what is an fte employee

For example, if an employee has an FTE of 0.80, multiplying that number by 40 means that an employee works 32 hours a week. To find your average number of FTEs for the year, add together your total FTEs per month and divide your total by 12. For example, say you run an ice cream van five hours per day, four days a week . Keep in my mind that some laws, including the https://www.bookstime.com/ ACA and the Paycheck Protection Program , require employers to use specific calculations to determine the number of FTEEs. No, people who own the organization or company cannot be counted in the FTE and average annual wage calculation. One of the most common yet often perplexing compliance concerns HR teams encounter is calculating FTE, or full-time equivalency.

what is an fte employee

This is where the concept of the full-time equivalent employee comes in. This is done by counting somebody who works half as much as a full-time employee as half an employee, and so on. 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. In conclusion, having accurate FTEs for all your employees will also help employers determine responsibilities towards them, their PTO rates, and whether the business is eligible for certain federal programs.

The Comprehensive Guide to Full-Time Equivalent for Businesses

If your company considers 35 hours full-time, then you would adjust your calculation accordingly. Once you’ve determined the weekly working hours and the overall number of holidays granted to employees, the rest is simple. Simply multiply the number of weeks in a year by the number of work hours in a week.

Planning for project work in an organization by setting deadlines and a budget becomes more accessible using this tool. Having accurate employee equivalents can help HR in a number of ways. It can be useful to calculate paid time off for employees and if the business is eligible for federal programs. The ACA’s mission is to reduce the cost of health insurance coverage for eligible individuals. The act includes cost-sharing reductions and tax credits to help lower costs for lower-income families and individuals. It requires small group health plans to meet certain requirements, such as covering essential health benefits (e.g., preventative services). Full-time equivalent employees are people who work the entire workweek—eight hours per day, five days a week, totaling 2,800 hours per year.

Make a List of All Employees & Hours Worked

FTE adds up all of your part-time employees to create FTE employees.Full-time equivalent, or FTE, is a metric used to determine how many full-time and part-time employees you currently have on staff. Each FTE is equivalent to the number of hours your full-time employees work. Remember, your business is not considered an ALE if you employed less than 50 FTEs on average during the previous calendar year.

what is an fte employee

If there are full-time employees getting less work done than others, then they aren’t working as effectively and can use improvement. The result you get is the total hours worked by all the employees in your business. The 2,080 figure can be called into question, since it does not include any deductions for holidays, vacation time, sick time, and so forth. Alternative measures of FTE that incorporate these fte meaning additional assumptions can place the number of hours for one FTE as low as 1,680 hours per year. The exact number will depend on the country where the employment is occurring, since the number of holidays varies by country. Using time tracking software, like Homebase, will allow you to run a historical report based on employee work history and status to gather the average hours worked using custom fields.

Step 5: Add your full-time employee total to your FTE total

The definitions of full-time and part-time vary depending on law and policy. Most employers determine full-time status based on business needs and typically consider an employee to be full-time if they work anywhere from 32 to 40 or more hours per week. Regardless of your company’s definition of full-time status, coverage under various employment laws is based on the definition provided in the law. For instance, under the Affordable Care Act , full-time means working, on average, at least 30 hours per week. By contrast, under the Families First Coronavirus Response Act , full-time employees are defined as those normally scheduled to work at least 40 hours each workweek. When you calculate full-time equivalent employees, you generally find the average hours worked by your part-time employees during a certain period of time. Then, you divide that number to determine how many FTE employees your part-time employees make up and add them to your full-time employee total.

  • Divide the total hours worked by the number of full-time hours for the given time period to find the FTE.
  • If you add all of the weekly hours of your employees and divide it by the hours in the workweek, you’ll determine how many full-time equivalent employees your business has.
  • Available hours per week is the number of hours your business considers standard work time multiplied by the number of employees you require to accomplish those related needs.
  • An FTE 100% is a full-time employee, the one working 40-hour workweeks (also known as an FTE 1.0).
  • If your business qualifies as an ALE, you must offer health insurance policies to your employees, as required by the ACA, or potentially be subject to a tax penalty.

FTE has a lot of different uses and calculation methods depending on why you want to calculate it. It will help you plan a project or your work according to deadlines and your budget. Sometimes one person can be your FTE 100%, or FTE 1.0, which is another way to call it. An FTE calculation for all employees in a company needs to be rounded down to the nearest whole number (usually, 1.0 FTE or greater).