What is a Full-Time Equivalent FTE? Definition Meaning Example

Before we delve into how to calculate it, there are a few important points to note. If a company has work schedule of 40 hours a week, the employees expected to work 40 hours per week are 1.0 Full Time Equivalents. Bear in mind that these are just simple FTE example calculations — project managers approach FTE from a different angle while federal programs use different FTE calculation methods.

• It’s important to keep in mind that it doesn’t indicate the actual number of employees, but rather the actual hours worked.
• However, the IRS mandates only 30 hours per week or 130 hours per month for an employee in the US to be considered full-time in terms of the type of employment.
• You’re full time.” Not when some employees work 50 hours some weeks, and 30 other weeks.
• An FTE calculation for all employees in a company needs to be rounded down to the nearest whole number (usually, 1.0 FTE or greater).
• So the FTE is not the number of employees in a company, but the equivalent of a full-time employee.
• Your financial situation is unique and the products and services we review may not be right for your circumstances.

A full-time position would equate to around 30 to 40 hours per week for most employers. If a company considers 40 hours per week as the basis for a full-time position, then anyone working an amount of hours below this range is considered a part-time employee. The same logic is applied if a company considers 30 hours per week as the standard for a full-time position. If your project is estimated to need 250 hours of work to complete, take those 250 hours and divide them by 8 hours, a normal full-time workday.

What Is FTE? How to Calculate Full-Time Equivalent

And this also means that 1 FTE may equal a different number of working hours in different countries or even companies. The FTE is used to determine how much paid time off employees can take, and different organizations have different policies regarding fte meaning PTO. Many AI platform companies hire contract employees for several projects. 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.

The results will reflect the actual full-time payroll of the company. These metric is particularly important when companies are comparing themselves with industry averages or with close competitors. Several federal programs in the United States—such as the Paycheck Protection Program —use FTE to determine employer eligibility. FTE is also used in the United States to determine whether an employer is an ALE for the fiscal year. Finally, small business owners in the United States need this metric to see if they can apply for a tax credit in the amount of 50% of the employer-paid health care premiums. A full-time equivalent is a unit of measurement used to determine the amount of full-time hours worked by all employees in an organization.

FTE definition

Her company has a 5-day work week, and full-time employees work 8 hours per day. Rather than hiring new employees, businesses can use FTE to deploy staff across various departments thereby keeping costs down. Depending on the type of work that is required, management can decide the number of full-time employees that are needed for a particular project and assign employees to those positions accordingly. 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.

• 0.5 FTE is typically used for positions such as project managers, supervisors, overheads, and strategists, where it isn’t necessary to be present for the entirety of the workweek, as the job can be done in fewer hours.
• According to the IRS, an employee’s hours of service for a year include all the hours for which the employee is paid or entitled to payment for the performance of duties for the employer during the tax year in question.
• Your 36 part-time and full-time employees are equal to 33.5 FTE.
• To delve further into the matter, let’s look at how FTEs are calculated.
• Divide the calculated total by the number of hours that a full-time equivalent works.