The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a law requiring some employers to offer continued health coverage to workers and their families when they are no longer eligible for the company-provided plan. For example, measuring FTE from month to month, or even week to week, helps to track overall workloads and expected employee output, even as part-time schedules chop and change. Figuring out exactly how many people work for a company is more complicated than asking for a show of hands.

With time, you also improve your project budgeting skills as you determine the budget based on the resources you’ll need to hire for the project. However, in an FTE model, you only hire people as per your project pipeline’s need — never having to assign work to employees just because you’ve employed them. Put this way, you’ll see that the FTE model helps with efficient resource allocation. Based on the skill assessment, you go through your resource inventory to assign work to employees that have the right skills needed for the project. In case you don’t have the skills you need for the project in-house, you hire more people.

Step 4. Add annual hours worked for full-time employees and part-time employees

In project management, a full-time equivalent (FTE) is a unit of measurement that allows you to match personnel with projects. Different locations have different laws regarding employer mandates to their employees. Some are based on the number of Full-Time Equivalent workers a company employs. Remember to deduct any allotted holidays, vacation and sick days from the total number of hours working in a year. For our examples, we are allotting four weeks total time off a year, bringing the number of working weeks down from 52 to 48. If an employee works 20 hours a week for this same company, they only work half the amount as a full-time employee and are 0.5 FTE.

The credit is equal to 50% of qualified wages eligible employers pay employees between March 13, 2020 and December 31, 2020. A full-time equivalent employee is a combination of your part-time employees. Each part-time employee counts as a portion of a full-time employee. When you add together multiple part-time employees, you can create full-time equivalent employees. Besides ALEs needing to know their FTE status to comply with the employer mandate or not, understanding how many FTEs you have at your organization is good for your company’s metrics.

Example of an FTE calculation

As you can see, the part-time employees are converted into the performance of a full-time employee. So the FTE is not the number of employees in a company, but the equivalent of a full-time employee. Because the number of employees says nothing about a company’s actual work performance.

• Some labor laws and employee benefit programs are linked to how many employees a company has on its payroll.
• If you’re trying to determine whether or not you’re an ALE in the United States, you should use the IRS’s minimum of a 30-hour work week in your calculation.
• You also have 20 part-time employees who each work roughly 60 hours per month.
• A full-time employee who works 40 hours per week is equal to one FTE, and a part-time employee working 20 hours per week is equal to 0.5 FTE.
• Five of them work full-time (40 hours per week), three occupy a part-time position each working 20 hours a week, and the other two each work 10 hours per week.

An FTE of 1.0, for example, corresponds to the hours worked in a day for a full-time employee. Consequently, the FTE for a part-time employee working 20 hours a week would be 0.5. 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.

How to Calculate the Full Time Equivalent (FTE) in 4 Steps

This means that although company ABC employs 4 workers, their combined hours are equivalent to 3 full-time employees. Add together your full-time (40) and FTE part-time employees (10) to get your total full-time equivalent 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. Full-time equivalent, or FTE, measures the total amount of full-time employees working at any one organisation. It is a way of adding up the hours of full-time, part-time and various other types of employees into measurable ‘full-time’ units. It could require 15 full-time employees (600 hours/40 hours) five days to complete, 30 part-time employees five days to complete, one full-time employee 15 weeks to complete, or a combination of these.

Divide the total hours worked by all of your employees by the number of available full-time hours in a year (usually 2,080). This gives you the total number of hours worked by all of your employees. First, it is necessary to determine the number of hours worked by part-time employees. The full-time equivalent converts the hours worked by part-time employees into hours worked by full-time employees. If you are such an employer, then you are eligible to apply for a tax credit in the amount of 50% of employer-paid health care premiums.

Separate hours of part-time employees

Add together your full-time employees (20) and your FTE part-time employees (10) to get your full-time equivalent employees. To determine your eligibility for the small-business tax credit, you’ll need to use a different system for counting FTEs. First, count the total number of employees who worked at your company at any time during the year, both full-time and part-time. 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. Daniel, Nicole and Bobby do not work a full 40 hours a week, and to calculate the Full-Time Equivalent of the hours they work, you must divide each employee’s working hours by the company’s hours for a full-time workweek.

A full-time employee is considered to work at least 30 hours per week on average. 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.

Do not include 1099 contractors; they are not considered employees. A simpler way of calculating FTE for PPP is to assign an FTE of 1.0 to employees working 40 or more hours per week, and an FTE of 0.5 to those who work less. The Paycheck Protection Program (PPP) is designed to prevent job losses during the pandemic by giving loans to small businesses to cover payroll expenses and other costs. A fte meaning portion of this loan can be forgiven based on the number of FTE workers an employer has on its payroll. The Affordable Care Act (ACA) is designed to reduce the cost of health coverage for uninsured and lower-income individuals and their families. Under the ACA, some large employers might be responsible for providing minimum essential coverage or making shared responsibility payments to the IRS.