The full time equivalent, often abbreviated as FTE is an indicator that reflects an employee’s productive capacity. An FTE of 1.0, for example, corresponds to the hours worked in a day for a full-time employee. Consequently, the FTE for a part-time employee working 20 hours a week would be 0.5.

• FTE calculations are also important when determining eligibility for certain federal programs and benefits.
• 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.
• It is a way of adding up the hours of full-time, part-time and various other types of employees into measurable ‘full-time’ units.
• FTE value helps in indicating the number of full-time employees that a company shall employ in a year or the number and type of employees needed to complete a project.
• Once a business knows the FTE of each employee, they can calculate their company’s FTE.

Let’s take a look at a few of the more common programs you might be expected to provide an FTE figure for. By tracking the time you spend on different tasks, you can see how productive you are during different parts of the day, and make adjustments to your schedule accordingly. The workplace can become more creative and productive when more individuals collaborate, share ideas, and build on one another’s work. Even though increasing the number of full-time equivalents (FTE) may result in more creative work, it is crucial to realize that creativity has many different components and is influenced by a variety of factors. If you have at least 50 FTEs employees, you are an ALE for the year, which means you are subject to specific reporting requirements and share responsibilities under the ACA.

What About Seasonal Workers and FTE Calculations?

Several federal programs in the United States—such as the Paycheck Protection Program (PPP)—use FTE to determine employer eligibility. FTE is also used in the United States to determine whether an employer is an ALE (Applicable Large Employer) for the fiscal year. Finally, small business owners in the United States need this metric to see if they can apply for a tax credit in the amount of 50% of the employer-paid health care premiums. Human resources often use the FTE metric to make staffing decisions for the entire company.

Marija Kojic is a productivity writer who’s always researching about various productivity techniques and time management tips in order to find the best ones to write about. She can often be found testing and writing about apps meant to enhance the workflow of freelancers, remote workers, and regular employees. Appeared in G2 Crowd Learning Hub, The Good Men Project, and Pick the Brain, among other places. As evident, once you have the total number of hours per day, you’ll be able to pick whatever days/employees ratio you want to carry out the estimated workload.

What Does FTE Mean?

It is sometimes useful to know how the total number of full-time and part-time employees are working in a business. But, in many situations, a business needs to view or report its staffing level in terms of full-time work. With 14 employees, 7 of which are full-time and 7 part-time, the staffing capacity is 9.04 full-time employees per year. Now add the total number of hours worked by full-time employees to that of part-time employees to get the total number of hours for all employees. The full-time equivalent converts the hours worked by part-time employees into hours worked by full-time employees. Let’s say that a full-time weekly schedule in your company is 40 hours per week, and your employees are scheduled with 40 hours of work a week.

There are some exceptions when calculating FTE for the purposes of the small business tax credit. One FTE equals 2,080 hours per year and the total number of employees is taken into account rather than the number of hours they have worked. 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. 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. A full-time position would equate to around 30 to 40 hours per week for most employers. If a company considers 40 hours per week as the basis for a full-time position, then anyone working an amount of hours below this range is considered a part-time employee.

What is FTE (full-time equivalent)

FTE offers a systematic method to determine the requirement for upcoming projects and the number of hours needed to complete tasks. As a result, it is a very beneficial measurement tool for long-term business strategy. You can determine how many hours your project needs, and after calculating the equivalent EFT of that hour, you can hire the number of people the project requires to be completed. An understanding of FTE also helps employers decide when to hire staff for short-term projects.

Figuring out exactly how many people work for a company is more complicated than asking for a show of hands. And while they’re all valued as part of the company, there are certain situations in which they’re not considered in the same way when calculating your headcount. FTE can show employers when it is time to provide their employees with health insurance, and bonuses because they get timely information to keep in compliance with the law.

What is the FTE schedule, and how does it differ across the countries?

This blog does not provide legal, financial, accounting, or tax advice. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog. The affordability threshold for employer-sponsored health plans in 2021 is 9.83%, which is a small increase from the rate of 9.78% in 2020. For a business to manage their business efficiently, they need to know they have enough manpower to carry out the work. In our example, we calculated Janet at 1.25, Tom at 1.0, Ryan at 0.5 and Gina at .25.

