How to Calculate FTE Hours

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Most business owners can't be considered employees for the FTE calculation.
Most business owners can't be considered employees for the FTE calculation. (Image: Jason Florio/Digital Vision/Getty Images)

A company needs to know how many full-time equivalent -- or FTE -- employees it has in order to comply with healthcare and labor laws. Each full-time worker that a company employs counts as one FTE employee. The hours of part-time employees must be summed and divided by 30 to determine FTE part-time employees.

Importance of FTE calculation

A business must calculate its number of FTE employees to comply with the Affordable Care Act. The ACA requires employers with more than 50 FTE employees to comply with health insurance offerings that it does not mandate for smaller companies. Only companies with less than 50 FTE employees can use the Small Business Health Options Program Marketplace. The number of FTE employees a company has also determines whether or not it will incur fines and penalties if it doesn't offer minimum health care coverage.

Identify Your Employees

The first number you need to know to calculate FTE employee hours is how many employees you have, both full-time and part-time. This sounds simple enough but there are some nuances. Neither the owners of sole proprietorships nor partners in partnerships can be considered employees. If you own more than 2 percent of an S corporation or 5 percent of a C corporation, you can't count yourself as an employee. Any spouse or relative of an S corporation shareholder who owns more than 2 percent can't be considered employees. Similarly, spouses and relatives of C corporation owners who own more than 5 percent can't be considered employees. Finally, be sure to exclude independent contractors and seasonal workers from this count.

Determine FTE Part-Time Employees

Determine the hours worked by part-time employees. Part-time employees are those that work less than an average of 30 hours a week. Divide the total part-time hours by 30 to find the FTE for your part-time employees. For example, say that you have 14 part-time employees who work an average of 20 hours a week. Total hours are 280. The number of FTE part-time employees is 280 divided by 30, or 9.33 employees.

Calculate Total FTE Employees

Add the number of FTE part-time employees to the number of full-time employees to calculate total FTE employees. A full-time employee is one who works an average of 30 hours a week or more. For example, say that in addition to your part-time staff, you employee seven full-time workers. Your total amount of FTE employees is 7 plus 9.33, or 16.33.

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