Small Business Glossary and Definitions

A Full-Time Equivalent (FTE) is unit of measure to determine the equivalent number of full-time employees when an employer has employees that work on a part-time basis. FTE calculations are often necessary to determine, for instance, certain government requirements for applicability of laws, such as the Affordable Care Act. Typically, an employer determines what constitutes a full-time employee as a basis for their needs.

For example, a base-line unit for a full-time employee is determined over a given time period.

 (8 hours per day) X (5 days per week) X (52 weeks per year) = 2,080 hours

Then, the total number of hours worked by all employees, regardless of full- or part-time status, is divided by 2,080 per the following formula:

FTE =  (Total hours worked by full-time employees) + (Total hours worked by part-time employees)

                                                                        2,080

The result is the FTE or the number of full-time employees required if all employees were full-time status.