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What is a Full-Time Equivalent FTE? Definition Meaning Example

full time equivalent

Headcount is the total number of employees working in your company, including part-time and full-time workers. They are not measured in fractions or percentages — one employee is equal to one employee, no matter how many hours that employee has worked throughout the year. Calculating headcount is good for creating organizational strategies and setting goals, but it doesn’t give you specific insight as FTE does for data like departmental labor. To calculate FTE for COBRA, multiply the number of part-time workers you have by the average number of hours they each work per week, and divide the result by 40 (the working hours in a week for a full-time employee). This tells you how many FTE employees your part-time workers add up to. Add this to the number of actual full-time employees you have to find your total FTE.

  • Each employee who worked less than 40 hours per week on average during a specific calculation period counts as 0.5 FTE and is viewed as a part-time employee.
  • An FTE of 1.0 is equivalent to a full-time worker or student, while an FTE of 0.5 signals half of a full work or school load.
  • To convert the number of hours your employee is expected to work based on his or her FTE, you’ll need to reverse the previously mentioned process of calculating FTE based on the number of hours worked.
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More importantly, many government support programs use FTE as a basis to decide how your company should be treated. And some state and federal employment laws only apply to companies who meet a certain threshold of FTE employees. A single full-time employee is the baseline of the measurement and has an FTE of 1.0, while a part-time employee working half as many hours has an FTE of 0.5. These values are combined with simple addition, so that three part-time employees working half as many hours as a full-time employee would have a total FTE of 1.5. Use FTEs to check eligibility for tax and health insurance policies. Some health insurance policies through the Affordable Care Act are only available to businesses that have certain FTEs.

How Do I Calculate Revenue Per Employee?

Remember, your business is not considered an ALE if you employed less than 50 FTEs on average during the previous calendar year. If you employ seasonal workers and their hours cause your total number of employees to exceed 50 or more, you may be able to apply the seasonal worker exemption. There is typically no requirement for employers to offer vacation time, either to full-time or part-time employees. Generally, employers can offer vacation and other voluntary benefits to full-time employees and not part-time employees. However, many employers do offer vacation to part-time employees, usually on a pro rata basis. Similarly, if an employee works 20 hours a week, then there should be two such employees to complete the full-time schedule. These two part-time employees will be considered one full-time employee.

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The actual workload is not taken into consideration for this calculation. In practice, these numbers still usually fall somewhere between 32 and 40 hours per week, with 40 hours per week being a common norm for a full-time schedule. 💡To track employee work hours and decide whether your employees are full-time equivalents, try Clockify, our free time tracker for teams. Here are some common scenarios in which you wouldn’t have access to employer-sponsored insurance – and suggestions for how you can still get affordable, comprehensive health insurance.

What is a typical official full-time schedule?

While 30 hours per week is the minimum number of hours needed to be classified as full-time by the IRS, in many companies, a 40-hour workweek is considered full-time hours. FTE is the number of full-time equivalent hours all your employees work. For a 40-hour workweek, a full-time employee that works 40 hours counts as 1 FTE. A part-time employee that works 20 hours a week counts as 0.5 FTE. If you add all of the weekly hours of your employees and divide it by the hours in the workweek, you’ll determine how many full-time equivalent employees your business has. Like we mentioned, some employees count 37.5 to be the standard workweek, which is the number of hours actually worked when you exclude the breaks. Under the FFCRA, covered employers must provide both full- and part-time employees with emergency paid sick leave if they’re unable to work or telework for a covered reason.

Generally, an FTEE is a way to express a part-time workforce in terms of full-time employment. This calculation is sometimes done by taking the number of total hours worked by all part-time employees and dividing by the number of hours that are considered to be a full-time schedule. In the case of a 35-hour workweek, an employer would simply divide an employee’s scheduled hours by 35 to arrive at the equivalent rate.

Why are FTE calculations important for employers?

These rates will depend on PTO accrual rate policies of a company, organization, or institution. We already discussed how to use work hours to calculate FTE for individual employees. For example, you may want to do this when you want to make an FTE offer to a new employee during a job interview. And, the actual number of hours attached to a FTE will also depend on your organization’s policy. However, bear in mind that this only applies to positions that work 30 hours per week when assigned with a 0.75 FTE position, i.e. the IRS minimum for a full-time definition. 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.

full time equivalent

Independent contractors or 1099 workers do not count toward ALE. You should also leave out any employees who work outside the U.S., leased employees, and workers who hold positions like direct selling or commission-based agenting. If you fail to meet the above mandate for part of the year, you owe payment for each month you didn’t meet the requirements. Determine the payment amount by taking how many employees you employed in each month, minus up to 30 like before, but multiply by however many months out of 12 total and multiply by USD 2,700. The “pay or play” penalty for nonprofit and for-profit organizations, which the IRS determines based on the employer’s 1095-C and 1094-C forms and the employees’ individual tax returns. All ALEs are responsible for offering group health insurance unless they meet some specific terms and case-by-case scenarios. ALEs are subject to penalties and fines if they fail to do so.

A typical 40h workweek is a term you are surely familiar with. Although in some cases, employees consider 37,5 hours a full-time work week, because they don’t include the 30 min mandatory daily break in the total amount. To calculate the full-time equivalent for the actual full-time employees, simply do a headcount. As such, you may consider making it your internal company policy to calculate your employees’ average hours per week and your FTEs every year to maintain an accurate picture of your organization. Lastly, add the number of full-time employees you have to the full-time equivalent of your part-time employees to get your total FTEs for your organization.

  • Below we answer frequently asked questions about full-time, part-time, and full-time-equivalent employees.
  • Additionally, some state and federal employment laws will only apply to your organization if you have a certain amount of FTEs.
  • To determine your eligibility for the small-business tax credit, you’ll need to use a different system for counting FTEs.
  • Not every full-time employee is an FTE employee, since FTE status only includes employees who work hours contributing toward a 1.0 or 0.5 FTE measurement.
  • Many AI platform companies hire contract employees for several projects.

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