FTE stands for full-time equivalent (not full-time employee) and translates the total hours worked by part-time employees into the number of equivalent full-time employees. To calculate FTE, you have to know how many employees you have, and the average number of hours they work. You can then determine the equivalent number of full-time workers you employ.
An FTE calculation is used to determine the size of your company for various reasons. For instance, once you reach 50 FTE, you’re required by the Affordable Care Act (ACA) to provide health insurance to your employees. We recommend working with a payroll provider like Gusto that can manage health benefits for you at a low per employee cost. It’s only $39/month plus $6/month per employee. Click here to try Gusto free for one month.
Free FTE Calculator
Use our free FTE calculator to determine how many full-time equivalent employees you have.
Below are four steps to calculate FTE; these steps and the free calculator above will help you verify that your counts are correct:
1. Make a List of All Employees & Hours Worked
The first step in calculating FTE is to make a 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: the employee name and the average number of hours that the employee works per week. (For the purposes of this calculation, include any approved leave, such as sick leave or paid time off, in the average weekly hours.) This information provides the basis for calculating your FTE.
An example is provided below:
2. Determine Which Employees Are Full-Time vs. Part-Time
For the purposes of calculating FTE, most employers consider a full-time-employee as one who works between 30 and 40 hours a week. In fact, the Department of Labor (DOL) doesn’t define full-time. It leaves that definition up to the employer.
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 a little math, which we’ll cover below in our examples.
SHOP, on the other hand, considers full-time employees as those who work on average 30 hours a week or more, for at least 120 days a year. If you’re trying to determine which are full-time and part-time for ACA purposes, use 30 hours worked a week as the criteria for a full-time employee. Here are two examples to help you determine what’s considered full-time for your FTE calculation.
30-Hour a Week Example:
For example, if full-time in your company is 30 hours, then every employee who works 30 hours a week or more is considered full-time. Two 15-hour a week workers would equal one FTE. This definition is the most commonly used to determine how many FTEs you have for ACA purposes. Both Carole and Lynn would be full-time employees under this example.
40-Hour a Week Example:
If a normal full-time schedule at your company is 40 hours a week, then 40 is the number of hours used to consider an employee full-time. In that case, it would take two 15-hour a week workers and one 10-hour a week worker to equal one FTE.
This example is one you might use when determining how many workers you’ll need for a project, or to estimate staffing levels required for business growth. In fact, if 40 constitutes full-time, you might consider Carole a part-time employee at only 35 hours a week.
Salaried employees who work full-time, or are expected to work a full-time schedule (even if they don’t report their actual hours each week), are considered full-time employees in both cases.
Part-time employees are employees who work 29 hours a week or less on average. This could be an employee who works 20 hours a week, an intern who works one day a week, or an employee who is on-call or only works the weekends. It could also be temporary staff that work an irregular schedule—perhaps 30 hours one week and 12 hours the next.
What’s important is that “on average” they work under 30 hours a week. To get a good estimate, it’s best to average hours over a 90- or 120-day time frame. In addition, if you’re calculating FTE for ACA purposes, you’d only include the part-time person in your calculations if they worked 120 days or more per year. In our example, Jimmy and Marta would be considered part-time employees.
Available Hours per Week
Available hours per week is the number of hours your business considers standard for full-time employees. To determine this amount, ask yourself: what do you expect a full-time employee to work in terms of hours per week? Exclude overtime. Exclude unpaid lunch breaks. The answer should be between 30 and 40 hours a week.
Some businesses list this information in their employee handbook or offer letters. For example, a business might state, “Our standard work hours are Monday-Friday, 8:00 a.m. – 5:00 p.m.” If employees take a one-hour lunch, then the available hours per workweek are 40 hours (8 hours a day x 5 days a week = 40).
Here are some other examples:
- Four and a half day work week: Monday-Thursday, 8 a.m. – 5 p.m. (one-hour lunch), Friday, 8 a.m. – 12 p.m. = 36 hours
- Four, 10-hour-day work week: Tuesday – Friday, 7 a.m. – 6 p.m. (one-hour lunch) = 40 hours
- Five-day work week: 8:30 a.m. – 4:30 p.m. (30-minute lunch) = 37.5 hours
Actual Hours Worked per Week
Actual hours worked per week is the exact number of hours an employee worked. However, to get an average number of hours worked per week, 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 this week than what’s typical.