• The FTE employee doesn’t have to actually exist, and can be a combination of part-time employees.
• HR departments use FTE salaries to determine part-time workers’ salary compensation.
• Any employee having at least 30 working hours per week (or 130 a month) is considered a full-time employee under this act.
• This tells you that, when allocating resources for future projects, you can reduce the number of FTEs by one and still have enough workforce to complete the project.
• The 40-hour workweek calculation is applicable if you are doing the math for accounting and business purposes.

If you’re trying to determine whether or not you’re an ALE in the United States, you should use the IRS’s minimum of a 30-hour work week in your calculation. The IRS taxpayer advocate service has created an estimator that can help with this calculation. Within this method, the employee is credited with 8 hours for each day they would be required to work at least 1 hour (including PTO). Within this method, you add up all actual hours worked (including PTO). So, 75 is the number of hours needed per day to finish the said 600-hour project.

What Is Full-Time Equivalent (FTE) & How Is It Calculated?

As an added bonus, a company with a high number of satisfied customers is more likely to have a great reputation, which could lead to increased sales and the hiring of outstanding workers. As a result of increased demand for goods and services, a larger workforce may be required. Employers can use FTE to evaluate their hiring capacity and current payroll, as well as for reporting purposes related to labor laws and employee benefit programs. To convert an employee’s full-time equivalency into standard hours, multiply their FTE rate by 40. 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. For example, if a part-time employee works for 26 hours one week, their FTE value would be 0.65 (26 hours worked / 40 hours).

Because with FTE, your determinant in the equation is the total full-time working hours. When you analyze staffing in terms of hours worked rather than number of employees, it gives a more accurate picture of business performance. The Affordable Care Act (ACA) contains provisions that only apply to Applicable Large Employers or ALEs. As mentioned previously, the FLSA doesn’t specify how many work hours qualifies for full-time employment. The IRS, however, does put a number on it to regulate ACA provisions including the ACA shared responsibility payment and some small business tax credits. FTEs are calculated in different ways for different accounting uses or for calculating eligibility for different federal programs.

Greater Performance Review

If a working week is 40 hours over 5 days, a 0.75 FTE employee will work just 30 hours in that same period. We’ll assume that where you are, full-time employment means working 8 hours a day, 5 days a week, for 52 weeks 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. Divide the total hours worked by all of your employees by the number of available full-time hours in a year (usually 2,080).

The method for calculating FTE is slightly different for each of these uses. Just indicate how many employees work at your company, how many hours they work a week, and for how many weeks. Our model will then instantly calculate the Full Time Equivalent for you. To find the equivalent of a full-time day, divide the total number of hours by 8. The PPP is an SBA program (Small Business Administration) that helps preserve a business in times of crisis.

FTE stands for full-time equivalent and measures how many full-time employees an organization has. Full Time Equivalent (FTE) refers to the unit of measurement equivalent to an individual – worker or student – one unit of a work or school fte meaning day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload. In step 4, we learned that the total number of work hours for all employees in a single week equals 153.

• In a nutshell, FTE is an acronym for full-time equivalent — a figure that reflects the number of full-time workers in your company.
• It features a simple drag-and-drop interface, customizable reports, and productivity insights to help you optimize your team’s performance.
• Still, in this case, it’s more reasonable to take some bigger periods, let’s say, 90-day or 120-day periods, during which you can take the average number of hours spent by part-time employees.
• Horizons can support your business by helping you hire full-time employees anywhere in the world.
• To calculate the Full-Time Equivalent, simply divide the number of hours an employee works by the number of hours the company counts as full-time.
• With Time Analytics, you can also set up reminders for employees to submit their timesheets on time and get an overview of their hours worked.

The IRS Taxpayer Advocate Service has an Employer Shared Responsibility Provision (ESRP) Estimator to help you determine FTEs and see if you qualify as an ALE. Businesses use the FTE calculations for a variety of purposes, and the most common ones are presented below. We’ll also show you how to perform various calculations that involve FTEs, and provide you with automatic calculators that will help make the process easier. As you can see, FTEs are a valuable tool for businesses of all sizes and can be used in various ways to improve efficiency and optimize resources. However, like any other business metric, FTEs have their limitations. Fortunately, some tools and techniques help businesses accurately compute and monitor their FTEs – simplifying this critical process.