What Is Full-Time Equivalent FTE?

fte definition

This measurement method is often used when deciding how much to pay employees based on their wages or salary. The number of hours worked depends on the company and the industry, as specified in the worker’s contract. If another person works 30 hours per week, they will have an FTE of 0.75 (30/40). Three full-time employees would have an FTE of 3.0 and the part-time FTE is 0.875. 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. For example, you’ll want more hands on deck in a restaurant during the busy holiday and summer seasons.

fte definition

This employee list should include both the employee name and number of hours worked. If you’re offering health coverage to remote workers, there may be some additional considerations. Calculating FTEs will also determine an employer’s fte meaning duties under the shared responsibility provisions of the Affordable Care Act. In this article, we will explore the meaning of FTE from a U.S. perspective, how it is calculated and the purposes of doing so as an employer.

What Is Full-Time Equivalent (FTE)?

FTEs are calculated in different ways for different accounting uses or for calculating eligibility for different federal programs. Hours worked are just like they sound — how many hours an employee has worked. You need to understand hours worked for financial processes, like billing and budgeting.

  • This number doesn’t reflect sick leave, paid time off, seasonal assistance, or paid overtime.
  • Calculate the FTEs by determining the number of hours worked by full-time or part-time employees in a year.
  • On the other hand, FTE is used for complex and intensive projects that may require different or reinvented frameworks, methodologies, and processes.
  • The baseline in order to qualify as 1.0 unit of a full-time employee is set at 40 hours, so a part-time employee that worked 20 hours would be marked as a 0.5 FTE.
  • If you, for instance, choose the first method, enter all the actual hours worked (including PTO) and divide that number with 2,080 to get the final FTE.

An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting. Using the same formula, the number of part-time hours worked amounts to 5,000 hours per year. The chart below displays the number of weekly hours worked with the corresponding FTE under the standard 40 work-week. In this article, we will not only explain to you the FTE meaning, but we will also provide examples, helping you fully understand how to calculate FTE for your company. Plus, you’ll need to understand what FTE is and how to perform the FTE calculation if you want to apply for the Paycheck Protection Program (PPP) loan forgiveness program.

How do you convert FTE to hours?

For example, if an employer considers 40 hours per week as full-time, employees who work 40 hours each per week count as 1.0 FTE, while those that work 20 hours per week, or part-time, make 0.5 FTE. In this case, two part-time workers would count as 1.0 FTE, and four part-time workers would count as 2 FTE. Various combinations can be created depending on the needs of the business. Therefore, eligible employees https://www.bookstime.com/articles/invoice-financing may obtain affordable and minimum health insurance coverage thanks to FTE calculations under the Affordable Care Act. Any employee having at least 30 working hours per week (or 130 a month) is considered a full-time employee under this act. A full-time equivalent (FTE) — also known as a whole-time equivalent or WTE — represents the sum of all full-time hours employees work in a certain company.