What Is FTE Full-Time Equivalent?

What Is FTE Full-Time Equivalent?

Full Time Equivalent (FTE) refers to the unit of measurement equivalent to an individual – worker or student – one unit of a work or school day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload. To calculate FTE correctly, you’ll need to quantify your total weekly available work hours; it’s an important component of the calculation. Available hours per week is the number of hours your business considers standard work time multiplied by the number of employees you require to accomplish those related needs.

It serves as a useful scale to calculate a variety of performance metrics in business and can act as a resourceful tool to enable an optimum staffing model. “Full-Time Hours” is generally the number of hours considered to be full-time in a given time period (often 40 hours per week in the United States). Under the ACA, certain small businesses are eligible for a small-business tax creditto help with the costs of offering health benefits to employees. One qualification for this credit is that the business must have 25 or fewer FTEs. Knowing your number of FTEs is important for assessing business performance, and it’s required under the Affordable Healthcare Act (ACA) and for certain tax credits. The method for calculating FTE is slightly different for each of these uses.

Steps

It’s used by businesses to figure out how many full-time or part-time employees are in a company and for organizing projects. It’s an important element to accounting to determine employee wages, hours of service, and your company’s expenses. An FTE is a measure of how many employees are equivalent to a full-time worker.

Full-time equivalent students[9] 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. Jennifer Soper has 25+ years of writing and content design experience, working with small businesses and Fortune 100 companies. When it comes to running a successful business, you always want to be as efficient as possible and cut costs wherever you can.

Calculating FTEs for the Small Businesses Tax Credit

The list should include the employee’s name and the number of hours they work per week. The Full Time Equivalent (FTE) represents a unit of measurement standardized to equal the number of hours worked by the typical full-time fte meaning finance employee. The full-time equivalent measurement is valuable for distributing resources effectively. HR can use FTE calculations to allocate headcount to different departments or projects based on workload and priorities.

• 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.
• FTE allows HR to compare workloads and staffing levels across a company’s units or departments, ensuring equitable distribution of resources.
• This law was passed in 1985 as a benefit to employees who have lost their jobs.
• If you have a mix of full-time and part-time employees, the full-time equivalent (FTE) lets you represents the full-time hours that all of the employees in your business work.
• Many laws and regulations related to benefits eligibility, overtime pay, and other workforce standards depend on whether an employee is classified as full-time or part-time based on FTE status.
• Full-time equivalent is used in benefits administration to determine eligibility for certain benefits.

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. If you have a mix of full-time and part-time employees, the full-time equivalent (FTE) 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.

How is FTE calculated?

To calculate it, take the total hours worked by all part-time employees and divide it by the hours worked by full-time employees. (For a year, that is 2,080 hours with 40-hour workweeks and 1,560 hours with 30-hour workweeks, which is considered full-time for ACA reporting). FTE is a method of calculation to use when you want to accurately forecast specific needs of your business. It’s common when budgeting or managing personnel resources for projects. Essentially, it relates to the actual hours both full-time and part-time employees work during a regular workweek. According to the Affordable Care Act (ACA), employers with 50 or more FTEs are required to offer ACA-compliant benefits.

• A full-time worker is generally in a more advantageous position when compared to a fixed-term contractor.
• Stay on top of FTE trends and leverage HRIS tools to master this essential workforce metric.
• However, external contractors and freelancers are generally not included in the FTE count.
• Let’s run through the steps to calculate the FTEs that need to be replaced.
• 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.
• For large employers, calculating FTEs is necessary in order to determine if they are subject to the employer shared responsibility provisions of the Affordable Care Act (ACA).
• The following example will help you understand the concept of FTE in terms of total hours worked for all employees and the time they worked.

Divided by the standard 40-hour work week, this would equal 2.5 FTEs — so you know that you will need two full-time workers and one part-time worker or another combination of workers that adds up to 2.5 FTEs. For example, you could use it to calculate the staff you need to cover a certain number of hours or to compare the cost of part-time and full-time employees. 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. When calculating your FTEs for basic accounting or business purposes, the simplest way to do it is to divide total annual work hours for all employees by an average full-time annual work schedule.