Glossary

Full-time equivalent (FTE)

A way to convert part-time hours into the number of full-time workers they equal, used to decide whether the ACA employer mandate or a tax credit applies.

Also called: FTE, full-time equivalent employee, FTE count

A full-time equivalent counts part-time hours as if they were worked by full-time employees. The term matters because several employee-benefit rules turn on headcount, and part-timers count for more than zero.

For the ACA employer mandate, a full-time employee averages at least 30 hours of service a week, or 130 hours in a month. To get FTEs for a month, add the hours of all non-full-time employees, counting no more than 120 hours per person, and divide by 120. An employer is an applicable large employer if its full-time employees plus FTEs average at least 50 over the preceding calendar year (26 CFR 54.4980H-1). Say a business has 40 full-time staff and part-timers who together work 1,200 hours in a month (a hypothetical). That is 10 FTEs, for 50 that month.

The small business health care tax credit under IRC section 45R uses a different formula: total hours of service, capped at 2,080 per employee, divided by 2,080 and rounded down. The credit requires fewer than 25 FTEs. Because each rule has its own counting method, never reuse one headcount for another purpose. Seasonal workers and aggregation of related companies add further wrinkles. The guide on the The ACA employer mandate: who must offer coverage and the 2026 penalties walks through the monthly count, and the ACA employer mandate (ALE) calculator runs it.

Last reviewed October 10, 2026

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Related terms

Applicable large employer (ALE) Under the ACA, an employer with an average of 50 or more full-time and full-time-equivalent employees in the prior year, subject to the employer mandate. COBRA A federal law letting workers and families keep their employer's group health coverage for a limited time after a job loss or other qualifying event. QSEHRA An employer-funded account for businesses under 50 full-time equivalent employees that reimburses workers for premiums and medical costs up to an annual cap.

Related guides

The ACA employer mandate: who must offer coverage and the 2026 penalties Who is an applicable large employer, what coverage avoids the 4980H penalties, and the 2026 figures: 9.96% affordability, $3,340 and $5,010. ACA reporting: Forms 1094-C and 1095-C for large employers Who files Forms 1094-C and 1095-C, 2026 deadlines, the website-notice option under the Paperwork Burden Reduction Act, e-filing and penalty amounts. Benefits for part-time and seasonal workers: ACA and eligibility rules When part-time, seasonal and variable-hour employees count under the ACA employer mandate, how look-back measurement works, and what else you must offer them. Group health insurance for small businesses: how it works and what it costs How small-group health coverage is sold, rated and administered: eligibility, contribution rules, enrollment, plan options and the ACA rules that shape it. Group life insurance for employees: how it works and what it costs you How group term life and AD&D work for employers: plan design, guaranteed issue, portability, and the Section 79 imputed income rules with the 2026 IRS table. QSEHRA explained: the small employer HRA, 2026 limits and rules How a QSEHRA works for employers under 50 full-time employees: 2026 limits ($6,450 and $13,100), eligibility, notice, W-2 reporting and tax credit effects.

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Related tools

ACA employer mandate (ALE) calculator Tells you whether last year's headcount makes you an applicable large employer and estimates the 4980H(a) and 4980H(b) payments you could face in 2026 or 2027. Group health insurance cost and affordability calculator Totals what a group health plan costs you and your employees, then tests employee-only affordability against the ACA safe harbors for 2026 or 2027. Small business health care tax credit calculator Estimates the IRC 45R credit the way Form 8941 does: up to 50% of premiums (35% for tax-exempt employers), reduced by the FTE and average-wage phase-outs.