If you run payroll weekly, you’ll likely have this data available. But if you pay monthly or semi-monthly, for example, you may have to total the number of available work hours in the month by the number of hours the employee worked, on average, to calculate your actual FTE.
Hours Worked per Week Example
For example, one part-time employee who worked 10 hours this week would be the equivalent of .25 FTE. Here’s the math.
Total hours full-time workers work in a week = 40
Total hours a part-time worker worked in a week = 10
40/10 = .25 FTE
In other words, your one part-time employee is the equivalent of .25 full-time workers.
Hours Worked Per Month Example
For example, 10 part-time employees who each work 48 hours a month would be the equivalent of 2.5 FTE. Here’s the math.
Total hours full-time workers work in a month = 120
Total hours part-time workers work in a month = 48
120/48 = 2.5 FTE
In other words, your 10 part-time employees are the equivalent of 2.5 full-time workers.
The Society for Human Resource Management (SHRM) provides this additional clarification as an example:
FTEs are about hours worked more than they are about numbers of employees. You could have four employees and only one FTE. Four 0.25 employees would be 1.0 FTE. John, Mark, Mary, and Sue could each work 10 hours per week and the total would be 40 hours worked or one FTE.
If you use a payroll provider like Gusto, you will be able to run a report based on payroll history and employee status to gather this information using custom fields. In addition, Gusto provides small business employers with a range of employee benefits options, including healthcare insurance for their staff. Click here to try Gusto free for 30 days.
3. Decide Why You Need to Calculate FTE
There are many ways to calculate FTE and you may use them for different reasons. For example, you may want to obtain a headcount at the start of each quarter or year to see how much your company has grown. Or, you may be planning to add staff. You’ll need to know how many people to add based on the workload.
Perhaps you may be counting FTEs to determine whether you’re required to abide by a particular labor law, such as Title VII of the Civil Rights Act or ADA. The ADA kicks in when you reach 15 employees. Below are three ways to calculate FTE based on the reason you want to use the FTE results.
Easy Estimate of FTE for General Purposes
If you want a simple way to determine how many FTEs are currently employed in your business, you’ll only need a few pieces of information, including how many hours part-time employees worked versus how many hours full-time staff worked (your standard or actual hours). This type of calculation is best if you want to know how big your company is or to see how it’s grown.
Example of an Easy Estimate
In this example, you have four part-time employees and 32 full-time employees. You have 36 total employees. That’s your headcount. Now, here are four steps showing how the math works to calculate how many FTEs you have:
- Add up all the hours worked by part-time employees last week. Example: four employees worked a total of 60 hours last week. One worked 12 hours, two worked 15 hours and one worked 18 hours (12+15+15+18=60). We’ll use 60 hours for our answer.
- Determine the number of hours full-time employees are paid for. Or, determine what constitutes full-time at your company. (This number is typically between 30 and 40 hours a week.) We’ll use 40 hours as our answer since that’s pretty common.
- Divide the top number by the bottom number (60 hours/40 hours = 1.5 FTE). Therefore, the four part-time employees are equivalent to 1.5 full-time workers. We’ll use 1.5 FTE as our answer.
- Add the part-time FTE (1.5) to the full-time workers (32) to come up with our total FTE (32+1.5 = 33.5). Therefore, we have 33.5 FTE in our example.
In this example, your 36 employees are equal to 33.5 FTE.
Annual Count of FTE
If you want to know how many employees you had over a period of time, say one year, so that you can compare this year to last year, you’ll need a bit more data. You’ll need, for example, a total of all the hours worked by all part-time employees throughout the year, Then, you will need to know what the comparative full-time hours would have been.
Example of an Annual Count
If your company considers 40 hours to be a full-time work week, then annual full-time hours would be 2,080 (40 * 52 = 2,080.) Therefore, 2,080 is the average number of work days in a year for an employer open 52 weeks a year.
