The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over the next several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Determining the Number of Full-Time Equivalents.
To determine the number of full-time equivalents (FTEs), divide total hours worked by qualifying employees by 2,080, but exclude any hours worked by any single employee in excess of 2,080. Round the resulting quotient down to the nearest whole number. For example, if five employees work 2,080 hours each, three employees work 1,040 hours each, and one employee works 2,300 hours, calculate the number of FTEs as follows:
- 2,080 hours/employee X 5 employees = 10,400 hours
- 1,040 hours/employee X 3 employees = 3,120 hours
- 2,080 hours/employee X 1 employees = 2,080 hours (limited by law to 2,080 maximum per employee)
- 10,400 + 3,120 + 2,080 = 15,600
- 15,600 ÷ 2,080 = 7.5
- 7.5 rounded down to the nearest whole number is 7, so the employer has 7 FTEs.
The next topic to be covered in this series is Determining the Amount of Average Annual Wages. Contact Vision Payroll if you have further questions on Determining the Number of Full-Time Equivalents.