What is a Full-Time Equivalent FTE? Definition Meaning Example

Let’s 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 . This is where the concept of the full-time equivalent employee comes in. Put simply, FTE is a way of tallying a company’s total staff. 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.

Of course, you should also look at profit numbers, not just revenue figures. However, Revenue Per Employee figures allow you to see how much each employee contributes to revenues. In fact, you provide more room for each employee to work than your competitor; you don’t need to expand your facility to match their productivity figures. The ‘FTE salary per year’ box will automatically calculate the FTE salary. Enter the salary earned under the ‘salary earned during the job’.

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Otherwise, the company needs to make an employer shared responsibility payment to the IRS if one or more full-time employees receive a premium tax credit for buying their individual coverage elsewhere, like through Marketplace. Standard FTE assumes that typical employees work 40-hour workweeks, five days a week, and eight hours a day. Since there are 52 weeks per year, this equates to an average full-time employee having the opportunity to work a total of 2,080 hours.

You might also find FTE referred to as whole-time equivalent or work-year equivalent , depending on the context. Bear in mind that these are just simple FTE example calculations — project managers approach FTE from a different angle while federal programs use different FTE calculation methods. However, if your company employees part-time employees as well, several of them together may equal 1.0 FTE. FTE will influence how many hours employees can accrue for PTO. The actual PTO an employee can accrue may depend on several factors, including years of employment that dictate an employee hourly PTO accrual rate. These rates will depend on PTO accrual rate policies of a company, organization, or institution. In one company, a full-time schedule may be 40 hours per week.

Full-Time Equivalent (FTE) Definition

If you’re offering health coverage to remote workers, there may be some additional considerations. Read our employer’s guide to find out more about different types of insurance you can offer your employees. The amount they are liable to pay the IRS for an employer shared responsibility payment.

You’ll also need to know the actual number of weekly work hours to complete the FTE calculation. Actual hours worked per week is full time equivalent the exact number of hours an employee worked. However, you’d want to average those hours over a time period such as four months.

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For a business, specifically those with a large number of part-time workers, converting worked hours into FTEs is important in helping the company know how many full-time employees the part-time workers are equal to. Generally, a regular workload of a full-time employee is 8 hours a day for five days a week.

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.

Employers can use an average number of FTE employees for each pay period falling within a month. You can apply different methods for different classifications of employees, as long as you apply the method consistently within each classification. Once you have a total number of hours, divide by 2,080 and round down for your FTE. You typically would not include hours that owners or partners work within this calculation, but you can do so for your own accounting purposes if you want to include labor from ownership as part of your evaluation.

To determine this amount, ask yourself, what do you expect a full-time employee to work in terms of hours per week? Your FTE calculations must be accurate for IRS and Department of Labor reporting. At 50 FTEs, you’re required by the ACA to provide health insurance to your employees and by the FMLA to allow employees to take up to 12 weeks of leave for qualifying conditions. Several part-time employees may be equivalent to a full-time employee, depending on the number of hours they work during the listed periods. Clockify lets you track your cost rates per employee and then compare and contrast them with employee billable hourly rates.

For example, measuring FTE from month to month, or even week to week, helps to track overall workloads and expected employee output, even as part-time schedules chop and change. This could refer to either https://www.bookstime.com/ a single full-time employee or two or more part-time employees whose contributions add up to the equivalent of one full-time worker. Your 55 part-time and full-time employees are equal to 48.68 FTE.

• She uses this extensive experience to answer your questions about payroll.
• It can also do the same for a full-time employee who hasn’t completed a whole year of work yet.
• This is how a company, on average, calculates the average yearly number of hours that a full-time employee works.
• FTE is the number of full-time equivalent hours all your employees work.
• Some health insurance policies through the Affordable Care Act are only available to businesses that have certain FTEs.