What Is FTE

• Definition: Full-Time Equivalent (FTE) is a way to standardize how many “full-time” workers your workforce really equals even if many workers are part-time.
• Why We Use It:
  • To understand how much work is being done in terms of full-time capacity.
  • To plan staffing more efficiently.
  • For budgeting: labor costs, benefits, and compliance obligations often rely on FTE.
  • To comply with regulations or programs that depend on FTE thresholds (e.g., small business health insurance schemes).

How FTE Is Calculated

1. Define Full-Time Hours
   First, you need to decide what “full time” means for your organization. This might be 30 hours/week, 40 hours/week, or another number, depending on your policy.
2. Total All Employee Hours
   Sum up the hours worked by all employees full-time plus part-time over a specific time frame (week, month, or year).
3. Convert to FTE
   • Divide the total hours worked by the standard full-time hours in that same period.
   • For example, if “full time” is defined as 40 hours/week, and your workforce works a combined 200 hours in one week, then FTE = 200 / 40 = 5.0.
   • If you’re measuring annually, you might divide total hours by a full-time annual hours figure (e.g., 2,080 hours for a 40-hour week × 52 weeks).
4. Rounding and Representation
   The resulting FTE value is often expressed as a decimal (e.g., “3.88 FTE”). Many organizations round to two decimal places for simplicity.

Examples

• Single Part-Time Worker: Suppose you have one employee working 20 hours/week, while your full-time definition is 40 hours/week.
  → FTE = 20 / 40 = 0.5
• Mixed Workforce: Imagine a company has:
  • 3 full-time employees (each working 40 hours/week) → total = 120 hours,
  • 2 part-time employees (one working 25 hours/week, another working 15 hours/week) → total = 40 hours of part-time.
    → Combined hours = 160; FTE = 160 / 40 = 4.0

Results You’ve Got

• Low FTE (e.g., < 1): If your total FTE is very low, it may mean you’re operating with a very small workforce (or very few hours), and certain small-employer benefit options may not apply.
• Moderate FTE (e.g., 1–50): This range is often significant in the context of small business health coverage eligibility (like SHOP), because many programs define small employers within this bracket.
• High FTE (> 50): If your FTE goes beyond thresholds used by benefit providers or government programs, you might need to explore different coverage plans or compliance requirements.

Next Steps & Recommendations

1. Re-run the Calculator Regularly
   Use this tool every few months (or at least annually) to recalculate FTE based on updated employee hours. This ensures your data stays current and relevant.
2. Integrate FTE Insights Into Business Planning
   Use your FTE number when preparing your annual budget, especially for staffing, salary expenses, and benefits. Treat FTE as a critical planning metric, not just an HR statistic.
3. Consult with a Benefits Advisor
   Once you know your FTE, speak with a health insurance broker or benefits professional. They can guide you on the best health plan options (like SHOP) based on your FTE, and help you understand employer obligations.
4. Track Hourly Trends
   Maintain records of how many hours part-time workers log over time not just for payroll, but to refine your FTE modeling. Trends (seasonality, hiring surges, churn) will help you anticipate future FTE shifts.