Full Time Employee or Full Time Equivalent (FTE) Employee

Hey Fun People,

Well I always thought that a full time employee was a full time employee that that was that but there are several different ways that the government looks at it.

According to the “Play or Pay Mandate” of the new Health Care Law…  “a full time employee (works 30 hours or more a week)” and the Play or Pay restrictions follow that guideline.

However, this becomes confusing when we look at how the government calculates the Business Health Care Tax Credit.  Tax Credits are calculated based on the businesses Full Time Equivalent Employees.

 Here is the formula that you will need when determining your FTEs.

The number of FTEs is determined by dividing:

The total hours for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by 2080.  (Note… 2080 hours is a 40 hour a week employee.  Remember these are all in the same new Health Care Law!)

            (The result, if not a whole number, is then rounded to the next lowest whole number)

Part Time employees = 1040 hours

Let me give you an example so that you might better understand it.

For the 2010 tax year an employer pays 5 employees wages for 2,080 hours each, 3 employees wages for 1,040 hours each and 1 employee for 2,300 hours.

The employer’s FTE would be calculated as follows:

Total hours not exceeding 2,080 per employee the sum of;

For the 5 employees paid for 2,080 hours each (5 X 2,080) = 10,400 hours

For the 3 employees paid for 1,040 hours each (3 X 1,040) =   3,120 hours

2,080 hours for the 1 employee paid for 2,300 hours (lesser of 2,300 and 2,080) = 2,080

These all add up to 15,600 hours

FTEs = 7      (15,600 divided by 2,080 = 7.5 rounded to the next lowest whole number).

This will certianly be discussed at great length by the government and hopefully they will get this straightened out..  It is important to know however that employers with a Full Time Equivalent of 25 or more employees are INELIGIBLE for the tax credit.

Tomorrow we will talk about the NEW amendment to the Fair Labor Standards Act that is in effect now.

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Have a great day and a profitable week and always remember…

TOGETHER WE HAVE THE POWER OF FAMILY

Rich