How to Calculate Full Time Employees (FTE) for PPP Loan Forgiveness
May 29, 2020

May 29, 2020
As of May 28, 2021, the Paycheck Protection Program has run out of funding. You can learn more about the PPP with our COVID-19 resource hub.
When the Small Business Administration announced the launch of the Paycheck Protection Program in response to the coronavirus, the biggest draw for small businesses? Not only would the funds help them keep their staff employed, but the loan was up to 100 percent forgivable if used for approved expenses (including payroll, rent, mortgage interest, and utilities).
The first round of PPP funds went out April 3, 2020—and the small businesses that received funding in early April are coming to the end of the eight-week period following loan origination and having to navigate forgiveness options and fill out the PPP Loan Forgiveness Application.
If your business received a Paycheck Protection Payment loan, you’ll need to calculate the loan forgiveness amount you’re eligible for. And a big part of the equation? Full-time employee (FTE) calculations.
Here’s everything you need to know about how to calculate full-time employees for PPP loan forgiveness:
Before we jump into loan forgiveness calculations, let’s review the requirements for Paycheck Protection Loan forgiveness.
In order for PPP loan proceeds to qualify for forgiveness, business owners must meet the following conditions:
While determining the non-payroll cost requirements is fairly straightforward, calculating loan eligibility for full-time equivalent employees is a bit more involved.
So what, exactly, are the forgiveness calculations for full-time employees?
The first step to calculating loan forgiveness for your employees is to determine their full-time equivalency, as you’ll need to prove that you maintained the same number of full-time equivalents during the eight-week time period following loan origination as you maintained before the COVID-19 crisis hit. (If your company employs independent contractors, it’s important to note that any payments made to independent contractors are not eligible for loan forgiveness and should not be included in your calculations.)
There are two ways to calculate FTE to prove you maintained FTE employee levels (the SBA allows PPP loan recipients to use either calculation on their loan forgiveness application, as long as the calculation remains consistent).
The first way to calculate FTE is to take the average number of hours paid each week, divide by 40, and round to the nearest tenth.
Hours paid each week / 40 = FTE
The Treasury defines a full-time employee as an employee who works 40 or more hours per week, so FTE is calculated on a scale of 1.0, with 1.0 being the equivalent of 40 hours per week. So, if you have a full-time employee that works 40 hours per week, they would have an FTE of 1.0 (40 hours paid each week / 40 = 1.0).
If you employ part time or hourly workers, they may have an FTE of less than 1.0. For example, if you have a part-time worker who is paid for 20 hours per week, their FTE would be 0.5 (20 hours paid each week / 40 = 0.5).
On the other hand, recognition of FTE caps out at 1.0. So, even if you have salaried employees that work 60 hours a week, they wouldn’t equal 1.5 FTE (60 hours paid each week / 40 = 1.5) because FTE can’t exceed 1.0.
So, in this scenario, your FTE calculations might look like this:
Employee #1, 40 hours per week: 1.0
Employee #2, 55 hours per week: 1.0
Employee #3, 35 hours per week: 0.9
Employee #4, 32 hours per week: 0.8
Employee #5: 20 hours per week: 0.5
If you wanted an easier way to calculate FTE, you could also assign an FTE of 1.0 to all employees that work 40 hours or more per week and an FTE of 0.5 to employees who work less than 40 hours per week.
So, in that scenario, your FTE calculations might look like this:
Employee #1, 40 hours per week: 1.0
Employee #2: 55 hours per week: 1.0
Employee #3: 35 hours per week: 0.5
Employee #4, 32 hours per week: 0.5
Employee #5: 20 hours per week: 0.5
In addition to calculating FTE and showing that you maintained headcount after receiving your PPP loan, there are a few other factors that play into your eligibility for loan forgiveness, including: