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Global Work Glossary

How is Full-Time Equivalent (FTE) calculated?

Full-Time Equivalent (FTE) or Whole-Time Equivalent (WTE) is a measure used by employers to quantify the total hours worked by all employees in their organization. It helps in determining the workforce size and is often used for various purposes like project planning and eligibility for government programs.

Calculating FTE:

To calculate FTE, divide the total hours worked by all employees by the standard full-time workweek (usually 40 hours) and round up to two decimals.

FTE=(Total hours worked by all employees)/40 hours

When to Use FTE:

Project Planning: FTE helps in estimating the time and resources required for projects. It guides hiring decisions and resource allocation. Government Program Eligibility: Many government programs, like the Paycheck Protection Program (PPP), use FTE to determine employer eligibility for assistance or benefits. Qualifications for FTE Employees: FTE employees typically work full-time, defined as eight hours per day, five days a week, totaling 2,800 hours per year. However, according to the IRS, 30 hours a week and 130 hours per month can also qualify as full-time.

Interpreting FTE Levels:

FTE 100%: A full-time employee working 40-hour workweeks. 0.5 FTE: Represents part-time work, approximately 20 hours per week. FTE levels can vary based on business needs and operational requirements.

Exceptions to FTE Calculation:

Different purposes may require different FTE calculations. For example, determining ALE status or eligibility for tax credits. For ALE status determination, the IRS suggests using a minimum of 30 hours per week. Various methods exist for calculating FTEs for specific purposes like the Small Business Tax Credit or PPP eligibility.

Key Considerations:

FTE calculations may differ based on the context and purpose. Employers should adhere to specific guidelines when calculating FTEs for government programs to ensure eligibility. Utilizing accurate FTE data can inform strategic decisions and ensure compliance with regulatory requirements.

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