How to Calculate FTE: Full-Time Equivalent Formulas & More

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. This is a straightforward example since each employee who works 40 hours per week in your company has a 1.0 FTE. Since both are considered to be full-time schedules 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. 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.

• Once you decide why you want to use FTE, identify the appropriate calculation method, and follow it through.
• For over a decade, Jennifer worked as an HR generalist, providing expertise in accounting, payroll, and HR by implementing payroll and benefits best practices and creating onboarding and employee-relations documentation.
• In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees.
• As you can see from the example above, you can easily calculate how many full-time equivalent employees you need to hire to successfully complete a project.
• A headcount simply counts the total number of people employed at your organization or within a particular department.
• Therefore, eligible employees may obtain affordable and minimum health insurance coverage thanks to FTE calculations under the Affordable Care Act.
• Businesses use the FTE calculations for a variety of purposes, and the most common ones are presented below.

If an employer has a 40-hour workweek, a worker scheduled for 40 hours per week is 1.0 FTE. The calculation of FTE is an employee’s hours divided by the employer’s number of hours considered a full-time workweek. The PPP is an SBA program (Small Business Administration) that helps preserve a business in times of crisis. The total FTEs number is used to calculate the loan that borrowers are eligible for.

How To Calculate FTE for Better Resource (And Budget) Management

As long as the employee’s hours add up to 40 hours per week, it doesn’t matter what hours and days they work. This is critical in today’s workplace, with more people working remotely and with flexible hours. To calculate your FTE when applying for a PPP loan, take the average number of hours worked by employees each week for the covered period, divide by 40, and round to the nearest tenth. For a PPP loan, a full-time employee is considered to work at least 40 hours per week, and no single employee can have an FTE exceeding 1.0. A full-time equivalent (FTE) is a unit of measurement used to determine the amount of full-time hours worked by all employees in an organization. If a normal work week consists of 40 hours, an employee who works for 40 hours per week has an FTE of 1.0 while a part-time employee working only 20 hours per week has an FTE of 0.5.

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. With Float, you can check the total leave balance for FTE or PTE employees using the time off policies feature. You can view the unused balance as a whole number or percentage for on-the-fly planning. If you want to save time, why not use our free full time equivalent calculator template for excel to easily work out your company’s FTE.

Full-time equivalent

Unlike FTEs, your headcount is totaled regardless of how many full-time or part-time employees you have or the number of hours per day they work. Depending on how many part-time workers you employ, you’re likely to have a higher overall headcount than FTEs. However, a full-time employee is not the same as a full-time equivalent. The number of full-time equivalent employees at an organization is made up by a combination of full-time and part-time employees. According to the ACA, part-time hours are considered anything less than 30 hours per week. FTE stands for full-time equivalent, and it’s a unit of measurement equal to the number of hours typically worked by a single full-time employee at a given company.

This is particularly true for large organizations that employ a variety of full-time, part-time, and flexible staff. An FTE calculation is a method for measuring how many full-time employees are present at a company, alongside the number of part-time employees that in aggregate can be translated into full-time terms. Although most businesses consider 40 hours a week and 160 hours per month full-time employment, according to the IRS, 30 hours a week and 130 hours per month are enough. In some cases, employers consider 37.5 hours a full-time work week because they don’t include the 30-minute mandatory daily break.

What is the difference between FTE and headcount?

” – knowing full well that your part-time employees don’t work as many hours as your full-time employees. So, each of your part-timers count as a fraction of a full-time employee. An FTE 100% is a full-time employee, the one working 40-hour workweeks (also known as an FTE 1.0). You can work out the Full-Time Equivalent by dividing an employee’s scheduled hours by the employer’s hours for a full-time workweek. Additionally, some state and federal employment laws will only apply to your organization if you have a certain amount of FTEs. This is similar to how certain laws only apply to a full-time employee, but not a part-time employee.

FTE is a way for employers to add up and compare a mix of part-time and full-time workers, by combining their relative working hours into one simple and easy to understand value. FTE stands for full-time equivalent and is used by businesses to calculate the total number of full-time hours worked within their business among all employees. A full-time employee (working 40 hours per week) is equal to one FTE; a part-time employee (working 20 hours per week) is equal to 0.5 FTE. An FTE or full-time equivalent calculation helps organizations better understand operational logistics as it relates to their employees and their employees’ contributions. It is critical for accounting purposes and determining wages, and for calculating the company’s expenses when paying its workers. (For a year, that is 2,080 hours with 40-hour workweeks and 1,560 hours with 30-hour workweeks, which is considered full-time for ACA reporting).