Here are other options for average work weeks resulting in a different number of compensable hours per year:
- 30 hours a week: 1,560 hours a year (30 * 52 = 1,560)
- 32 hours a week: 1,664 hours a year (32 * 52 = 1,664)
- 35 hours a week: 1,820 hours a year (35 * 52 = 1,820)
- 38 hours a week: 1,976 hours a year (38 * 52 = 1,976)
You will need some kind of report to tell you how many hours part-time workers (those who average under 30 hours a week) worked throughout the year. Let’s say you had 10 part-time workers, who worked a total of 6,700 hours a year. (On average, each worked 670 hours this year).
Here’s how the math would work in four steps for a company with 55 employees, 10 of whom are part-time.
- Determine what your full-time (compensable) hours are per year for a full-time employee. For example, if your company expects a 35-hour work week, and compensates employees 52 weeks a year, then full-time hours per year would be 1,820/year (35 * 52 = 1,820). Therefore, we’ll use an example of 1,820 hours.
- Sum all hours worked by all part-time employees for that same year. For example, if your company has 10 part-time employees, who in total worked 6,700 hours in the year, then 6,700 hours is the value we’ll use.
- Divide the bottom number by the top number. The total hours that workers could be paid for is 1,820/year. Part-time employees worked 6,700 hours in total. Therefore, those 10 employees equate to 3.68 full-time employees (6,700/1,820 = 3.68). Part-time employees equal 3.68 FTEs.
NOTE: You could also use the average of 670 hours worked a year by part-time employees to determine how much of an FTE each part-time employee is on average. Then multiply that FTE percentage by the number of part-timers (670/1,820 = .368 FTE; 10 x .368 = 3.68 FTE).
- Add the number of full-time employees to the part-time FTEs. For example, if you had 45 full-time employees and part-time workers equaling 3.68 FTEs, your total would be 48.68 FTEs (45 + 3.68 = 48.68). You therefore have 48.68 FTEs in total.
In this example, you have 55 total employees (your headcount), but only 48.68 FTEs.
ACA Compliant FTE Count
Because ACA health benefits are required to be offered by any employer who has 50 or more FTEs, the calculation becomes more specific. For example, only employees who have worked 120 days or more are counted. In addition, you have to provide an average based on four months’ worth of hours worked data.
Additionally, ACA considers full-time to be 30 hours a week. Therefore, any employee who works 30 or more hours a week, or 130 hours a month on average, is considered a full-time employee. That affects your calculations.
Here’s a four-step example showing how the math is done for that ACA calculation. In this example, you have 35 full-time and 12 part-time employees.
- Identify all current full-time employees who worked for at least 120 days (four months), and averaged 30 more hours a week during that time. (Each full-time employee is equivalent to one FTE.) For example, if you had 35 full-time employees, then that equals 35 FTE.
- Identify all current part-time employees who worked during that same most recent 120-day time frame. (Don’t count part-time employees who are no longer working or full-time employees who just started and haven’t yet worked for four months.) Let’s say the number who fit those criteria is 12.
- Count the average hours worked by each part-time employee over the four-month period and divide it by all hours full-time employees would have been compensated for that same pay period (in this case, 30 hours a week or 130 a month).
Let’s say that over the past 120 days, one ACA FTE would have been compensated for 130 hours a month. Thus, they’d work 520 hours over four months (130 x 4 = 520 hours.) You have 12 part-time employees who in total worked 2,500 hours in that same time frame, averaging 208.3 hours each over four months (2,500/12/4=208.3).
Each part-time employee can be averaged as .40 FTE (208.3/520 = .40). Since there are 12 of them, they equal 4.8 FTE (12 x .40= 4.80) 4.8 FTE.
- Add the two FTE sums together. Add 4.8 FTE to your full-time employee count of 35 (35 + 4.8 = 39.8). Note that 39.8 FTE is less than your headcount total of 47 employees.
