Full Time Equivalent Definition: 706 Samples

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. An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting. Determining the FTE of your company is crucial for its productivity. Imagine that, with the same FTE, an employee can deliver 100 units, while another only delivers 30. In this case, the calculation may show that the first professional is overqualified for the position, whilst the other needs more training and development.

Sarah’s FTE is 0.7, so she works 70 percent of a full-time work week. 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. We’ll also show you how to perform various calculations that involve FTEs, and provide you with automatic calculators that will help make the process easier. The amount they are liable to pay the IRS for an employer shared responsibility payment. This is also known as “the employer mandate” or “the pay or play provisions”.

When do you use FTE?

If a normal work week consists of 40 hours, an employee who works for 40 hours per week has an FTE of 1.0 while a part-time employee working only 20 hours per week has an FTE of 0.5. All the above-mentioned factors end up costing the company something and affecting its bottom line. It is critical for accounting purposesand determining wages, and for calculating the company’s expenses when paying its workers. 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.

• All the above-mentioned factors end up costing the company something and affecting its bottom line.
• This is just one example of how FTEs can be used to adjust staffing levels — in reality, there are many other ways that this could be done.
• The total of 30 hours for exempt positions who work 40 hours per week under normal conditions.
• With the variety of working options available today some employees may work part-time while others may only work at certain times of the year or in several other flexible ways.
• Whether you are looking to expand your business internationally, outsource your operations, or take on more remote staff contact us today to discuss your needs.

The number of full-time equivalent employees is determined by dividing the total number of hours of service for which wages were paid by the employer to employees during the taxable year by 2,080. See 1.45R-2 and for permissible methods of calculating hours of service and the method for calculating the number of an employer’s FTEs. For example, an employee working 20 hours per week is considered half a full-time employee (if the employer considers a 40-hour workweek full time). As long as the employee’s hours add up to 40 hours per week, it doesn’t matter what hours and days they work. Since FTE considers the total time worked, it provides flexibility. This is critical in today’s workplace, with more people working remotely and with flexible hours.

More Definitions of FTE

When it comes to staffing, one of the most important metrics is the number of full-time equivalent employees, or FTEs. But what is the FTE meaning in business, and how can you calculate it? Moreover, having accurate FTEs for all employees will also help employers determine responsibilities towards them, their PTO rates, and whether the business is eligible for certain federal programs. Once you decide why you want to use FTE, identify the appropriate calculation method, and follow it through. 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.

This calculation provides a convenient way to quantify how many theoretically “whole” full-time employees are on the company payroll, even if the majority of your workforce is actually part time. You might have a designer, a developer, and a tester on your team. If each of these workers works 40 hours per week, then you are already meeting the FTE requirement. However, if one of them only works 20 hours per week, then you will need to bring in another part-time worker to meet the FTE requirement. In its most basic form, FTE is calculated by dividing the total number of hours worked by full-time employees by the number of hours worked by all employees. 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).

Give some leeway for time off

In this section, we will explore how to calculate FTE for different laws or programs. By knowing how many full-time equivalents you have, you can see where your organization has room for growth. One option is to bring on a part-time employee on a full-time basis temporarily. If a company bills clients, or pays out overtime, identifying teammates’ full-time equivalency helps identify and track organizational costs.

fte meaning about assigning the best people to the task and putting them in a position to succeed . Divide the total number of hours by 2080, and that ultimately determines the number of FTEs. Join BambooHR and League to explore how to go beyond wellness resolutions so your organization can reap all the benefits of a healthy workforce.

More Definitions of Full Time Equivalent

For example, you’ll want more hands on deck in a restaurant during the busy holiday and summer seasons. In the construction industry, you’ll need a larger headcount when a bigger project comes along. It’s easier to plan for this when you can visualize your project needs and team capacity.

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. These rates will depend on the PTO accrual rate policies of a company, organization, or institution.