define fte

In our example, we will divide the total hours worked by Employees D and E by the number of hours worked by Employees A. 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. If you run payroll weekly, you’ll likely have this data available. But if you pay monthly or semimonthly, you may have to divide the number of available work hours in the month by the number of hours the employee worked, on average, to calculate your actual FTE. For the purposes of calculating FTE, most employers consider a full-time employee one who works between hours a week.

  • This metric provides a useful way to measure all of the hours worked by each type of employee thereby helping businesses organize their headcount more effectively.
  • Part-time workers are usually paid less than full-time employees and may not have access to the same benefits.
  • 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.
  • This is particularly true for large organizations that employ a variety of full-time, part-time, and flexible staff.
  • For example, if a part-time employee works for 26 hours one week, their FTE value would be 0.65 (26 hours worked / 40 hours).
  • Under ‘The value of assignment length,’ enter the no. of months worked/ 12.
  • 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.

One whole FTE unit is 1.0, which can be made up of a single person or multiple employees. Let’s say a full-time measurement for your company is 40 hours per workweek.

Why is FTE important for your company?

You’ll also need to know the actual number of weekly work hours to complete the FTE calculation. Actual hours worked per week is the exact number of hours an employee worked. However, you’d want to average those hours over a time period such as four months. 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.

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An easier, fairer comparison between full-time and part-time employees

The concept is also useful for comparing headcount levels among the firms within an industry, as part of an industry analysis. With so many employment intricacies, it’s crucial you clearly distinguish between each type of employee, especially if you’re managing a large global team. Globalization Partners’ global employment platform streamlines worker classification and ensures your company is compliant in key areas like employment contact generation and payroll. If you fail to meet the mandate for one full year but have fte meaning met other requirements, you will owe an amount equal to the number of full-time employees you employed during that year, minus up to 30 employees. This provision also requires employers to give employees 1095-Cs for tax purposes and to determine whether the ALE owes further payments or penalties. Use online estimator tools to examine what penalties or payments you might be held accountable for. When it comes to running a successful business, you always want to be as efficient as possible and cut costs wherever you can.

  • By comparing full-time employee’s numbers between industry competitors a company can analyze its current status about staffing, this can lead to conclusions like whether the company is under-staffed or over-staffed.
  • There are 8 working hours in the day on Monday, and the DEF Company staff works 136 hours during that day.
  • 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.
  • 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.
  • FTE refers to calculating the number of hours instead of the number of employees to forecast costs based on a full-time workweek.

Human Resources departments often use FTE to figure out how to set the working hours and salaries of employees. It’s important to keep in mind that it doesn’t indicate the actual number of employees, but rather the actual hours worked.

How to Calculate Full-Time Equivalent

This information can be helpful when budgeting for future projects. For example, if you have a project that requires 10 hours of work each week, but your current staff only has the capacity for 8 hours, you would need to hire an additional 0.2 FTE to complete the project. 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. Another key provision in the ACA states that all ALEs must offer a health insurance plan that qualifies as minimum essential coverage , otherwise known as the employer mandate. Your 55 part-time and full-time employees are equal to 48.68 FTE. Jennifer Hartman is an HR Specialist and staff writer for Fit Small Business, with over 15 years of experience in accounting, payroll, and human resources.

  • 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.
  • It is a unit of measurement that represents an employee’s work hours on a weekly full-time basis.
  • Bear in mind that this is just the expected number of hours Olivia may work with a 0.7 FTE — she will likely use some of these hours for PTO.
  • First, you need to account for the hours of a full-time weekly schedule and the actual employee hours they would be scheduled to work.
  • 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.

At G-P, our industry leading Global Employment Platform™ helps companies unlock their full potential by building highly skilled global teams in days instead of months. Here we discuss the opportunities – and challenges – in achieving the kind of global growth and success we can all share. Make sure that part-time and full-time workers are treated equally regarding benefits and compensation. If a company bills clients, or pays out overtime, identifying teammates’ full-time equivalency helps identify and track organizational costs. Information provided on Forbes Advisor is for educational purposes only. Your financial situation is unique and the products and services we review may not be right for your circumstances. We do not offer financial advice, advisory or brokerage services, nor do we recommend or advise individuals or to buy or sell particular stocks or securities.