Therefore, in this example, even though 47 employees feels like it is approaching the ACA threshold of 50 FTEs, your actual FTEs are under 40. Therefore, you’re still far from needing to provide mandatory health benefits to employees.
The primary reason I see most small(er) businesses calculating FTE is to make sure they are compliant with ACA benefits rules. The Affordable Care Act requires employers to offer group health benefits when they have 50 or more FTEs.
A small business may have about 40 full-time employees, but with the addition of 20 part-timers that they employ on a regular basis (i.e., not seasonally), they may end up going over the FTE cap, which could trigger the requirement to offer group coverage. Miscalculating that number or not counting part-timers’ hours in their calculation could mean a company is out of compliance, which could trigger fines or a complaint.
Your employees can read and do math (hopefully!), so you don’t want them to figure it out before you do. Companies also may want to calculate FTEs for Small Business Tax credits, which kick in for employers of 25 or fewer employees. I would encourage any companies that are hovering near milestones for different employment laws to do their FTE calculations carefully!
– Jill Santopietro Panall, SPHR, SHRM-SCP, 21Oak HR Consulting
4. Determine Your Total FTE
Depending on the reason you’re calculating FTE and the calculation example you use above, the result of your calculation is a number that represents your FTE. You can use the FTE total each month, quarter, 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.
If you’re calculating data for ACA purposes, which uses 30 hours as a standard workweek calculation, then the total you get will vary from some of the other uses, such as counting FTE requirements for staffing growth.
In other words, your business may have a 38-hour work week schedule, which works for you for DOL and general labor law purposes. But, for the purposes of ACA, you’ll be required to calculate FTEs based on 30 hours or more equaling one FTE. That would result in your FTE count being slightly higher for ACA purposes than for business budgeting or general headcount uses.
Frequently Asked Questions (FAQs)
What is .5 FTE?
Often, when describing the number of workers a company has, or the number of open positions available, a company will list part-time openings as .5 FTE, or some other fraction of what a full-time employee would work.
An easy way to remember FTE is that it’s the typical full-time hours a full-time employee would be working in that firm. For example, if full-time employees in your company work 40 hours a week, then a .5 FTE position or employee in your company would be expected to average 20 hours a week (40 x .5 = 20).
Who Uses the Term FTE?
FTE is an acronym typically used by HR staff and project managers. HR staffers use the term to explain to their management team how many full-time-equivalent employees are working for a company. They may use FTEs to give the budgeting team an idea of how many new hires are planned for next years’ growth.
For instance, businesses employing part-time staffers, like a restaurant, theme park or a service company, may have many employees but fewer FTEs.
Project managers use FTE when they’re trying to budget for how many staff members or contractors to hire. Let’s say it takes three FTE to complete the work required on a project. They will then know how many workers (full- or part-time staff or contract workers) they’ll need to complete that work by a given deadline.
Are There Other Terms Similar in Meaning to FTE?
Educational institutions, outside the scope of this article, also use the term FTE, which means full-time equivalent student, or one who attends school and works in such a way that they’re equivalent to a full-time student.
It can also be used when scheduling teachers who work in more than one school or district, to ensure their full-time-equivalency doesn’t go over 40 hours a week.
Why is it a Mistake to Interchange the Term FTE with Full-Time Employees?
When used for ACA purposes, FTE is a very specific term used to calculate whether a company is required to provide benefits, for example. If your company has 41 full-time employees and 20 part-time employees who each work 20 hours a week, it would be a mistake to say it has 41 FTE. In fact, is has 51 FTE, and would be required to offer benefits.
Calculating FTE correctly has legal ramifications, such as labor law compliance, and ensures you remain compliant with ACA by providing employees with health benefits once you reach 50 FTE. It gives you a sense of how big your company is and how many employees you have, even if some of them are part-time and represent only a fraction of a full-time worker.
Using robust HR/benefits and payroll software like Gusto can ensure your business remains compliant with labor laws based on the number of employees and FTE you have. In addition, Gusto adds easy employee onboarding, e-signatures, electronic document storage, and a full range of ACA-compliant health insurance benefits you can provide to employees once you reach the 50 FTE threshold. Try Gusto free for one month.