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ALEs must offer insurance to each full-time employee who works at least 130 hours per calendar month. Standard FTE assumes that typical employees work 40-hour workweeks, five days a week, and eight hours a day. Since there are 52 weeks per year, this equates to an average full-time employee having the opportunity to work a total of 2,080 hours.
Both Carole and Lynn in our example above would be full-time employees under this example. It is critical for accounting purposesand determining wages, and for calculating the company’s expenses when paying its workers. In most cases, employers fall below the threshold required to be an ALE and are, therefore, not subject to the employer shared responsibility provisions. (For a year, that is 2,080 hours with 40-hour workweeks and 1,560 hours with 30-hour workweeks, which is considered full-time for ACA reporting).
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Also, do not include yourself as the business owner, unless you are paid a salary and receive a W-2. If you’re concerned about staying compliant, consider software such as Homebase that will track your employee hours, provide reporting, https://www.bookstime.com/ and can also prepare your time sheets for payroll. FTE is a very specific term used to calculate whether a company is required to provide benefits under the Affordable Care Act and the Family Medical Leave Act , for example.
FTE is the full-time equivalent hours that all the employees in your business represent. The term “full-time equivalent” is often used to calculate government employees. However, the number of FTEs in a government agency will depend on the project’s requirements that are being carried out, its timeframe, and budget allocations or restrictions. For example, if an employee’s salary was $30 per hour and the individual worked 40 hours per week, their salary would be $1,200 per month.
Importance of Calculating FTEs
A typical full-time schedule is 40 hours per week, 52 weeks per year, which totals 2,080 hours. So, in this case, you would add up all employee hours for the year and divide by 2,080. If your company considers 35 hours full-time, then you would adjust your calculation fte meaning accordingly. Full-time equivalent employees are people who work the entire workweek—eight hours per day, five days a week, totaling 2,800 hours per year. Human resources often use the FTE metric to make staffing decisions for the entire company.
This ensures that you’re not getting a skewed result based on a higher or lower number of hours worked in a week than typical. According to the IRS and the ACA, part-time employees work fewer than 30 hours a week on average. This could be an employee who works 20 hours a week, an intern who works one day a week, or an employee who is on call or only works weekends. It could also be a temporary staff member who works an irregular schedule.