Toast Payroll: Calculate Full-Time Equivalent (FTE) Employees

Last updated: Apr 8, 2026, 9:59 AM

Learn how to calculate how many full-time (or equivalent) employees you have to for the purpose of ACA filing.

In this Article:

 

Full-Time Equivalent Employee Basics

FTE employees are full-time equivalent employees. FTEs are used to measure how many full-time employees an employer has, along with the number of part-time employees that can be translated into full-time terms.


A company's FTE number determines whether they are considered an applicable large employer (ALE). ALEs are subject to the "pay or play" provisions under the Affordable Care Act (ACA) and are required to complete year end filing with the IRS (e.g. 1095-C). Not all employers are ALEs. The IRS defines an ALE as an employer that has averaged at least 50 full-time employees, including full-time equivalents, during the prior calendar year.


The IRS requires employers to use a combination of full-time employees and full-time equivalents when determining if they averaged 50 full-time employees. Learn more from the IRS by reading Identifying Full-Time Employees.

 

  • A full-time employee is one who has averaged at least 30 hours of service per week during a calendar month or at least 130 hours of service during a month.
  • A full-time equivalent is a combination of employees, each of whom individually is not a full-time employee but who, in combination, are equivalent to a full-time employee.
    • Full-time equivalent employees are not to be considered full-time employees for determining who should be offered medical coverage.

 

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Calculate FTEs

When calculating FTEs, keep in mind that Toast Payroll reporting is driven from check dates, not pay period dates. Hours within a given pay period are attributed to the month of the check date. For example, if you have a pay period of 9/21/25 - 9/27/25 with a check date of 10/2/25, the hours for the pay period will be attributed to October instead of September.


Toast Payroll recommends using the Per Pay Period Employee Audit Report for a comprehensive report for both hours and earnings for employees. It will help you complete the following calculations.

 

  1. Navigate to Reports > Standard and search for this report.
  2. Select the appropriate FEIN (Federal Employer Identification Number).
  3. Use the Pay period field to select the appropriate payrolls. Hold the Ctrl/command key to select multiple payrolls at once.
  4. Check the boxes to include each set of data.
  5. Leave the Group Data By setting on Group By Employee.
  6. Run your report.

 

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Full-Time Employees

First, calculate the number of full-time employees (including seasonal help) for each calendar month.

 

  • A full-time employee for any month is an employee who has on average at least 30 hours of service per week during the calendar month or 130 hours during the calendar month.
  • Hours of service include hours for which the employee is paid or entitled to payment even if no work ids performed (e.g. vacation, bereavement, sick leave). Learn more from the IRS here: Identifying Full-Time Employees. 
  • Seasonal employees are those who are hired into a position for which the customary annual employment is six months or less.

 

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Full-Time Equivalents

After you have your monthly totals for full-time employees, you will calculate the number of full-time equivalent employees for each calendar month.

 

  • Begin by adding all the hours worked by employees who were not full time employees.
  • Next, you will divide the total hours by 120 (not 130).
  • The result is the number of full-time equivalents for that calendar month. Employers may round the resulting monthly FTE calculation to the nearest one hundredth.
    • For example, if the calculation is 30.578 FTEs for a calendar month, you may round that number to 30.58 FTEs.
  • Once you have monthly totals for both full-time employees and full-time equivalents, you will combine the two and divide by 12. If the total is over 50, you are an ALE for the current year.

 

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Example Calculations

Example 1

  • ABC Company has 40 full-time employees for each calendar month during 2025.
  • ABC Company also has 15 part-time employees for each calendar month during 2025 each of whom have 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 900 [15 x 60 = 900].
  • Dividing the combined hours of service of the part-time employees by 120 equals 7.5 [900 / 120 = 7.5]. This number, 7.5, represents the number of ABC Company’s full-time equivalent employees for each month during 2024.
  • Employer XYZ adds up the total number of full-time employees for each calendar month of 2025, which is 480 [40 x 12 = 480].
  • Employer XYZ adds up the total number of full-time equivalent employees for each calendar month of 2025, which is 90 [7.5 x 12 = 90].
  • Employer XYZ adds those two numbers together and divides the total by 12, which equals 47.5 [(480 + 90 = 570)/12 = 47.5].
  • Because the result is not a whole number, it is rounded to the next lowest whole number, so 47 is the result.
  • So, although ABC Company has 55 employees in total [40 full-time and 15 part-time] for each month of 2025, it has 47 full-time employees (including full-time equivalent employees) for ALE determination.
  • Because 47 is less than 50, ABC Company is not an ALE for 2026.

 

Example 2

  • ABC Company has 40 full-time employees for each calendar month during 2025.
  • ABC Company also has 20 part-time employees for each calendar month during 2025, each of whom has 60 hours of service per month.
  • When combined, the hours of service of the part-time employees for a month totals 1,200 [20 x 60 = 1,200].
  • Dividing the combined hours of service of the part-time employees by 120 equals 10 [1,200 / 120 = 10]. This number, 10, represents the number of ABC Company's full-time equivalent employees for each month during 2025.
  • Employer XYZ adds up the total number of full-time employees for each calendar month of 2024, which is 480 [40 x 12 = 480].
  • Employer XYZ adds up the total number of full-time equivalent employees for each calendar month of 2025, which is 120 [10 x 12 = 120].
  • Employer XYZ adds those two numbers together and divides the total by 12, which equals 50 [(480 + 120 = 600)/12 = 50].
  • So, although ABC Company only has 40 full-time employees, it is an ALE for 2026 due to the hours of service of its full-time equivalent employees.

 

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Additional Resources


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This content is for informational purposes and is not intended as legal, tax, HR, or any other professional advice. Please contact an attorney or other professional for advice.