For a business, specifically those with a large number of part-time workers, converting worked hours into FTEs is important in helping the company know how many full-time employees the part-time workers are equal to. 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 is equal to one FTE; a part-time employee is equal to 0.5 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. Full-time equivalent , or whole time equivalent , is a unit of measurement that indicates the workload of an employed person in a way that makes workloads or class loads comparable across various contexts. FTE is often used to measure a worker’s or student’s involvement in a project, or to track cost reductions in an organization. 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. Some businesses list this information in their employee handbooks or offer letters.
Use case 1: staff replacement
Salaried employees who work full time or are expected to work a full-time schedule (even if they don’t report their actual hours each week) are considered full-time employees in both cases. If you’re trying to determine who is full time and part time for ACA purposes, use 30 hours per week as the criteria for a full-time employee. If you’re calculating FTE for a different purpose and consider 40 hours to be full time in your organization, you can use that as your criteria. This is where the concept of the full-time equivalent 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.
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll. There are 2,080 working hours in the year, and the GHI Company staff works 22,880 hours during that year. When 2,080 working hours are divided into 22,880 hours, the result is 11 FTEs. Full-time equivalent refers to a unit which indicates the workload of an employed person in a way that makes workloads comparable across various contexts. It allows companies to standardize salaries by finding an equivalent salary between the part-time and those working full-time.
What Does FTE 100% Mean?
All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective”), an SEC-registered investment adviser. Here’s a breakdown of everything you need to know to calculate FTE for individual projects. The full-time equivalent is an indicator that answers many of the questions Human Resources departments need answers to. This, therefore allows them to make better decisions regarding personnel management. Join BambooHR and League to explore how to go beyond wellness resolutions so your organization can reap all the benefits of a healthy workforce.
- Let’s say that Sarah is a part-time employee who works 28 hours per week.
- To ensure that a company with 100 part-time employees is treated as fairly as one with 50 full-time employees, an FTE is calculated to compare both workforces.
- Human resources often use the FTE metric to make staffing decisions for the entire company.
- To calculate the total FTE, add the number of FTEs worked by full-time employees (1 FTE for each full-time worker) to the part-time FTE you calculated in step five.
- Now determine the number of hours worked by full-time employees over a given period.
- In this scenario, the FTE gives you a simpler way of calculating the number of employees you need to replace, rather than trying to calculate the total hours worked and then working out what percentage of that is full-time.
- 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).
To fte meaning FTEs, add together the number of hours worked by all part-time employees and divide that total by the number of hours worked by full-time employees. If your project is estimated to need 250 hours of work to complete, take those 250 hours and divide them by 8 hours, a normal full-time workday.
How do I calculate the Full-time Equivalent (FTEs)?
This ensures that you’re not getting a skewed result based on a higher or lower number of hours worked in a week than typical. For the purposes of calculating FTE, most employers consider a full-time employee one who works between hours a week. 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. 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. 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.
The program allows for more time to spend the funds and makes it easier to receive loan forgiveness for small businesses based on the average FTE employee reduction and other requirements. The program is also extended to qualified sole proprietorships, independent contractors, and self-employed individuals. Based on an FTE of 1.0, we 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. It is a unit of measurement that represents an employee’s work hours on a weekly full-time basis. The PPP is an SBA program that helps preserve a business in times of crisis. The total FTEs number is used to calculate the loan that borrowers are eligible for.
FTE Meaning: Final Words
Project Management Plan Agile projects, track deadlines, and deliver results. Professional Services Take control of billable hours and increase client satisfaction.
What is the FTE for 37.5 hours?
What is an FTE? A Full Time Equivalent is determined by the number of hours worked by employees. For example, a person working a full week of 37.5 hours or more equates to 1 FTE while a person working 19 hours equates to an FTE of 0.5 as that person only works half time.
FTE is a very specific term used to calculate whether a company is required to provide benefits under the Affordable Care Act and the Family Medical Leave Act , for example. Employers can also monitor workloads for future budgeting and staffing with FTE. If a company bills clients, or pays out overtime, identifying teammates’ full-time equivalency helps identify and track organizational costs. If you’re ever asked to calculate FTEs for your company, the person or organization asking you for the figure should be able to outline exactly how they expect you to arrive at your result.
How to Calculate the Full Time Equivalent
For all intents and purposes, your business requires 4.25 employees to function. For example, comparing the two groups over time allows an organization to find opportunities to improve efficiency when hiring seasonally or when making part-time and full-time staffing decisions. For example, imagine the project will involve designing a new website. The design phase might take 35 hours, the development phase might take 40 hours, and the testing phase might take 25 hours. You are a project manager, and you are trying to make arrangements for an upcoming project.
- In other words, do you know what the full time equivalent is and how it can help you better understand the needs of your organization?
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- In most cases, employers fall below the threshold required to be an ALE and are, therefore, not subject to the employer shared responsibility provisions.
- This could be an employee who works 20 hours a week, an intern who works one day a week, or an employee who is on call or only works weekends.