FTE stands for full-time equivalent and is used by businesses to calculate the total number of full-time hours worked within their business among all employees. A full-time employee (working 40 hours per week) is equal to one FTE; a part-time employee (working 20 hours per week) is equal to 0.5 FTE.
Determining the number of FTEs for your business, whether to meet legal requirements or for budgeting, requires you to perform calculations by taking the total hours worked by part-time employees and dividing the total hours worked by full-time employees. You can then determine the equivalent number of full-time workers you employ.
Calculating FTE Manually
FTE is a very specific term used to calculate whether a company is required to provide benefits under the Affordable Care Act (ACA) and the Family Medical Leave Act (FMLA), for example. Employers can also monitor workloads for future budgeting and staffing with FTE.
FTE is calculated by taking the total number of hours worked by part-time employees in a week, month, or year plus the total number of hours worked by full-time employees and dividing by the average number of 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).
Your FTE calculations must be accurate for IRS and Department of Labor (DOL) reporting. At 50 FTEs, you’re required by the ACA to provide health insurance to your employees and by the FMLA to allow employees to take up to 12 weeks of leave for qualifying conditions.
If you’re concerned about staying compliant, consider software such as Homebase that will track your employee hours, provide reporting, and can also prepare your time sheets for payroll.
Follow the steps below to calculate your FTEs:
1. Make a List of All Employees & Hours Worked
The first step in calculating FTE is to make a complete list of all employees. These are individuals who are paid using a year-end W-2 form. Do not include 1099 contractors. Also, do not include yourself as the business owner, unless you are paid a salary and receive a W-2.
On the list, include two pieces of information: each employee’s name and the total number of hours that each employee works per week. (For the purposes of this calculation, include any approved leave, such as sick leave or paid time off in the total weekly hours.) This information provides the basis for calculating your FTE.
Total Hours Worked in a Week
2. Determine Which Employees Are Full Time vs Part Time
For the purposes of calculating FTE, most employers consider a full-time employee one who works between 30-40 hours a week. Although the DOL doesn’t define what a full-time employee is (it leaves that definition up to the employer), the IRS does, so make sure that as work roles change, you keep up-to-date records of your FTE employees.
In the chart below, because both Carole and Lynn are full-time employees, they would each be counted as one FTE. However, determining the FTE for Jimmy and Marta requires calculation.
Total Hours Worked in a Week
Full Time (FT) or Part Time (PT)
3. Determine Your Total FTE
To determine your total FTE, add the total part-time hours worked, plus the total full-time hours worked. From there, if your full-time hours are 40 per week, divide the number by 2,080. If your total full-time hours are 30 per week, divide the number by 1,560. This will give you your total FTE for all full- and part-time employees for the year. You can use the FTE total each week, month, or year to determine company growth. You can also use the FTE total to remain compliant with federal, state, and local labor laws that may be based on employer size such as mandatory sick time laws.
Understanding Your Business’s Available Hours Per Week
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.
To determine this amount, ask yourself, what do you expect a full-time employee to work in terms of hours per week? Exclude overtime and unpaid lunch breaks. The answer should be between 30-40 hours a week per employee (when considering full time).
Some businesses list this information in their employee handbooks or offer letters. For example, a business might state, “Our standard work hours are Monday to Friday from 8 a.m. – 5 p.m.” If employees take a one-hour lunch, then the available hours per workweek is 40 hours (eight hours a day x five days a week).
Here are some other examples:
- Four and a half day workweek: M-Th 8 a.m. – 5 p.m. (one-hour lunch), F 8 a.m. – noon = 36 hours
- Four, 10-hour day workweek: T-F 7 a.m. – 6 p.m. (one-hour lunch) = 40 hours
- Five day workweek: 8:30 a.m. – 4:30 p.m. (30-min. lunch) = 37.5 hours
Actual Hours Worked Per Week
You’ll also need to know the actual number of weekly work hours to complete the FTE calculation. Actual hours worked per week is the exact number of hours an employee worked. However, you’d want to average those hours over a time period such as four months. This ensures that you’re not getting a skewed result based on a higher or lower number of hours worked in a week than typical.
If you run payroll weekly, you’ll likely have this data available. But if you pay monthly or semimonthly, you may have to divide the number of available work hours in the month by the number of hours the employee worked, on average, to calculate your actual FTE.
Using time tracking software, like Homebase, will allow you to run a historical report based on employee work history and status to gather the average hours worked using custom fields. In addition, Homebase provides small business employers with a range of scheduling options to ensure your staff hours are within the correct range.
FTE Calculation Examples
Below are two ways to calculate FTE:
Calculating FTE correctly helps ensure you are compliant with applicable labor laws and IRS reporting rules; it also ensures you remain compliant with the ACA and FMLA by providing employees with health benefits and leave once your company reaches 50 FTE. Additionally, FTE calculations give you a better sense of your current staffing levels so that you can plan and budget accordingly.