HR Decoded: FTE, ALE and Other HR Buzzwords

HR Decoded

Employment laws and HR terms can be complex. Employers are bound to run into a term or acronym that leaves them thinking, “What does that mean?” For those head-scratching moments, we explain some commonly used HR terms in plain English.

Employee Status

  • At-will employment: Generally, “at-will” means that either the employee or the employer may terminate the employment relationship for any reason, as long as the reason (if any) is a lawful one. There are exceptions to at-will employment, such as when there is an express or implied contract. At-will policy provisions are commonly included in employee handbooks, related policy documents (such as handbook acknowledgment forms) as well as job offer letters to help ensure that employees fully understand that employment is not guaranteed for any specified period of time. Employment relationships are presumed to be at-will in all states except Montana.
  • Non-exempt: Under federal law, a non-exempt employee is one who is entitled to at least the minimum wage for each hour worked and to overtime pay whenever they work more than 40 hours in a workweek. Most employees must be classified as non-exempt. Note: Some states, such as California, require overtime under other circumstances, including when a non-exempt employee works more than eight hours in a workday.
  • Exempt: An exempt employee is exempt from minimum wage and/or overtime, but must meet specific salary and duties tests to be classified as such. Generally, exempt employees must receive a fixed salary each week, regardless of the quality or quantity of work performed.
  • Salaried: A salaried employee is one who is paid on a salary basis. However, paying an employee on a salary basis doesn’t necessarily mean the employee is exempt from overtime (specific federal and state tests must be satisfied to be classified as exempt). Non-exempt employees may be paid a salary as long it equals or exceeds the minimum wage for each hour worked and the employee receives overtime pay when due.
  • Full-time: The definition of full-time employee can vary depending on law and policy. For example, the Affordable Care Act (ACA) defines a full-time employee as one who works, on average, at least 30 hours per week. By contrast, California defines full-time employment as 40 hours per week for the purposes of certain overtime exemptions (to be exempt, employees must generally earn at least two times the monthly state minimum wage for full-time employment). Other laws may define full-time employee with a higher or lower hours worked threshold, or your company may determine the definition of full-time employment based on policy and business needs.


  • Affordable Care Act (ACA): The ACA is a comprehensive health care reform law that, among other things, requires certain employers to offer full-time employees minimum essential coverage that is deemed affordable, or face a penalty.
  • Full-time equivalent (FTE) employees: Generally, under the ACA, full-time equivalent (FTE) employees are made up of employees that work less than 30 hours per week (part-time employees). The number of FTE employees is calculated by adding all the hours worked by part-time employees in a month and dividing by 120. Employers must include FTEs when determining the total size of their workforce.
  • Applicable Large Employer (ALE): Under the ACA, an ALE is an employer with 50 or more full-time and FTE employees. Generally, an ALE must offer health coverage and meet certain annual reporting requirements. Keep in mind that you will also be considered an ALE if you are part of a controlled group with a combined total of 50 or more full-time and FTE employees. Controlled groups exist when two or more entities that have a common owner or are otherwise related are treated as a single employer under section 414 (b), (c), (m), or (o) of the Internal Revenue Code.


  • Retaliation: Retaliation is when an employer (or someone acting on behalf of the employer) takes adverse action against an applicant or employee for engaging in “protected activity.” Depending on the law, the protected activity may involve opposing an unlawful employment practice, participating in an investigation or lawsuit, or exercising another right granted to the employee by the law. In addition, there are prohibitions against retaliation for taking job-protected leave, filing workers’ compensation claims, and for raising ethical, financial or other concerns.
  • Americans with Disabilities Act (ADA): The ADA is a federal law that applies to employers with 15 or more employees. Under the ADA, employers must provide reasonable accommodations to qualified applicants and employees with known disabilities, unless it would impose an undue hardship on the employer. Some states have similar requirements that apply to smaller employers.
  • Reasonable accommodation: A reasonable accommodation is a change in the work environment or in the way work is customarily done that enables an individual to perform the essential functions of the job and enjoy equal employment opportunities. Some examples of reasonable accommodations may include modifying work schedules or equipment, light duty work, or making facilities accessible to the individual. Note: Under federal law, employers with 15 or more employees must also provide reasonable accommodations for sincerely held religious practices and beliefs. Some states also require accommodations for other situations, such as pregnancy and related conditions.
  • Undue hardship: Under the ADA, undue hardship refers to a significant difficulty or expense and focuses on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation. An employer must assess on a case-by-case basis whether a particular reasonable accommodation would cause undue hardship and whether there is an alternative equally effective accommodation that the employer could provide.

This blog does not provide legal, financial, accounting, or tax advice. This blog provides practical information on the subject matter. The content on this blog is “as is” and carries no warranties. ADP does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog.

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