A full-time equivalent (FTE) employee is a way to combine the hours of part-time employees to determine if an employer is an Applicable Large Employer (ALE) under the ACA.
FTEs do not need to be offered coverage, but they count toward the 50-employee threshold that triggers the employer mandate.
👥 How to Calculate FTEs:
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Add up all the hours worked in a month by non-full-time employees (those working less than 30 hours/week)
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Cap each part-time employee at 120 hours per month
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Divide the total by 120 to get the number of FTEs
🧮 Example:
If 10 part-time employees each work 60 hours/month:
10 × 60 = 600 hours → 600 ÷ 120 = 5 FTEs
Add these FTEs to your count of full-time employees to determine if you average 50 or more total employees in the calendar year.
🧠Why It Matters:
Even if a company has only 30 full-time employees, enough part-time hours could push them over the ALE threshold and trigger ACA employer mandate and reporting requirements.