The Key Components to Setting Up Payroll: Part 5.2 – Payroll Policies, Full-Time Equivalency (FTE)

5 mins read

This article is written to provide you with an understanding of what an Full time Equivalency (FTE) is and why it is important to have them defined when setting up your Payroll.

An employee’s (or position’s) classification is defined by their work schedule or full-time equivalency (FTE) and expected duration of their employment (“Classification”). In this article, we are going to discuss FTE, which is one component that ensures employees are classified and paid accurately.

Most provinces/territories have a standard definition of what constitutes as a full-time and part-time employee. It is important to remember that if your province/territory does not have a standard definition, that the federal governments guidelines should be adhered too.

In the province of Saskatchewan, Full-Time (FT) employees are defined as those who work 30* hours or more per week; Part-Time (PT) employees are defined as those who work less than 30* hours per week.

Defining these are fairly important to the company, as it establishes those who are eligible to participate in company programs, fringe benefits, other HR-related total reward plans, like the full-time employees. To extend on this, most company policies may only apply to full-time employees.

Part-time employees on the other hand could have some limitations placed on their participation level when it comes to these programs and plans. It is also common that some company policies do not apply to these employees such as fringe benefits or paid time off.

Below is a table which displays what each FTE is eligible to participate in. Please keep in mind that this is a general guideline and participation eligibility may vary between companies.

You will notice on this table that some items have an (*). This is because every company administers their programs and policies different. (x) Denotes that the benefit is available, (-) denotes that it is not available.

For example, A company’s Group Benefits provider states that only full-time employees are eligible to participate in their program. If this is the case, then the company is not required to provide benefits to part-time employees. However, if the company is generous, they may decide to give the part-time staff a benefit uplift to offset the costs of any health-related matters.

To extend on FTEs, companies have the option to further define them by using a percentage-point system out of 100% (1.0); which is calculated on an employee’s weekly hours of work divided by the company’s standard weekly hours. This is extremely useful, especially when the company is prorating an employee’s salary or paid time off.

For example, John is scheduled to work 32 hours per week, but his company’s standard work schedule is 40 hours. This means his scheduled FTE is 80% (.80) out of 100% (1.0). Now the company wants to figure out what his prorated salary is. So Payroll will take his full-time salary $86,250 multiply it by .80 to get his prorated salary of $69,000.

Now that we understand what an FTE is and the importance of why they should be defined for your employees (or positions), stay tuned for part 5.3 of this series when we discuss Employment Type, which is another key component to consider defining when setting up your payroll.

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