What is Full-Time Equivalent FTE & how to calculate it

A full-time equivalent employee refers to a combination of part-time employees that add up to one or more full-time employees. If an employer employs fewer than 50 full-time employees in the preceding year it will not be considered an ALE and, therefore, the employer will not be subject to the shared responsibility provisions for the current year. An understanding of FTE also helps employers decide when to hire staff for short-term projects. 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).

Once you have determined the number of full-time equivalents, you can then multiply this number by the number of employees to get the total number of full-time employees. They also use it to calculate labor costs for the expected project workload and subsequently define the funds needed to finish a project. According to the ACA’s definition of ALE, full-time employees work at least 30 hours per week on average, usually calculated based on the prior year’s FTE information. Companies in their first year can make estimates based on reasonable expectations. ALEs must offer insurance to each full-time employee who works at least 130 hours per calendar month.

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Once you’ve calculated your employee FTE, you can see how many part-time employees it takes to complete the same workload as a full-time employee. It is sometimes useful to know how the total number of full-time and part-time employees are working in a business. But, in many situations, a business needs to view or report its staffing level in terms of full-time work.

Calculate the FTEs by determining the number of hours worked by full-time or part-time employees in a year. To do this, multiply the number of weeks in a year with the number of hours for a full-time position. For the purposes of determining ALE status, the IRS defines a full-time employee as one who works on average 30 hours per week or 130 hours per month (or more). There are simpler FTE calculations that you can use for employee management or cost analysis. For example, you can compare a part-time worker’s salary to a full-time worker of the same seniority or role to ensure that they are being treated fairly. If your full-time worker makes $60,000 per year, and you have a part time worker who is 0.5 FTE (working 20 hours per week), they should be making $30,000 if you want all things to be equal.

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It can refer to either one person’s work calculating full-time or numerous people doing the functions of one full-time employee. Whereas, employees that works 20 hours per week are considered 0.5 FTEs. In general, full-time means an employee who works 40 hours per week, although this can vary depending on the organization. 100% FTE or 1.0 FTE refers to one full-time employee or a number of people who make up the duties of one full-time position.

FTE can serve as a parameter for your decision-making as a manager regarding promotions, dismissals, division of tasks, training and talent development. Through this, you can identify the needs and internal capabilities of your employees more easily, as well as exercise more strategic management. In short, it is a crucial term that is important for HR specialists and accountants alike. As you will understand by the end of this article, there are plenty of situations in which knowing the meaning of FTE and how to calculate it can be quite useful. In order to calculate your full-time equivalent as well as possible, here are the main data to collect and their particularities. Outside of the business environment, FTE is also used to measure a student’s class load or involvement in a school project… It seems like we never leave school behind.

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A full-time equivalent assists in tallying work hours, salaries, employee productivity, and company’s or workplace’s productivity, as well as calculating how much time an assignment or a project will take. With so many employment intricacies, it’s crucial you clearly distinguish between each type of employee, especially if you’re managing a large global team. Globalization Partners’ global employment platform streamlines worker classification and ensures your company is compliant in key areas like employment contact generation and payroll. This provision also requires employers to give employees 1095-Cs for tax purposes and to determine whether the ALE owes further payments or penalties. Use online estimator tools to examine what penalties or payments you might be held accountable for. The ACA legally requires that employers, individuals, and the government each help offer insurance to as many people as possible.

Outside the business environment, this unit of measure is also used to measure a student’s class load or involvement in a school project. Determining the FTE of your company is crucial for its productivity. Imagine that, with the same FTE, an employee can deliver 100 units, while another only delivers 30.

The role of FTEs in determining whether an employee qualifies as an ALE

The baseline in order to qualify as 1.0 unit of a full-time employee is set at 40 hours, so a part-time employee that worked 20 hours would be marked as a 0.5 FTE. FTE calculations are also important when determining eligibility for certain federal programs and benefits. 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 (including PTO).

• Our model will then instantly calculate the Full Time Equivalent for you.
• It might sound cold, but it’s a vital metric when companies are applying for government loans, and when determining whether the company is large enough to have to follow certain laws.
• FTE stands for “full-time equivalent,” and is used to measure the number of employees working for a company.

ALEs are required to offer affordable health coverage of minimum value to all full-time employees and their eligible dependents. In order to calculate the number of full-time equivalents in your company, you need to first determine the number of hours worked by all employees in a week. This can be done by dividing the total process costing definition and meaning number of hours worked in a week by the number of employees. Once you have determined the number of hours worked by all employees in a week, you need to then divide the number of hours worked by the number of hours considered full-time. Most companies consider a full-time employee to be someone who works 40 hours a week.

The full-time equivalent converts the hours worked by part-time employees into hours worked by full-time employees. In the context of the Health Care Reform Act, the Affordable Health Care Act requires the calculations that determine whether a business is classified as owned by a large employer or a small business. These calculations are used to clarify the company’s obligations regarding employee health benefits. An FTE salary is an employee salary converted into a full-time equivalent salary within a full year, regardless of whether the said employee holds a full-time or part-time position. The actual workload is not taken into consideration for this calculation. A full-time employee who works 40 hours per week is equal to one FTE, and a part-time employee working 20 hours per week is equal to 0.5 FTE.