What Is Full-Time Equivalent FTE?

According to the IRS, an employee’s hours of service for a year include all the hours for which the employee is paid or entitled to payment for the performance of duties for the employer during the tax year in question. This includes paid vacation, holiday, and sick leave, in addition to other paid leaves. To determine whether a company is an Applicable Large Employer , the ACA says that a company must have an average of 50 or more FTE employees over the course of one year. The ACA considers a full-time employee one who works at least 30 hours per week. Some labor laws and employee benefit programs are linked to how many employees a company has on its payroll. To ensure that a company with 100 part-time employees is treated as fairly as one with 50 full-time employees, an FTE is calculated to compare both workforces.

For example, if your business pays a certain type of employee $40,000 a year for a full-time 40-hour workweek, an employee who works 25 hours a week would have an FTE of 0.625 and a salary of 40,000 x 0.625, or $25,000. Hopefully, this article has helped you understand FTE meaning in business, how to calculate it, and why it’s an important metric. Start using it today for a more accurate view of your company’s human resources.

How to calculate an FTE?

See 1.45R-2 and for permissible methods of calculating hours of service and the method for calculating the number of an employer’s FTEs. A company with 100% FTE has the same number of employees working full-time as there are hours in a week . This would be equivalent to a company with 50 full-time employees and no part-time workers. By determining your company’s FTE you get a better understanding of how effective and useful your workers are. Part-time workers are usually paid less than full-time employees and may not have access to the same benefits. In the last step, just divide the total number of hours of full-time employees and part-time employees by the number of regular full-time hours to generate the full time equivalent for a certain period of time. Several federal programs in the United States—such as the Paycheck Protection Program —use FTE to determine employer eligibility.

• It could require 15 full-time employees (600 hours/40 hours) five days to complete, 30 part-time employees five days to complete, one full-time employee 15 weeks to complete, or a combination of these.
• Full-time Employees are workers who typically work for hours a week and are employed on a permanent basis.
• An FTE of 1.0 is equivalent to a full-time worker or student, while an FTE of 0.5 signals half of a full work or school load.
• The total of 30 hours for exempt positions who work 40 hours per week under normal conditions.
• If eligible, employers may receive a tax credit of up to 50% of the wages paid.

Marija Kojic is a productivity writer who’s always researching about various productivity techniques and time management tips in order to find the best ones to write about. She can often be found testing and writing about apps meant to enhance the workflow of freelancers, remote workers, and regular employees. Appeared in G2 Crowd Learning Hub, The Good Men Project, and Pick the Brain, among other places. Within this method, the employee is credited with 8 hours for each day they would be required to work at least 1 hour . So, 75 is the number of hours needed per day to finish the said 600-hour project. However, it will be up to you to decide how many people you’ll want to employ to carry this out and what type of employment you will offer them.

How to Calculate the Full Time Equivalent

Divided by the standard 40-hour work week, this would be equal to 2.5 FTEs— so you know that you will need two full-time workers and one part-time worker, or another combination of workers that adds up to 2.5 FTEs. Imagine you are a human capital manager who has lost four employees and needs to replace their hours. Two of these employees worked full-time hours , employee three worked 20 hours per week, and employee four worked 15 hours per week. To calculate the total FTEs for your business, you need to add up the hours worked by all employees, both full-time and part-time. In a nutshell, FTE is an acronym for full-time equivalent — a figure that reflects the number of full-time workers in your company. Before we delve into how to calculate it, there are a few important points to note. To calculate the full-time equivalent for the actual full-time employees, simply do a headcount.

• However, the IRS mandates only 30 hours per week or 130 hours per month for an employee in the US to be considered full-time in terms of the type of employment.
• If it’s a 40 hour week, each employee that works 40 hours per week is equal to 1.0 FTE.
• In this particular case, your FTE must be 1.0 or 0.75 as the minimum requirement.
• When 2,080 working hours are divided into 22,880 hours, the result is 11 FTEs.
• Jennifer Hartman has more than 20 years of writing and content experience, working with small businesses and Fortune 100 companies.

fte meaning say you have four full-time employees, three part-time employees working 20 hours a week for 30 weeks per year, and one part-time employee working 15 hours a week for 52 weeks per year. Get this by multiplying the number of full-time employees by the number of hours in a working week . FTE counts part-time employees as some fraction of a full-time employee, usually based on the number of hours they work (though depending on the business, there are other ways of measuring a given employee’s contribution).

FTE Meaning: What Does FTE Mean In Business?

In this way, scheduling projects based on the FTE calculation allows for greater accuracy in workforce planning and the efficient allocation of resources. To calculate FTE for COBRA, multiply the number of part-time workers you have by the average number of hours they each work per week, and divide the result by 40 (the working hours in a week for a full-time employee).

Such calculations facilitate accounting processes such as estimating wages, payroll, costs, etc. In most cases, employers fall below the threshold required to be an ALE and are, therefore, not subject to the employer shared responsibility provisions. All the above-mentioned factors end up costing the company something and affecting its bottom line. On the other hand, a full-time equivalent is one or more employees whose work hours combine together to total at least 30 hours per week or 130 hours per month. The Affordable Care Act requires every employer with 50 or more full-time employees working at least 30 hours per week to offer health insurance to its employees. The results will reflect the actual full-time payroll of the company. These metric is particularly important when companies are comparing themselves with industry averages or with close competitors.