How to Calculate FTE for PPP Loans

The scramble to secure PPP loans has been top-of-mind for small business owners. Once a loan is secured, the next step for many of them will be to determine how to qualify for loan forgiveness. One thing everyone will need to know is what full-time equivalent employees are and how to calculate your FTE number.
How to calculate FTE for PPP Loans
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Like many small business owners across America, you’ve likely received or are hoping to receive a PPP loan from the SBA. One of the key features of these loans is that they’re forgivable if certain guidelines are followed. For an entire breakdown of those guidelines, you can read more here.

One of the guidelines pertains to maintaining the number of employees you have on payroll, and the calculation for this is made using something called Full Time Equivalents, or FTEs. So you’re probably asking yourself “What is an FTE? And how do I know if I’m maintaining my FTEs so I can qualify for loan forgiveness?”

If this is you, you’re in the right place. We’ll break down FTEs and help you understand what that means for your PPP loan.

What is a Full Time Equivalent (FTE)?

FTEs are a way to measure the number of full-time hours being logged at your company. The FTE is calculated using both your full-time and part-time employee count.

The calculation for full-time employees (individuals who work 30 hours per week or more on average) is extremely easy. All full-time employees are counted as 1. So if you have 10 full-time employees working for you, that equates to 10 FTEs. 

The calculation for part-time employees will require you to do a little math. To determine how a part-time employee (individuals who work fewer than 30 hours per week on average) fits into the FTE equation, you’ll need to add the average number of hours worked per week by all your part-time employees, and divide that number by 30.

To make this even easier, we invite you to grab a pen or pencil, pull out a piece of paper, and follow along as we show you how to calculate the FTE for your part-time workers.

Step 1: Write down the number of part-time workers you have. It may even help to write the name of each part-time worker if you don’t have too many. Remember, the IRS classifies part-time workers as those who work less than 130 hours a month, or average fewer than 30 hours per week.

Step 2: For each individual part-time worker, you need to write down the average number of hours they work in a week.

Step 3: Now that you’ve calculated the average number of hours for all your part-time workers, add them all together.

Step 4: Take the result of step 3, and divide the number by 30.

Step 5: It’s likely that your result from step 4 will contain a decimal. Round down to the nearest whole number (ex: if your number is 6.7, round down to 6).

Step 6: You’ve now successfully calculated your FTE number for your part-time workers. Add this number to the number of full-time employees you have, and you’re set!

A Real Life Example

Just to make sure there’s no confusion, we’ll quickly go over a real life example. For this example, we’ll examine a fictitious bowling alley called Lucky Lanes. Lucky Lanes has applied for, and has been granted a PPP loan from the SBA and needs to now calculate the number of full-time equivalent employees (or FTE number).

Lucky Lanes has 8 full-time employees.

Lucky Lanes also has 10 part-time employees. Five of the part-time employees average 20 hours worked each week, and the other five average 15 hours worked each week.

To calculate the FTE number, Lucky Lanes first needs add the average number of hours worked for all 10 part-time employees:

20+20+20+20+20+15+15+15+15+15 = 175 hours

Now that they know their part-time employees average 175 hours a week, they need to divide this number by 30.

175/30 = 5.83

The resulting number contains a decimal point. This number should be rounded down to the nearest whole number, in this case, that number is 5.

So Lucky Lanes now knows that with their 8 full-time employees, and the number 5 calculated as the FTE for their part-time workers, their final FTE number, or the number of full-time equivalent employees is 13 (8+5).

Calculate FTE for PPP Loans

How to Meet The Staffing Requirement for PPP Loans

Ok, so now that you know how to calculate the average number of full-time equivalent employees (FTE number), let’s determine what you need to know to meet the staffing requirements to receive loan forgiveness.

First, using the process we reviewed above, you’ll need to determine the number of full-time equivalent employees you had during one of the following time periods:

A) February 15, 2019 to June 30, 2019
B) January 1, 2020 to February 29, 2020
(Note: If you’re a seasonal employer, you must use option A)

At the end of the 8-week coverage period, you’ll then need to determine the number of full-time equivalent employees you currently have on staff.

Now take your current FTE number and divide it by the FTE number from time period A or B (you may also try it with both time periods, and you can choose to select whatever result is largest).

If the number in your result is larger than or equal to 1, you have successfully maintained your headcount and you meet this requirement for loan forgiveness. Unfortunately, if your result is smaller than 1, you will not meet the requirement for forgiveness and your forgivable expenses will be reduced proportionately.

*There are still some unknowns here on how many hours per week will count as full-time. The United States Treasury hasn’t explicitly said the calculation will be based on a 30-hour week. However, when calculating other government-enforced programs (like the number of FTEs on staff when an employer is mandated to provide health benefits) the 30-hour week has been used to indicate full-time employment.

Additional note: There are some questions around what to do if an employee wasn’t employed by the company for the full time period between Feb 15, 2019  – June 30, 2019 or the full time period between Jan 1, 2020 – Feb 29, 2020. Rather than make a guess on what to do in this situation, we will update the article when more information about this scenario is provided.

Final note: Eddy is not a law firm, and the contents of this article should not be considered as legal advice. If you have further questions about qualifying for loan forgiveness or about PPP loans, we advise you to speak with your lender, an SBA representative, or a lawyer.

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