Full Time Equivalent FTE Definition, How to Calculate, Importance

From the expression of a need to contractualisation, the entire staffing process is digitalised and secured. Use FTEs to check eligibility for tax and health insurance policies. Some health insurance policies through the Affordable Care Act are only available to businesses that have certain FTEs. For example, the Small Business Health Options Program requires you to have fewer than 50 FTEs to qualify.

The primary purpose of the full-time equivalent metric is to help in project management. Project managers can use it to calculate various crucial elements in a project. For example, FTE can help them estimate the number of hours a project will take to complete. Similarly, it can help determine the number of full- and part-time employees the company must put on a specific project.

Small business guide to health benefits

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• Staff is synonymous with employees for the purpose of LEED calculations.
• If your Total Equivalent Full-time Employees is 50 or more, you qualify as an Applicable Large Employer for 2019 ACA compliance and reporting.
• A full-time equivalent, abbreviated as FTE, is a unit of measurement used to compare employed people or students who work or study a different number of hours per week.
• It can be helpful in cases where companies employ both full-time and part-time employees.
• Also, this tells you how many full-time equivalents are in your part-time employment.
• Several federal programs in the United States—such as the Paycheck Protection Program —use FTE to determine employer eligibility.
• Your salaried staff members work 40×15, a total of 600 hours a week.

For that purpose, the average for part-time employees is considered. Full-time equivalent is a unit to measure the total number of hours employees work.

Do I have to offer health insurance?

You’ll need to count the number of employees employed in your company throughout the year. This section requires that all employees must be given information about their health care coverage. To convert the number of hours your employee is expected to work based on his or her FTE, you’ll need to reverse the previously mentioned process of calculating FTE based on the number of hours worked. An FTE salary is an employee salary converted into a full-time equivalent salary within https://www.bookstime.com/ 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. Calculating FTE for individual employees may help you decide whether your employees are eligible for certain programs, such as the Public Service Loan Forgiveness program. Outside of the business environment, this unit of measure is also used to measure a student’s class load or involvement in a school project.

As you can see, the part-time employees are converted into the performance of a full-time employee. So the FTE is not the number of employees in a company, but the equivalent of a full-time employee.

Examples of how to calculate FTE for all employees

Charlette Beasley is a payroll & HR expert at Fit Small Business. With more than a decade of accounting and finance experience, Charlette has worked side-by-side with HR and accounting leaders to establish and help implement payroll best practices, controls, and systems. Her experience ranges among small, mid-sized, and large businesses in industries like banking and marketing to manufacturing and nonprofit. FTE is a very specific term used to calculate whether a company is required to provide benefits under the Affordable Care Act and the Family Medical Leave Act , for example.

Her boss may use that as the basis for the salary negotiations. On the other hand, employee Janet works 1.25 times the amount of a full-time employee and may receive a higher salary than 1.0 employee. The FTE definition refers to the number of hours of work of a full-time employee.

FTE calculator for project managers

Many employers often wonder what the difference is between a full-time employee and a full-time equivalent employee. An individual employee is considered full-time if they average at least 30 hours per week or at least 130 hours per month. While 30 hours per week is the minimum number of hours needed to be classified as full-time by the IRS, in full time equivalent many companies, a 40-hour workweek is considered full-time hours. To determine if your company is an ALE, you must include all FTEs in your total number. To calculate the full-time equivalent of part-time employees, add the actual hours worked by all part-time workers, including seasonal workers, in a given month and divide the total by 120.

Your 10 part-time employees work 20×10, a total of 200 hours a week. The part time employees, on the other hand, work 20 hours per week and 25 weeks out of the year. The FTE calculation counts part-time employees as a fraction of a full-time employee, most often on the basis of the number of hours worked.

Example of an FTE calculation

For all these reasons, it’s important to you learn to calculate full-time equivalent employees accurately. Once all employee hours are accounted for, you can complete this step by adding all the hours worked for the week. Companies may also need to calculate the full-time equivalent for a specific program. Some programs come with instructions on how to measure this metric.

We already discussed how to use work hours to calculate FTE for individual employees. For example, you may want to do this when you want to make an FTE offer to a new employee during a job interview. And, the actual number of hours attached to a FTE will also depend on your organization’s policy. However, bear in mind that this only applies to positions that work 30 hours per week when assigned with a 0.75 FTE position, i.e. the IRS minimum for a full-time definition. In contrast, non-exempt positions who typically work only 28 hours per week on a 0.75 FTE schedule do not qualify, even if the employer policy defines them as full-time. Clockify lets you track your cost rates per employee and then compare and contrast them with employee billable hourly rates.

The FTE Calculator was designed to help determine if your company falls under the 50+ employer. If your business meets the pay or play penalty then you will want to plan a way to provide benefits to your employees. Employers Resource would like to enroll one of our Human Resource Specialists to help you down this path. This calculator is structured as a general guideline and is not an official representation of your specific situation.

• Remember, your business is not considered an ALE if you employed less than 50 FTEs on average during the previous calendar year.
• All the above-mentioned factors end up costing the company something and affecting its bottom line.
• You may have heard the term Full-Time Equivalent in the context of the number of employees working, the salary employees receive or the benefits a company is mandated to give their workers.
• Because the number of employees says nothing about a company’s actual work performance.
• For example, say you run an ice cream van five hours per day, four days a week .