What is full-time equivalent, and how to calculate FTE?

Under this scheme, employees and their families can temporarily continue to avail of their group health insurance coverage even after the loss of a job or other permitted reason as per the law. It is meant to provide an aspect of economic security for employees who would otherwise be susceptible to losing their insurance. 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? If you don’t know what it means, you should, as this metric can help you make important decisions. Through the full time equivalent calculation, it is possible to identify whether your small business needs to hire, restucture or reduce its staff, for example. If you increase your opening hours and are open every day of the week, then you have a 0.875 FTE.

If you have a mix of full-time and part-time employees, the full-time equivalent lets you represents the full-time hours that all of the employees in your business work. FTEs are important for checking HR metrics and determining tax statuses for your business, but luckily they’re pretty easy to calculate on your own. Keep reading to find out everything you need to know about calculating FTEs and how to use them. 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.

How to calculate FTEs

Within this method, the employee is credited with 40 hours for each week when payment was due . Within this method, the employee is credited with 8 hours for each day they would be required to work at least 1 hour . Bear in mind that these are just simple FTE example calculations — project managers approach FTE from a different angle while federal programs use different FTE calculation methods.

The actual number of working hours spent by an employee is not considered in these calculations. That means you have to add up the number of FTEs of your full-time employees and the number of FTEs of your part-time employees . Firms should at the same time consider overtime hours, late logins, leaves, and absences when calculating. Overtime calculations and other additional charges may depend on the country their employees are in. Denying benefits to part-time employees who work in the same range and hours as your full-time staff can have consequences depending on your local laws.

How do I calculate the Full-time Equivalent (FTEs)?

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 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. This means that the number of working hours of the company’s 3 part-time employees equals the number of working hours of 2 FTEs. Calculating FTE simplifies the project schedule, as it helps to plan the number of people required to complete a particular task.

Then, calculate the total number of hours worked by full-time employees for that same time period. Add the hours worked by full-time and part-time employees together, then divide that number by the total hours worked by full-time employees to determine the FTE for that particular period. An FTE is a measure of how many employees are equivalent to a full-time worker. To calculate it, take the total hours worked by all part-time employees and divide it by the hours worked by full-time employees. They also use it to calculate labor costs for the expected project workload and subsequently define the funds needed to finish a project.

Calculating FTE for COBRA

The first step in calculating FTE is to make a complete list of all employees. Also, do not include yourself as the business owner, unless you are paid a salary and receive a W-2. 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. FTEs may also influence how many hours employees can accrue for PTO. The actual PTO an employee can accrue may depend on several factors, including years of employment that dictate an employee’s hourly PTO accrual rate.

• 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.
• 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.
• Anything is possible with the most powerful work management software at your fingertips.
• Project Resource Planning Plan and allocate resources for timely delivery.

In turn, clients not only save on administrative costs, but the cost of an employee turns into a single line-item for easier accounting. 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. Under this act, eligible employers with at least 50 FTEs on average during the previous calendar year would be subjected to the IRS’s employer-shared responsibility. In the last step, just divide the total number of hours of full-time employees and part-time employees by the number of regular full-time hours to generate the full time equivalent for a certain period of time.

What is FTE (Full-Time Equivalent)?

One FTE equals 2,080 hours per year and the total number of employees is taken into account rather than the number of hours they have worked. Certain employees are not included in the calculation such as owners, partners, shareholders, family members or relatives, and seasonal workers who work fewer than 120 hours per year. All the above-mentioned factors end up costing the company something and affecting its bottom line.

This gives you the fte meaning number of hours worked by all of your employees. This means that 1 person is working full-time or several employees together work the number of hours determined for 1 full-time employee in the company. This is the number of working hours spent by 5 full-time employees per working week. Before the payroll processing begins, employers should prepare the requirements given by their employees such as their tax and financial information. They would also need to secure their employer identification number to ensure that deductions such as payroll taxes and employee benefits are accounted for.