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What is an FTE? How Do I Calculate Employee FTEs?


Question: What is an FTE? How Do I Calculate Employee FTEs?
The term FTE or Full-time Equivalent is used in many contexts, but in particular in the Health Care Reform Law. In this context, an FTE is used to determine the number of employees, both full-time and part-time, for purposes of determining eligibility for employer tax credits. A full-time employee is considered to work 2080 hours a year (52 weeks times 40 hours per week). Part-time employee hours are considered as a fraction of 2080 and are added together to get a total number of full-time equivalents.

How to calculate Full-time Equivalents (FTEs):
The number of an employer’s FTEs is determined by dividing:

  1. The total hours for which you (the employer) pay wages to all employees during the year, up to 2080 per employee, by
  2. 2,080. The result, if not a whole number, is then rounded to the next lowest whole number. So, 17.80 employees would be 17 FTEs.
Seasonal workers are disregarded in determining FTEs and average annual wages unless the seasonal worker works more than 120 days during the tax year.

The IRS provides this example:
For the 2010 tax year, an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each, and 1 employee wages for 2,300 hours.
The employer’s FTEs would be calculated as follows:

  1. Total hours not exceeding 2,080 per employee is the sum of:

    a. 10,400 hours for the 5 employees paid for 2,080 hours each (5 x 2,080)
    b. 3,120 hours for the 3 employees paid for 1,040 hours each (3 x 1,040)
    c. 2,080 hours for the 1 employee paid for 2,300 hours (lesser of 2,300 and 2,080)
    These add up to 15,600 hours
  2. FTEs: 7 (15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number)

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