Full-time equivalent employees (FTEs) represent the combined hours of part-time employees converted to full-time units. Even employers with fewer than 50 full-time employees may qualify as an ALE when FTEs are factored in.
Calculation Steps
- Add up all hours worked by part-time employees in a month
- Divide by 120
- Add this number to your full-time employee count
- Repeat for each month, then average across 12 months
Example
If a company had 40 full-time employees who each worked 120 hours per month and 20 part-time employees who each worked 60 hours per month, the part-time staff as a whole worked 1,200 hours each month (20 x 60 = 1,200). Dividing that amount by the number of hours a full-time employee worked in a single month results in having 10 FTEs (1,200 / 120 = 10) for each month.
So, although Company Y only has 40 full-time employees, it is an ALE due to the hours of service of its full-time equivalent employees.
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