In all cases, you should choose the most efficient solution for your company, taking into account the financial and time investments. For large employers, calculating FTEs is necessary in order to determine if they are subject to the employer shared responsibility provisions of the Affordable Care Act . A business is required to follow employment laws that depend on the number of employees and respectively FTE. In this section, we will explore how to calculate FTE for different laws or programs. Full-Time Equivalent provides the basis for understanding the individual’s contribution towards organizational success. It serves as a useful scale to calculate a variety of performance metrics in business and can act as a resourceful tool to enable an optimum staffing model.

• For example, 1.0 is typically the FTE representation of an individual’s full work/school day, while 0.5 would indicate half of the original figure, generally in reference to the workday.
• If eligible, employers may receive a tax credit of up to 50% of the wages paid.
• And this also means that 1 FTE may equal a different number of working hours in different countries or even companies.
• If your company considers the number of hours for a full-time position as 40 hours per week, note that working 30 or more hours counts as 1 FTE for purposes of ACA compliance.
• To plan the workload and determine the necessity to hire more employees.
• However, the number of FTEs in a government agency will depend on the project’s requirements that are being carried out, its timeframe, and budget allocations or restrictions.

FTE can serve as a parameter for your decision-making as a manager regarding promotions, dismissals, division of tasks, training and talent development. Through this, you can identify the needs and internal capabilities of your employees more easily, as well as exercise more strategic management.

How to calculate FTE for individual employees with examples

Divide this total number by 40, and then round the total to the nearest tenth to get the total FTE. They also use it to calculate labor costs for the expected project workload and subsequently define the funds needed to finish a project. The FTE also determines any business as an applicable large employer .

For a full-time one, the exact number of hours equals the expected number of hours in most cases. If you have both full-time and part-time employees in your company, you have to define how many FTEs you have in total. The full-time equivalent converts the hours worked by part-time employees into hours worked by full-time employees. Employee’s total hours worked divided by the number of compensable hours in a full-time schedule during a fiscal year. With the required inputs in place, we can arrive at approximately 52.40 FTEs by dividing the total hours worked by all employees by the total number of available work hours in a year. Suppose a company currently has 50 full-time employees on its payroll, along with 10 part-time employees.

Video: What is an FTE? Definition of FTE

With 14 employees, 7 of which are full-time and 7 part-time, the staffing capacity is 9.04 full-time employees per year. This rate is known as the affordability threshold and is typically adjusted every year to account for changes in market conditions, healthcare premium growth, and the American economy. If the total is at least 50, the employer is an ALE and is required to offer health insurance to all qualifying employees.

• One FTE does not necessarily equal one employee; one employee working 40 hours per week is equivalent to one FTE, but two employees working 20 hours per week each are also equivalent to one FTE.
• Now to figure out their FTE salary, simply multiply their FTE by the full-time employee’s yearly and weekly salary.
• The FTE in teaching also takes into consideration public and school holidays.
• 0.5 FTE is typically used for positions such as project managers, supervisors, overheads, and strategists, where it isn’t necessary to be present for the entirety of the workweek, as the job can be done in fewer hours.
• FTE efforts shall not include the work of general corporate or administrative personnel.
• A full-time equivalent employee refers to a combination of part-time employees that add up to one or more full-time employees.

An fte meaning 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. 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. Full-time equivalent employees are people who work the entire workweek—eight hours per day, five days a week, totaling 2,800 hours per year. Human resources often use the FTE metric to make staffing decisions for the entire company.