How to Calculate the Full Time Equivalent FTE in 4 Steps

The first FTE question you need to ask is “How many work hours are there in a year? ” – knowing full well that your part-time employees don’t work as many hours as your full-time employees. Project managers and budget analysts use FTE (Full-Time Equivalent) to convert part-time employee hours into full-time numbers. When estimating labor and overtime costs, you can use FTE figures to determine if you can afford a new hire.

• FTE or Full-Time Equivalent is an HR metric that quantifies an employer’s number of full-time employees regardless of how many hours each employee works.
• According to the IRS and the ACA, part-time employees work fewer than 30 hours a week on average.
• Generally, employers can offer vacation and other voluntary benefits to full-time employees and not part-time employees.
• These two part-time employees will be considered one full-time employee.
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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. 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. If the total is at least 50, the employer is an ALE and is required to offer health insurance to all qualifying employees. Employee’s total hours worked divided by the number of compensable hours in a full-time schedule during a fiscal year.

Example of full time equivalent calculation

The exact number will depend on the country where the employment is occurring, since the number of holidays varies by country. To determine this amount, ask yourself, what do you expect a full-time employee to work in terms of hours per week? FTE is frequently used to assess an employee’s workload and its contribution to a project, or to track cost savings in a company. FTE in salary is necessary for accounting, as well as calculating the company’s costs while compensating its employees. To be required to provide COBRA continuation coverage, a company must employ at least 20 full-time equivalent employees on more than half of its working days in the past year. The Paycheck Protection Program is designed to prevent job losses during the pandemic by giving loans to small businesses to cover payroll expenses and other costs.

Knowing your number of FTEs is important for assessing business performance, and it’s required under the Affordable Healthcare Act and for certain tax credits. The method for calculating FTE is slightly different for each of these uses. When a business employs a significant number of part-time staff, it can be useful to convert their full time equivalent hours worked into full time equivalents, to see how many full-time staff they equate to. The FTE concept is used in a number of measurements that compare headcount to revenues, profits, or square footage. The concept is also useful for comparing headcount levels among the firms within an industry, as part of an industry analysis.

What are the benefits of calculating FTE?

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. Employers can also monitor workloads for future budgeting and staffing with FTE. To find the equivalent of a full-time day, divide the total number of hours by 8. The standardized figure is 1.0, which refers to a full-time worker. The Paycheck Protection Program, established by the CARES Act, provides funds to small business owners to help them keep their workers on payroll. This section requires that all ALEs must provide their employees with affordable health care.

Next, she uses this figure to estimate the company’s health (awesome, of course!) by comparing it to the amount Toggl Track needs to operate properly. By examining revenues instead of https://www.bookstime.com/ profits , you can judge profitability on an employee’s actual work, not your other costs (ad costs, etc.). Of course, employee profitability factors heavily into hiring decisions.

Second FTE example

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. 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.

Part-time employees are included as a fraction of one FTE based on how much they work. Jennifer Hartman has more than 20 years of writing and content experience, working with small businesses and Fortune 100 companies.

The FTE calculation methods for determining business size

Sales agents may be compensated based on a consumer’s enrollment in a health plan. Contact your tax or legal professional to discuss details regarding your individual business circumstances. All quotes are estimates and are not final until consumer is enrolled. Employers often have questions about the differences between employee status, such as full-time, part-time, and full-time-equivalent employees, and how employment laws apply to these workers. Below we answer frequently asked questions about full-time, part-time, and full-time-equivalent employees. Secondly, the manager will perform an additional calculation for the total PM hours per year. Earlier, we mentioned that we have a total of 100 infusion pumps in our hospital inventory.

So, if it takes an average time of 1 PM hours per device that equals a total X of PM hours per year spent PMing 100 infusion pumps. First, a clinical engineering manager will calculate the PM hours, calibration hours, parts replacement hours, travel, etc… Additionally, he or she will add total unscheduled hours to the scheduled hours to an accurate benchmark. For example, we use the following factors below to calculate our FTEs. Yearly FTE equals the hours one full-time employee works in a year. Though I’ll use yearly figures in my examples, you can gain useful insights by calculating monthly FTEs.