Full-Time Equivalent (FTE)

Full-Time Equivalent (FTE) is a standardized measure used to calculate the total number of full-time hours worked by all employees, including both full-time and part-time staff. It helps employers:

Assess staffing levels
Forecast labor costs
Determine benefit eligibility (such as for the Affordable Care Act or the Small Business Health Options Program)
Evaluate productivity and workforce capacity

Rather than counting individuals, FTE represents how many full-time workers would be needed to complete the same amount of work.

Why Use FTE Instead of Headcount?

Headcount tells you how many individuals are on your payroll.
FTE tells you the total full-time workload being covered, including contributions from part-time employees.

For example, four part-time employees working 10 hours per week each would equal 1.0 FTE if your company defines full-time as 40 hours per week.

How to Calculate FTE

List all employees and the number of hours they are scheduled to work per week (exclude 1099 contractors).
Determine your company’s full-time definition, typically 40 hours per week.
Calculate each employee’s annual work hours by multiplying their weekly hours by 52 (weeks in a year).
Add together all full-time employee hours and calculate the total annual hours for part-time employees.
Divide total part-time hours by the annual full-time hours to convert part-time work into FTE.
Add the FTE for full-time workers (each counts as 1.0) to the part-time FTE to get your total FTE count.

Example FTE Calculation

Employees:

2 full-time employees working 40 hours/week
1 part-time employee working 30 hours/week
1 part-time employee working 20 hours/week
1 part-time employee working 10 hours/week

Annual Hours:

Full-time employees: 2 × (40 × 52) = 4,160 hours
Part-time employees: (30 + 20 + 10) × 52 = 3,120 hours

FTE Calculation:

Part-time FTE: 3,120 ÷ 2,080 = 1.5
Total FTE: 2.0 (full-time) + 1.5 (part-time) = 3.5 FTE

FTE and ACA Compliance

Under the Affordable Care Act, any employee working 30 or more hours per week (or 130 hours per month) is considered 1.0 FTE. Employers with 50 or more FTEs are required to offer ACA-compliant health benefits.