
of a parent company.  Your facility is required to register with FDA under section 415 of the 
FD&C Act.  Your parent company has two other subsidiaries (Subsidiary B and Subsidiary C) 
that manufacture other types of food ingredients and are also required to register.  However, your 
parent company does not manufacture/process, pack, or hold food for consumption in the United 
States and therefore is not required to register with FDA. For purposes of calculating the total 
number of FTEs for your business, you must determine the total number of hours for all the 
employees in your company (Subsidiary A), as well as Subsidiary B and Subsidiary C, but you 
do not need to count the hours for the employees at the parent company because it is neither a 
subsidiary nor an affiliate of your facility.  The parent company is not a subsidiary of Subsidiary 
A because Subsidiary A does not own or control the parent company; the reverse is true.  And no 
part of the parent company can be an affiliate of Subsidiary A because the parent company does 
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not include any registered facilities.  However, Subsidiaries B and C are affiliates of Subsidiary 
A because they are facilities and are all under common control by the parent company. 
Example B.6.2: Counting FTEs for franchisees that are facilities 
Your water bottling facility (Franchisee A) is a franchisee of the company Water-Water and is 
made up of 400 full-time employees who each work 40 hours per week (2,080 hours per year).  
Water-Water has two other franchisees (Franchisee B and Franchisee C) that also bottle water 
and have 350 and 275 full-time employees, respectively. Included within the Water-Water 
company is a bottled water operation with 150 full-time employees. All of the franchisees are 
facilities required to register.  Water-Waters water bottling operation also is a facility required 
to register.  Each of the four entities will only need to count their own employees because there 
are no subsidiaries or affiliates (i.e., there are no ownership, control, or common control 
relationships).  Therefore, your facility (Franchisee A) is a small business because it has 400 full-
time-equivalent employees.  
Example B.6.3: Determining the legal entity and counting FTEs for a farm mixed-type facility 
Your farm mixed-type facility is legally organized as a partnership.  It is also a member of a 
cooperative, which is a separate legal entity.  The cooperative sells processed farm products 
including jams, jellies, baked goods, and fresh-cut produce that are made by the farm mixed-type 
facilities that form the cooperative.  In addition to your facility, the cooperative also consists of 
two other members (farm mixed-type facilities), a sales division, a marketing division, and an 
accounting division.  Step 3 in Question B.1 has you calculate the number of FTEs in the legal 
entity of which the facility is part.  For purposes of determining which employees to include in 
the FTE calculation, you should add the hours for all employees of your partnership (including 
farm workers) but not those in the cooperative because the cooperative is a separate legal entity 
that is neither a subsidiary (i.e., it is not owned or controlled by your farm mixed-type facility) 
nor an affiliate (i.e., it is not a facility that controls, is controlled by, or is under common control 
with your farm mixed-type facility) of the partnership.  
B.7  Should you account for employees that are not engaged in food activities covered by 
parts 117 or 507? 
Yes, all employees of the legal entity that includes the facility, as well as its subsidiaries and 
affiliates, should be counted regardless of whether they are engaged in covered food activities.  
Examples of non-food activities employees could be engaged in include retail operations, 
management, accounting, or marketing. 
Example B.7.1: Counting FTEs not manufacturing/processing, packing, or holding food  
Your corporation (Soup Co.) includes two facilities that manufacture soup.  In addition, Soup 
Co. has divisions for sales and marketing that are separate from either facility.  When calculating 
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the business size for either facility, you should include all of the employees of the legal entity 
(Soup Co.) that includes the facility and therefore should include employees in the sales and 
marketing divisions.   
Example B.7.2: Counting FTEs in a more complex example 
Your facility, which manufactures food, is a division of Healthy Foods Markets, Inc., a small 
retail chain that has 3 retail stores.  See the diagram below, figure 2.  In figure 2, FT represents 
full-time employees and PT represents part-time employees. 
 
Figure 2 
Your facility manufactures deli salads, sandwiches, soups, salsas, dips and cut produce for the 3 
retail stores.  Your facility has 50 full-time employees (40 hours per week, 2,080 hours per year) 
plus 30 part-time employees that work 25 hours per week (1,300 hours per year).  The retail 
stores generally employ 100-125 full-time employees and 30-40 part-time employees (20 hours 
per week), with current employees shown in Table 1.  The corporation has 4 additional full-time 
employees that are not part of a facility  or a retail store.  Healthy Foods Markets, Inc. also has a 
subsidiary that operates a home delivery service and makes Internet sales that employs 20 full-
time sales representatives and 30 part-time (30 hours per week) delivery drivers. 
 
