PPP Loan Forgiveness: How to Calculate Full-Time Equivalencies

Please note: This blog is current to the date of its publication, Tuesday, July 7. For additional updates or assistance navigating these uncertain times, please contact us or visit our SST COVID-19 resource page.


When applying for Paycheck Protection Program (PPP) loan forgiveness, organizations must compare Full-Time Equivalencies (FTEs) with their Covered Period (or Alternative Payroll Covered Period) and Reference Period. But how do you calculate FTEs to ensure accurate reporting?

Below, SST’s experts break down the Small Business Administration’s latest steps for calculating an FTE to help ensure a smooth PPP loan forgiveness process for your organization.

The Covered Period is the 8-week or 24-week period starting with the date you received your PPP loan funds. If you received your funds prior to June 5, 2020, you may choose to use either the 8-week or 24-week periods. If you received your funds on or after June 5, 2020, you must use the 24-week period.

The Alternative Payroll Covered Period begins on the first day of your pay period following the date you received your funds. For example, if you decide to use the 24-week Alternative Payroll Covered Period and you received your funds on Monday, April 20, and the first day of your first pay period following the funding date was Sunday, April 26, then the first day of your Alternative Payroll Covered Period is April 26, and the last day is Saturday, Oct. 10.

The Reference Period is typically your choice of either 1) Feb. 15, 2019, through June 30, 2019, or 2) Jan. 1, 2020, through Feb. 29, 2020. However, seasonal employers, such as schools, may choose a Reference Period of any consecutive 12-weeks between May 1, 2019, and Sept. 15, 2019.

In calculating your loan forgiveness amount, you may use 100% of your loan proceeds for payroll. You are not required to use the funds for non-payroll expenses, but if you do, the non-payroll expenses are limited to a maximum of 40% of your loan amount.

In determining your FTEs, you have two options.

The simplified method allows you to count a full-time employee as a 1 and a part-time employee as a .5. For part-time employees, you may use a calculation of the average number of hours worked per week divided by 40, rounded to the nearest tenth. For example, a part-time employee who works an average of 30 hours per week would count as a .8 FTE. You may use either the actual method or the simplified method – just be consistent.

If your personnel policy defines a full-time employee as a person who works less than 40 hours per week, you may use your organization’s definition. Some entities define full-time as 36 hours, some define it as 32 or 30 hours. The key is to be consistent. If you define a full-time employee as one who works 30 hours per week, you may count that employee as a 1, but you must be consistent in doing so between your Covered Period and Reference Period. The maximum FTE value for an employee is 1 – in no case may an employee count as more than 1 FTE.

Your PPP loan forgiveness amount may be reduced if you cut employee pay by more than 25% or if you reduced the number of FTEs. If your organization did not furlough any employees or reduce hours worked by employees, you do not have to worry about the FTE reduction. Also, the voluntary resignation of an employee is considered an FTE reduction exception and will not reduce the loan forgiveness amount.

Keep in mind, there are safe harbors and other situations not specifically covered in this blog, and COVID-19 assistance programs are ever-changing. Please refer to the PPP Loan Forgiveness forms and instructions, as well as SST’s PPP Loan Forgiveness resource page for the latest updates, or contact us today.

Thanks to SST Manager of Client Accounting and Advisory Services Simeon May for providing the content for this post. Click here to learn more about Simeon.