What a full-time equivalent is and how to calculate it

If an employee works part-time throughout most of the year, he or she is not a seasonal worker and the employer must count the employee’s hours of service during the year in its FTE and average annual wage calculation. All wages paid to employees are taken into account in computing an eligible small employer’s average annual wages. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). Include only wages paid for hours of service (see the “What are the Permissible Ways to Count Hours of Service?” question on this page). Use wages as defined for purposes of the Federal Insurance Contributions Act . To determine your total FTE, add the total part-time hours worked, plus the total full-time hours worked. From there, if your full-time hours are 40 per week, divide the number by 2,080.

• Read our employer’s guide to find out more about different types of insurance you can offer your employees.
• Full-time equivalents help managers, business owners, and HR team members better understand existing costs to the business, as well as more effectively plan for future hiring needs.
• Or even appoint 12 full-time and one part-time resource for five days to complete the work.
• In this case, two part-time workers would count as 1.0 FTE, and four part-time workers would count as 2 FTE.

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. When you calculate FTE, you can find the costs of time, personnel, and money to determine staffing decisions. It’s used by businesses to figure out how many full-time or part-time employees are in a company and for organizing projects.

Step 1: Create a list of all employees and their hours worked

Employers can use an average number of FTE employees for each pay period falling within a month. Jean Murray, MBA, Ph.D., is an experienced business writer and teacher who has been writing for The Balance on U.S. business law and taxes since 2008. Using FTEs makes it easier to measure your business performance, particularly if you have lots of part-timers. After translating the part-timers into FTEs, you can compare your staffing levels to your industry competitors. Using FTEs also makes it easier to calculate revenue, productivity and profits per employee. Any company needs to know its workforce for social, financial and strategic management reasons. The full-time equivalent is one way of looking at your company’s workforce and will allow you to measure the workload and work capacity of an employee over a year.

Benefits like paid time off and maternity/paternity leave are all included within the number of hours worked, so don’t worry about accounting for these hours. A full-time equivalent employee is a worker with an FTE of 1.0, which will usually mean they’re employed full-time at your company. A full-time employee is considered to work at least 30 hours per week on average. Now determine the number of hours worked by full-time employees over a given period.

What Is FTE & How to Calculate It

The credit phases out for eligible small employers if the number of FTEs exceeds 10, or if the average annual wages for FTEs exceed $25,400 . The credit will be reduced based on the sum of the two reductions. This may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual FTE wages of less than $50,800 . Your 10 part-time employees work 25 hours a week, for a total of 250. Each of your 15 full-time employees works 2,080 hours per year, which comes to 31,200.

Certain employees are not included in the calculation such as owners, partners, shareholders, family members or relatives, and seasonal workers who work fewer than 120 hours per year. An understanding of FTE also helps employers decide when to hire staff for short-term projects.

Several part-time employees can add up to one full-time employee. Confused? Here’s how FTE works

You’ll also need to know the actual number of weekly work hours to complete the FTE calculation. Actual hours worked per week is the exact number of hours an employee worked. However, you’d want to average those hours over a time period such as four months. This ensures that you’re not getting a skewed result based on a higher or lower number of hours worked in a week than typical. To calculate FTE correctly, you’ll need to quantify your total weekly available work hours; it’s an important component of the calculation. 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 employee’s hours of service for a year include hours for which the employee is paid, or entitled to payment, for the performance of duties for the employer during the employer’s tax year. Hours of service also include hours for which the employee is paid for vacation, holiday, illness, incapacity , layoff, jury duty, military duty or leave of absence. Hours of service do not include the hours of seasonal employees who work for 120 or fewer days during the taxable year, nor do they include hours worked for a year in excess of 2,080 by a single employee. Full-time equivalent, or FTE, is a calculation human resource managers use to determine how many full-time employees they have on staff. To get this figure, they add the hours paid to all employees (full-time, part-time, etc.) and divide that by the number of hours a full-time employee would work over a given period. 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.

How to Calculate FTE for Individual Projects

It’s an important element to accounting to determine employee wages, hours of service, and your company’s expenses. Add up the total hours of service for which the employer pays wages to employees during the year , and divide that amount by 2,080. If the result is not a whole number, round to the next lowest whole number. (If fte meaning the result is less than one, however, round up to one FTE.) In some circumstances, an employer with 25 or more employees may qualify for the credit if some of its employees work less than full-time. For example, an employer with 48 employees that are each half-time has 24 FTEs and, therefore may qualify for the credit.