Table 1. Retail Store Employees of Healthy Foods 
Markets 
Retail  Full-time employees  Part-time employees 
Store  (40 hours / week)  (20 hours/week) 
1  102  37 
2  122  30 
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3  120  39 
Total  344  106 
 
Step 1.  Determine the legal entity the facility is a part of.  The facility is a division of the legal 
entity Healthy Foods Markets, Inc. 
Step 2.  Calculate the hours for the full-time and part-time employees of Healthy Foods Markets, 
Inc.   
First, calculate the hours for the full-time and part-time employees at your manufacturing 
facility.   
(50 x 2,080 hours) + (30 x 1,300 hours) = 104,000 hours + 39,000 = 143,000 
hours 
Next, calculate the hours for the employees of Healthy Food Markets, Inc. who are not 
employees at your manufacturing facility or at the retail stores. 
4 x 2,080 hours = 8,320 hours 
Next, calculate the hours for the full-time and part-time employees at each retail store. 
 
Table 2. Calculation of Hours for Retail Employees of Healthy Foods Markets, 
Inc. 
Retail  Full-time employee  Part-time employee  Total hours/year 
Store  hours (2,080  hours (1,040 
hours/year)  hours/year) 
1  102 x 2,080  = 212,160  37 x 1,040  = 38,480  250,640 hours 
hours  hours 
2  122 x 2,080  = 253,760  30 x 1,040  = 31,200  284,960 hours 
hours  hours 
3  120 x 2,080  = 249,600  39 x 1,040  = 40,560  290,160 hours 
hours  hours 
Total      825,760 hours 
 
Add the hours for all the employees of Healthy Foods Markets, Inc. 
    143,000 hours + 8,320 hours + 825,760 hours = 977,080 hours 
Step 3.  Calculate the hours for the subsidiary. 
  (20 x 2,080 hours) + (30 x 1,560 hours) = 41,600 hours + 46,800 hours = 88,400 hours 
Step 4.  Add the hours for all the employees of Healthy Foods Markets, Inc. and its subsidiary. 
  977,080 hours + 88,400 hours = 1,065,480 hours 
Step 5.  Divide the total number of hours by 2,080 hours. 
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  1,065,480 hours  2,080 hours = 512.25 FTEs (round down to 512).   
Since your facility is a business with a total of 512 FTEs, it is NOT a small business for purposes 
of part 117.  (If this were an animal food business, it would not be a small business for purposes 
of part 507, instead.) 
C.  Implications of Being a Small Business Under Parts 117 and 507 
C.1  Are there any exemptions for small businesses? 
A small business that is a farm mixed-type facility is exempt from the human food preventive 
controls requirements (21 CFR part 117, subparts C and G) if the only activities that it conducts 
that would be subject to the preventive controls requirements in 21 CFR part 117 are the low-risk 
activity/food combinations listed in 21 CFR 117.5(g) and (h).   
Similarly, a small business that is a farm mixed-type facility is exempt from the animal food 
preventive controls requirements (21 CFR part 507, subparts C and E) if the only activities that it 
conducts that would be subject to the preventive controls requirements in 21 CFR part 507 are 
the low-risk activity/food combinations listed in 21 CFR 507.5(e) and (f).  
C.2  What are the compliance dates for small businesses? 
FDA established staggered compliance dates based on business size for parts 117 and 507.  The 
compliance date for a small business facility subject to 21 CFR part 117 was September 18, 
2017. The compliance date for a small business facility subject to 21 CFR part 507 was 
September 18, 2017, for the CGMP requirements and September 17, 2018, for the animal food 
preventive controls requirements.  Certain provisions of parts 117 and 507 were extended by a 
final rule published in the Federal Register on August 24, 2016, 81 FR 57784 and/or are the 
subject of an enforcement discretion policy (Policy Regarding Certain Entities Subject to the 
Current Good Manufacturing Practice and Preventive Controls, Produce Safety, and/or Foreign 
Supplier Verification Programs: Guidance for Industry) issued January 4, 2018.  
 
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