Full-Time Equivalents: What Are They?

full time equivalent

For example, a project that is estimated to take 600 hours of work can be accomplished in a variety of ways depending on your allocation of staff and time requirements. Identifying which employees are FTEs is essential for a number of reasons ranging from workforce planning to adhere to employment laws under the Affordable Care Act. FTE calculations are also important when determining eligibility for certain federal programs and benefits. Clockify is a time tracker and timesheet app that lets you track work hours across projects. Outside the business environment, this unit of measure is also used to measure a student’s class load or involvement in a school project.

full time equivalent

Many companies only offer benefits to employees who are effectively full-time, so knowing your threshold for who qualifies and who doesn’t is also important. FTE is about 2,080 hours annually at most businesses, although this can vary at specific companies. When you analyze staffing in terms of hours worked rather than number of employees, it gives a more accurate picture of business performance.

Other methods to calculate your workforce full-time equivalent

In contrast, a part-time employee working only 20 hours per week would have an FTE of 0.5—which shows that their hours worked are equivalent to half of a full-time employee. 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. ALEs are required to offer affordable health coverage of minimum value to all full-time employees and their eligible dependents. 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).

All the above-mentioned factors end up costing the company something and affecting its bottom line. You can also use an FTE calculation to determine the appropriate pay for part-time workers. To identify the FTE for a specific part-time position, just divide the number of hours worked by the employee by the number of hours considered for a full-time worker. As long as you budget appropriately, benefits should not significantly impact your FTE calculations.

Full Time Equivalent Calculator

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. This is where the concept of the full-time equivalent (FTE) employee comes in. This is done by counting somebody who works half as much as a full-time employee as half an employee, and so on. It might sound cold, but it’s a vital metric when companies are applying for government loans, and when determining whether the company is large enough to have to follow certain laws.

The same is true for a 0.5 unit — it can be made of one part-time employee working for 20 hours or four employees working five hours. The full-time employees work 40 hours per week and 52 weeks out of the year, meaning that the number of full-time hours worked on an annualized basis is 104,000 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.

Who is considered an FTE employee?

Hours worked are just like they sound — how many hours an employee has worked. You need to understand hours worked for financial processes, like billing and budgeting. Independent contractors are not the same as employees, and the U.S. government has strict standards to reduce how many companies misuse contractors as laborers without paying the appropriate taxes and benefits. The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours.

  • Do you want help with the management of your company’s key figures, helping your team make the right decisions, and implementing the right measures in personnel 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.
  • 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.
  • Thankfully, a business owner can easily confirm their ALE status.

An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting. To see your employees’ FTEs, you can view their daily/weekly/monthly assignments in Clockify. Finally, the third method is based on the weeks-worked equivalency. An employee with a regular budgeted assignment of 75% of a full-time job position has a 0.75 FTE. Do you want help with the management of your company’s key figures, helping your team make the right decisions, and implementing the right measures in personnel planning?

What Else Does FTE Do?

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. Divide the total hours worked by all of your employees by the number of available full-time hours in a year (usually 2,080). This gives you the total number of hours worked by all of your employees. To determine fte meaning your eligibility for the small-business tax credit, you’ll need to use a different system for counting FTEs. First, count the total number of employees who worked at your company at any time during the year, both full-time and part-time. It is sometimes useful to know how the total number of full-time and part-time employees are working in a business.

full time equivalent

Employers can use FTE to evaluate their hiring capacity and current payroll, as well as for reporting purposes related to labor laws and employee benefit programs. Employers can use an average number of FTE employees for each pay period falling within a month. You typically would not include hours that owners or partners work within this calculation, but you can do so for your own accounting purposes if you want to include labor from ownership as part of your evaluation. This distinction is needed because a 40-hour work week is common, yet it is not universal. At some companies and in some countries, a 36-hour work week is also a viable option so for them, 36 hours of work equal 100% or 1.0 FTE.

Multiply the total hours worked in a week by 52, the number of weeks in a year, to find the number of hours worked annually. The list should include the employee’s name and the number of hours they work per week. Make sure to exclude time allotted for paid leave and sick leave. Do not include 1099 contractors; they are not considered employees. Full-time equivalent students[8] 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.

  • The value of knowing your FTE depends on whether you’re looking for something specific in your business or organization.
  • This calculation is not a linear number at most businesses where more FTE equals a specifically higher profit.
  • Monique Danao is a journalist and freelance writer who has worked with several startups and tech companies.
  • Knowing the difference between a full-time employee, a part-time employee, and an equivalent employee is a good place to start.
  • When the company calculates their FTE, they realize their two employees are the equivalent of three full-time workers.
  • (They may opt to give their employees a generous raise or some extra time off).

In this situation the business will also qualify for tax credits that are equal to 50% of employer-paid health contributions, which can be a great perk for smaller business owners. Full-time equivalent, or FTE, is a metric company based in the U.S. use to count how many hours all workers — including full-time, part-time, flexible, temporary, and as-needed employees — have worked. You might also find FTE referred to as whole-time equivalent (WTE) or work-year equivalent (WYE), depending on the context. The part-time employees, on the other hand, work 20 hours per week and 25 weeks out of the year. The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours worked by the typical full-time employee. To be required to provide COBRA continuation coverage, a company must employ at least 20 full-time equivalent employees on more than half of its working days in the past year.

Leave a Comment

Your email address will not be published. Required fields are marked *

English