Do you know the difference between FTE and full-time employee?

January 2014

Business size is one of several important factors that will help determine which parts of the Affordable Care Act apply to your business.

Though it may seem like a straightforward topic, business size is defined and applied in multiple ways. Generally, these details can help you determine the number of employees your business has and which parts of the law apply to your business.

Defining business size: The definition of business size will vary based on two calculations: the number of full-time employees that an employer has and the number of full-time equivalent employees that an employer has. To help you calculate business size, see the two calculations below.

Full-time employee:  A full-time employee is any employee with an average of at least 30 hours of service per week. Any employee who works 130 hours in a month is considered full-time, provided the employer applies this equivalency rule on a reasonable and consistent basis. To make this calculation the law allows employers to choose a prior period of time of three to 12 months.

Full-time equivalent (FTE) employee: For some parts of the law employers must calculate the number of FTEs they have, in addition to all full-time employees. This calculation is determined by dividing the total number of hours of service for the month of the employees who are not full-time by 120.

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This material is intended to provide general information about an evolving topic and does not constitute legal, tax or accounting advice regarding any specific situation. Aflac cannot anticipate all the facts that a particular employer or individual will have to consider in their benefits decision-making process. We strongly encourage readers to discuss their HCR situations with their advisors to determine the actions they need to take or to visit healthcare.gov (which may also be contacted at 1-800-318-2596) for additional information.