FTE refers to calculating the number of hours instead of the number of employees to forecast costs based on a full-time workweek. A full-time employee can be defined by a 40-hour workweek, 8-hours per day, 5 days per week. Now add the total number of hours worked by full-time employees to that of part-time workers to get the total number of hours for all employees. Employees who have more than 50 full-time employees or FTE workers, known as applicable large employers (ALE), must be in compliance with rules laid out by the ACA.

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• This way, you will be able to determine the number of full-time equivalent workers in your company even when you have part-time workers on-site.
• The Paycheck Protection Program (PPP) is a Small Business Administration (SBA) program to help employers retain employees during the public health and economic crisis.
• Let’s say you have 100 employees, but 18 of those employees are part-time and only work 10 hours a week.
• Many laws and regulations related to benefits eligibility, overtime pay, and other workforce standards depend on whether an employee is classified as full-time or part-time based on FTE status.
• If you’re ever asked to calculate FTEs for your company, the person or organization asking you for the figure should be able to outline exactly how they expect you to arrive at your result.

Divide the total hours worked by all of your employees by the number of available full-time hours in a year (usually 2,080). Most US companies adhere to the standard 40-hour, five-day workweek. However, many employers have experimented with a 4-day workweek in recent years. Factors such as regular hours worked, overtime hours, paid time off, and employee classifications (full-time, part-time) should be considered in FTE calculations. FTE is used in budgeting to estimate labor costs, allocate resources, and determine staffing needs based on workforce capacity.

Importance of FTE in Business

There are different ways to then decide how to break down that final number. Depending on your project needs, you can use only full-time employees or a mix of full-time and part-time to equal that FTE of 31.3. There’s a ton of flexibility that gives you the option to adjust with the scope of your project. To calculate your yearly FTE, you should calculate the work hours of all of your employees for that one year and divide that number by the ideal number of work hours per year for one full-time employee.

FTE Formula and Calculation

A part-time employee’s FTE salary is calculated by multiplying their FTE value by the salary allotted to an equivalent full-time employee. For instance, let’s say a full-time graphic designer working 40 hours per week makes $48,000 per year. A part-time graphic designer working 30 hours per week at that same company would have an FTE of 0.75 since they work 75% of that 40 hours. To be able to calculate the total FTE in your company, you need to determine the FTE of your part-time workers first. To do that, you need to divide the total number of hours worked by your part-time employees by the total number of annual hours worked by 1 full-time employee. You can then determine the equivalent number of full-time workers you employ.

For example, let’s say a company considers 40 hours per week as full-time employment. If an employee works 40 hours per week, they are considered a full-time employee. However, if another employee works only 20 hours per week, they would be considered half-time. When calculating your FTEs for basic accounting or business purposes, the simplest way to do it is to divide total annual work hours for all employees by an average full-time annual work schedule.

Comply With Federal Laws

The Affordable Care Act requires employers with 50 or more FTEs to offer healthcare benefits that line up with ACA standards. Whether you hire employees as part time or full time depends on your business needs and local regulations. A part-time workforce might save you money in wages and benefits but could, in turn, cost more in rehiring and training. You can also use an FTE calculation to determine the appropriate pay for part-time workers. To identify the FTE for a specific part-time position, just divide the number of hours worked by the employee by the number of hours considered for a full-time worker.

• If you’re concerned about staying compliant, consider software such as Homebase that will track your employee hours, provide reporting, and can also prepare your time sheets for payroll.
• In the chart below, because both Carole and Lynn are full-time employees, they would each be counted as one FTE.
• Three full-time employees would have an FTE of 3.0 and the part-time FTE is 0.875.
• However, external contractors and freelancers are generally not included in the FTE count.
• With 14 employees, 7 of which are full-time and 7 part-time, the staffing capacity is 9.04 full-time employees per year.
• Although the DOL doesn’t define what a full-time employee is (it leaves that definition up to the employer), the IRS does, so make sure that as work roles change, you keep up-to-date records of your FTE employees.

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Human Resources departments often use FTE to figure out how to set the working hours and salaries of employees. It’s important to keep in mind that it doesn’t indicate the actual number of employees, but rather the actual hours worked. An fte meaning FTE of 100% is equal to the amount of work one full-time employee performs within a given time period (a day, week, month, or year). In step 4, we learned that the total number of work hours for all employees in a single week equals 153.

Full Time Equivalent Calculator

To determine whether a company is an Applicable Large Employer (ALE), 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. In this example, your company has the equivalent of 5.24 full-time employees, or a 5.24 FTE. By this measurement, https://www.bookstime.com/ your four part-time workers amount to just less than one and one-quarter of a full-time equivalent employee. The FTE employee doesn’t have to actually exist, and can be a combination of part-time employees. For example, if your entire staff works part-time, the FTE employee is a hypothetical full-time worker by which your part-time workers are measured.

Employers must calculate FTE accurately to determine things like overtime pay and staffing needs. Staying up-to-date on laws, getting legal advice, and having clear processes are crucial to ensure FTE calculations are legal and fair to workers while following the rules. It is critical for accounting purposes and determining wages, and for calculating the company’s expenses when paying its workers. According to the Affordable Care Act (ACA), employers with 50 or more FTEs are required to offer ACA-compliant benefits. The ACA defines a full-time employee as someone who works 30 hours per week or 130 hours per month. If your company considers the number of hours for a full-time position as 40 hours per week, note that working 30 or more hours counts as 1 FTE for purposes of ACA compliance.