Full-time equivalent (FTE)

Determining FTEs and Average Annual Wages for the Small Business Health Care Tax Credit

All employees of the eligible small employer are taken into account when determining FTEs except:

  • owners of the small business, such as sole proprietors, partners, shareholders owning more than 2% of an S corporation or more than 5% of a C corporation;
  • spouses of these owners
  • family members of these owners, which include a child, grandchild, sibling or step-sibling, parent or ancestor of a parent, a step-parent, niece or nephew, aunt or uncle, son-in-law or daughter-in-law, father-in-law, mother-in-law, brother-in-law or sister-in-law.
  • A spouse of any of these family members should also not be counted as an employee.
  • seasonal worker  that provide services to the employer for no more than 120 days during the taxable year

Example of how to Calculate FTE

For the 2014 taxable year, an employer pays

1 FTE = 2080 hours in one year

  • five employees wages for 2,080 hours each,
  • three employees wages for 1,040 hours each
  • one employee wages for 2,300 hours


  • 10,400 hours for the five employees paid for 2,080 hours (5 x 2,080)
  • 3,120 hours for the three employees paid for 1,040 hours (3 x 1,040)
  • 2,080 hours for the one employee paid for 2,300 hours (lesser of 2,300 and 2,080)

The total hours counted is 15,600 hours.

15,600/2080 = 7.5  This is rounded to the next lowest whole number  = 7

This employer has seven FTEs


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