What Is FTE & How to Calculate It

In short, it is a crucial term that is important for HR specialists and accountants alike. As you will understand by the end of this article, there are plenty of situations in which knowing the meaning of FTE and how to calculate it can be quite useful. Full-time equivalent students is one of the key metrics for measuring enrollment in colleges and universities. The measure is often annualized to cover the average annual full-time equivalent students and is designated by the acronym AAFTE.

Such financial aid is subject to forgiveness if the borrower makes a request for it within 10 months of the end of the covered period. 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. For example, the Small Business Health Options Program requires you to have fewer than 50 FTEs to qualify.

The people-first HR software

For example, you’ll want more hands on deck in a restaurant during the busy holiday and summer seasons. In the construction industry, you’ll need a larger headcount when a bigger project comes along. It’s easier to plan for this when you can visualize your project needs and team capacity.

In this case, two part-time workers would count as 1.0 FTE, and four part-time workers would count as 2 FTE. Various combinations can be created depending on the needs of the business. A company with 100% FTE has the same number of employees working full-time as there are hours in a week . This would be equivalent to a company with 50 full-time employees and no part-time workers.

FTE Calculator, Employee Cost, and Revenue Per Employee

Although the DOL doesn’t define what a full-time employee is , the IRS does, so make sure that as work roles change, you keep up-to-date records of your FTE employees. 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. Based on an FTE of 1.0, we fte meaning calculate employees work 2,080 hours per year. 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. To calculate FTEs and see if you qualify for tax credit, you can choose one of the said methods (we’ve provided calculators for each).

With 14 employees, 7 of which are full-time and 7 part-time, the staffing capacity is 9.04 full-time employees per year. 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. However, if your company employs part-time employees as well, several of them together may equal 1.0 FTE.

Give some leeway for time off

This definition is the most commonly used to determine how many FTE you have for ACA purposes. Both Carole and Lynn in our example above would be full-time employees under this example. (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). It is critical for accounting purposesand determining wages, and for calculating the company’s expenses when paying its workers. Simply enter the number of full-time employees, then add up all the hours worked by part-time employees , and don’t forget to enter the hours of your standard workweek . This way, you will be able to determine the number of full-time equivalent workers in your company even when you have part-time workers on-site.

• In the construction industry, you’ll need a larger headcount when a bigger project comes along.
• Federal civil rights laws, however, count seasonal employees if they work every work day for 20 weeks in the current or previous year.
• 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.
• Get instant access to video lessons taught by experienced investment bankers.

Full-time Employees are workers who typically work for hours a week and are employed on a permanent basis. Along with regular wage, they get benefits such as health care, vacation pay, pension, and other requirements as per the prevailing law. Knowing the difference between a full-time employee, a part-time employee, and an equivalent employee is a good place to start. Proper calculations are crucial for the organization to ensure you’re meeting employer mandate regulations, submitting proper reporting, and avoiding costly penalties.