What is a FTE?
Human resource professionals love a good acronym. HRIS, ATS, EE, PTO...the list goes on and on! But sometimes, to truly understand the term, you need to know more than just what it stands for. With that in mind, let's dive into a commonly misunderstood HR acronym: FTE.
What does FTE stand for?
FTE stands for full-time equivalent—but be careful—it frequently gets confused for "full-time employee", and the two are not the same. Let's dive into how you can identify the differences between the two.
What is a full-time employee?
A full-time employee is an employee who, for a calendar month, averages at least 30 hours per week or 130 hours of work per month.
For example, if Jane works 35 hours a week, or 140 hours in a month, Jane would be considered a full time employee.
What is a full-time equivalent?
A full-time equivalent, is one or more employees whose work hours combined together total 30 hours per week or 130 hours per month.
How do you calculate FTEs?
To calculate full-time equivalents at your organization, you total the number of hours paid during a given period divided by the number of working hours in that period.
Here's what the equation looks like: Hours paid in given period / working hours in that period = FTE.
So, let's say that your organization runs on a typical 40 hour work week. You have 4 employees. Jane works 40 hours a week, Brian works 30 hours a week and Travis and Katie each work 15 hours a week. To calculate your number of FTEs you would:
Add the total number of hours worked/paid
40 + 30 + 15 + 15 = 100
Divide by the number of hours in the work period
100 / 40 = 2.5
In this example, your organization would have 2.5 FTEs.
What about seasonal workers?
Seasonal workers do not count toward your FTE total. A seasonal worker is simply defined as employees who perform labor or service on a seasonal basis, such as retail workers during the holiday season.
Do unpaid interns count?
No, unpaid interns do not count toward your FTE total. However, if you pay your interns, you will need to include them in your calculations.
Why do you need to know your total number of FTEs?
Awesome, you can now calculate the number of FTEs your organization has...but why is that important?
Some employers use FTE calculations to help benchmark revenue or even profits per employee. In those cases, knowing the number of FTEs can help you calculate those metrics.
However, there are also several employment and labor laws that require you calculate your number of FTEs to determine how that law applies to your company.
One such example? The Affordable Care Act (ACA).The Affordable Care Act requires all Applicable Large Employers (ALE) to offer full-time employees qualifying healthcare coverage. And how is it determined if you are an ALE or not? By your organization's number of FTEs. Any organization with 50 or more full-time equivalents is considered and ALE and therefor required to offer full-time employees healthcare coverage.
Want to stay up-to-date on the latest HR trends, best practices and laws? Check out BernieU for free, online educational HR courses now.
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