How Horizons Can Help You Hire Full-Time Employees

The method for calculating FTE is slightly different for each of these uses. She looks at KPIs (Key Performance Indicators) like gross profit margin (should be over 50% before hiring) and cash accounts (should equal min. 3 months’ revenue). For additional clarity, she researches industry averages to determine what Toggl Track can offer its employees. The first FTE question you need to ask is “How many work hours are there in a year?

• It makes the life of every project manager easier by avoiding tons of manual work.
• Being able to track your employees’ workloads and output between your full-time employees and FTEs gives you more insight into how efficiently your employees are working.
• For example, a business might state, “Our standard work hours are Monday to Friday from 8 a.m.
• To identify the FTE for part-time positions, divide the total number of part-time hours worked by the number of hours worked by one full-time worker.
• For example, say you run an ice cream van five hours per day, four days a week (20 hours per week).
• Federal civil rights laws, however, count seasonal employees if they work every work day for 20 weeks in the current or previous year.

In contrast, non-exempt positions who typically work only 28 hours per week on a 0.75 FTE schedule do not qualify, even if the employer policy defines them as full-time. In the fte meaning 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.

How to calculate full-time equivalents

100% FTE can also be achieved in several other ways, for example, through two part-time employees (who each work 20 hours per week) or four employees who work 10 hours per week. It could require 15 full-time employees (600 hours/40 hours) five days to complete, 30 part-time employees five days to complete, one full-time employee https://www.bookstime.com/ 15 weeks to complete, or a combination of these. 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.

• Employers can also monitor workloads for future budgeting and staffing with FTE.
• Depending on how big a company is, the ERC is calculated differently.
• The measure is often annualized to cover the average annual full-time equivalent students and is designated by the acronym AAFTE.
• These regulations include shared responsibility provisions and tax reporting requirements like issuing Form 1095-C when necessary.
• Furthermore, this value is used only as a basis for calculating the annual FTE and reflects the hours of an employee who works 5 days a week, 8 hours a day.

Full-time equivalents (FTEs) is a metric that measures the total number of full-time employees you have based on hours worked rather than the exact number of employees. Each part-time employee counts as a fraction of one FTE based on how many hours they work on average. Rather than hiring new employees, businesses can use FTE to deploy staff across various departments thereby keeping costs down. 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. The ACA makes health coverage a shared responsibility of individuals, employers, and the government to ensure that as many people as possible have affordable health insurance. While the law doesn’t require all business organizations to offer health insurance to their workers, employers who have 50 or more FTEs and are therefore considered ALEs must comply with the employer mandate.

Helps employers track team workload

Full-time equivalent (FTE) is the number of working hours spent by one full-time employee during a fixed period, which may be one week, one month, or, for example, one year. This method determines how many full-time employees are working in the company.Calculating FTE simplifies the project schedule, as it helps to plan the number of people required to complete a particular task. It also impacts the calculation of labor costs and forecasts project budgets for the future. Based on the FTE calculations, managers can decide on the number of people required for a project in the future – let’s say, whether it is reasonable to hire one more developer or not.

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 you’re offering health coverage to remote workers, there may be some additional considerations. FTE calculations are also important when determining eligibility for certain federal programs and benefits. Below, we’ll look more closely at FTE, the equation for an FTE calculation, and why it’s an integral metric for understanding your company’s organizational needs. Keep reading for a comprehensive explanation on how to  set yourself up for success  with FTE calculations, or use the links below to jump to a section you’d like to learn more about.

FTE Calculator, Employee Cost, and Revenue Per Employee

Horizons can support your business by helping you hire full-time employees anywhere in the world. Whether you are looking to expand your business internationally, outsource your operations, or take on more remote staff contact us today to discuss your needs. The SBA defines FTE employees as workers who work 30 hours a week or more. FTE also includes the sum of employees who work less than 30 hours a week, where the aggregate of work hours of those employees is equal to at least a 40-hour workweek. The 40-hour workweek calculation is applicable if you are doing the math for accounting and business purposes.