If you don’t know what it means, you should, as this metric can help you make important decisions. Through the full time equivalent calculation, it is possible to identify whether your small business needs to hire, restucture or reduce its staff, for example. To qualify for PPP loan forgiveness an organization must have maintained the same level of FTE employees during certain specified time periods following the loan disbursement. If your business has a 32- or 35-hour workweek, then multiply the number of employees by that amount instead of 40. Information provided on Forbes Advisor is for educational purposes only.
- It could also be a temporary staff member who works an irregular schedule.
- Read our employer’s guide to find out more about how to hire employees in Europe, Asia, Africa, or elsewhere.
- If you’re trying to determine who is full time and part time for ACA purposes, use 30 hours per week as the criteria for a full-time employee.
- The allocation is dependant on the time-sensitivity of the project.
- Employers can use an average number of FTE employees for each pay period falling within a month.
The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours. It can refer to either one person’s work calculating full-time or numerous people doing the functions of one full-time employee. To track employee work hours and decide whether your employees are full-time equivalents, there are a lot of great tools for tracking teams. If you want to run a business, or you already have one, two important things and skills you need to master are acronyms and math. Because, if you don’t know about this stuff, how else are you going to know how to calculate 0.5 FTE? I bet you feel pretty stressed right now, your head must be hurting… But don’t worry, luckily we are here for you and in this article you will find the answers to all of your questions. Within this method, the employee is credited with 40 hours for each week when payment was due .
How to calculate an FTE?
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. And also for small business owners to see if they can apply for a tax credit in the amount of 50% of the employer-paid health care premiums. The expected length of a full-time schedule has changed a lot through history — full-time employees now work about 20 or 30 hours per week less than they did in the 19th century.
If you’re calculating FTE for a different purpose and consider 40 hours to be full time in your organization, you can use that as your criteria. To determine whether a company is an Applicable Large Employer , the ACA says that a company must have an average of 50 or more FTE employees over the course of one year. The ACA considers a full-time employee one who works at least 30 hours per week. 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. The part-time employees, on the other hand, work 20 hours per week and 25 weeks out of the year. The FTE calculation counts part-time employees as a fraction of a full-time employee, most often on the basis of the number of hours worked.
Staff movements can be numerous depending on your activity, the economic context, the contract of each of your employees and the size of your company. Beyond its impact on your obligations and costs, knowing your workforce will allow you to plan the right resources at the right time and optimise their volume according to the context. Among the methods of calculating the number of employees, the full-time equivalent is an important unit of measurement for establishing a reliable budget and managing your business strategy.
FTE calculations are also important when determining eligibility for certain federal programs and benefits. Divide the total hours worked by the number of full-time hours for the given time period to find the FTE. FTE is the full-time equivalent hours that all the employees in your business represent. full time equivalent This is how a company, on average, calculates the average yearly number of hours that a full-time employee works. Full-time equivalent , or whole time equivalent , is a unit that indicates the workload of an employed person in a way that makes workloads or class loads comparable across various contexts.
How to Calculate Full-Time Equivalent
In the chart below, because both Carole and Lynn are full-time employees, they would each be counted as one FTE. However, determining the FTE for Jimmy and Marta requires calculation.
Several part-time employees may be equivalent to a full-time employee, depending on the number of hours they work during the listed periods. In the context of the Health Care Reform Act, The Affordable Health Care Act requires the calculations that determine whether a business is classified as owned by a large employer or a small business. These calculations are used to clarify the company’s obligations regarding employee health benefits. Considering that both count as a full-time schedule in their respective companies, both count as a 100% or 1.0 FTE. However, the IRS mandates only 30 hours per week or 130 hours per month for an employee in the US to be considered full-time in terms of the type of employment. Clockify lets you track your cost rates per employee and then compare and contrast them with employee billable hourly rates.
Calculating Eligibility for the Paycheck Protection Program (PPP)
But, in many situations, a business needs to view or report its staffing level in terms of full-time work. Some businesses list this information in their employee handbooks or offer letters. For example, a business might state, “Our standard work hours are Monday to Friday from 8 a.m. – 5 p.m.” If employees take a one-hour lunch, then the available hours per workweek is 40 hours .
Depending on the type of work that is required, management can decide the number of full-time employees that are needed for a particular project and assign employees to those positions accordingly. To get FTE for the year, divide the total annual hours worked by 2080, which assumes a 40-hour workweek for 52 weeks of the year. To calculate for the month, divide by 173.33, which is equivalent to 2080 hours divided by 12 months. The ACA requires that employers add all the hours worked by part-time employees in a month and divide by 120. Under the ACA, certain small businesses are eligible for a small-business tax creditto help with the costs of offering health benefits to employees. One qualification for this credit is that the business must have 25 or fewer FTEs.