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Understanding FTE Calculations and Formulas
What is the FTE Formula?
The basic FTE formula is: FTE = (Total Hours Worked) ÷ (Standard Full-Time Hours)
For example, if an employee works 30 hours in a standard 40-hour week, their FTE calculation would be:
30 ÷ 40 = 0.75 FTE
How to Calculate FTE Hours
- Start with your organization’s standard full-time hours (typically 40 hours/week or 2,080 hours/year)
- Add up all employee hours worked
- Divide the total hours by your standard full-time hours
FTE Hours for multiple employees:
- Full-time (40 hrs/week) = 1.0 FTE
- Part-time (20 hrs/week) = 0.5 FTE
- Two part-time employees (20 hrs each) = 1.0 FTE total
How to Calculate FTE for Affordable Care Act (ACA) Compliance
Full-Time Employees
Count each employee who works at least 30 hours per week or 130 hours per month as 1.0 FTE.
Part-Time Employees
- Add up all part-time employee hours for the month
- Divide the total by 120 (ACA’s monthly full-time standard)
- Round down to the nearest hundredth
Step-by-Step ACA FTE Calculation
- Count your full-time employees (30+ hours/week)
- Calculate part-time FTE:
- Total monthly part-time hours ÷ 120
- Add both numbers together
Example:
- 45 full-time employees (30+ hours/week) = 45 FTE
- 20 part-time employees working total of 1,800 hours/month
- 1,800 ÷ 120 = 15 FTE
- Total ACA FTE = 60 FTE
Important ACA Considerations
1. Measurement Periods
- Standard measurement period: 3-12 months
- Must be consistent for all employees
- Used to determine full-time status for the following stability period
2. Excluded Hours
Don’t count:
- FMLA leave
- Jury duty
- Military duty
- Vacation
- Sick leave
- Holiday pay
3. Seasonal Workers Exception
If you exceed 50 FTEs for 120 days or fewer during a calendar year, and the excess employees are seasonal workers, you’re not considered an ALE (Applicable Large Employer).
Remember: ACA FTE calculations differ from standard FTE calculations. Always use the ACA-specific method (30 hours/week threshold and 120 monthly hours divisor) when determining ACA compliance.
Why You Should Calculate FTE
Understanding your FTE count is important for several reasons:
1. Legal Compliance
Accurate FTE calculations help determine if you’re subject to certain regulations like the Affordable Care Act (applicable to businesses with 50+ FTEs).
2. Resource Planning
FTE numbers give you a clear picture of your actual workforce capacity, making it easier to plan projects and distribute workload effectively.
3. Budget Management
Knowing your FTE count helps you:
- Project labor costs more accurately
- Make informed hiring decisions
- Plan benefits expenses
4. Performance Tracking
FTE calculations allow you to measure productivity and efficiency across departments, regardless of how many part-time or full-time employees you have.
While the basic FTE formula is straightforward, your specific calculation method might need to be adjusted based on your organization’s needs or regulatory requirements. Always document your calculation method to ensure consistency across your organization.
Frequently Asked Questions About FTE (Full-Time Equivalent)
What does FTE 100% mean?
An FTE of 100% represents a full-time employee who works the complete number of hours your organization considers full-time. For most businesses, this means one person working 40 hours per week, or 2,080 hours annually. Think of it as your baseline for measuring workforce capacity.
What is the FTE for 37.5 hours?
For a standard 40-hour workweek, an employee working 37.5 hours would have an FTE of 0.94 (37.5 ÷ 40 = 0.9375). This means they’re working at 94% of full-time capacity. If your organization defines full-time as 37.5 hours, then this would be 1.0 FTE.
How many FTE hours are in a month?
A standard FTE month consists of approximately 173.33 hours (based on a 40-hour workweek). This number comes from taking the annual 2,080 FTE hours and dividing by 12 months. However, actual working hours in any given month may vary depending on the number of working days and your organization’s specific policies.
How Many FTE Hours are in an Annual FTE?
The standard annual FTE is 2,080 hours. Here’s the math: 40 hours per week × 52 weeks = 2,080 hours. But remember, this number doesn’t account for vacation time, holidays, or other paid time off. Many organizations use 1,920 hours (accounting for holidays and PTO) as a more realistic annual FTE calculation.
How much FTE is 3 days a week?
Assuming a standard 8-hour workday, an employee working 3 days per week (24 hours) would have an FTE of 0.6 (24 ÷ 40 = 0.6). This means they’re working at 60% of full-time capacity. For payroll and benefits calculations, this employee would be considered part-time in most organizations.
Remember: How you calculate FTE may vary based on your organization’s definition of full-time work. You should calculate FTE carefully – it affects everything from benefits eligibility to workforce planning and budget allocation.