How to Calculate the Full Time Equivalent FTE in 4 Steps

fte employees meaning

Understanding FTEs helps businesses optimize their workforce and provides invaluable insights into their organizational structure, enabling efficient resource allocation. This nuanced comprehension can lead to more effective workforce planning, budgeting, and operational efficiency. If you’re offering health coverage to remote workers, there may be some additional considerations. Calculating FTEs will also determine an employer’s duties under the shared responsibility provisions of the Affordable Care Act. Read our employer’s guide to find out more about how to hire employees in Europe, Asia, Africa, or elsewhere. In this article, we will explore the meaning of FTE from a U.S. perspective, how it is calculated and the purposes of doing so as an employer.

fte employees meaning

It is important for businesses to know their FTE for internal management and workloads, salary negotiations and to stay in compliance with legal mandates. If you’re ever asked to calculate FTEs for your company, the person or organization asking you for the figure should be able to outline exactly how they expect you to arrive at your result. Generally speaking, you can arrive fte meaning at your own FTE by following the steps below. Remember that while this is the most typical method of converting FTE to hours, it might vary based on the firm and their definition of full-time. It is crucial to note that the definition of full-time employment varies by company and industry, therefore 100% FTE may not always mean the same thing across organizations.

Why the FTE calculation is important

A full-time equivalent (FTE) — also known as a whole-time equivalent or WTE — represents the sum of all full-time hours employees work in a certain company. Along with counting the hours worked, FTEs show how many full-time employees a particular company employs within a fiscal year or needs to employ to carry out a project. In general terms, full-time equivalent (or FTE) is a unit of measure that plays an important role in calculations used in businesses, project management, or federal programs for eligibility purposes.

What is 0.9 FTE?

Full time: FTE stands for Full Time Equivalent. If you work 40 hours per week, you are a 1.0 FTE. If you were hired to work three 12-hour shifts, you are a 0.9 FTE (even if you work overtime or frequently reach 40 hours). A 0.5 FTE is typically 20 hours a week.

In this comprehensive guide, we explore the significance of FTE in the business world by providing insights into its calculation, strategic benefits, drawbacks, and the best tools for tracking it all. Our goal is to present a thorough understanding of FTEs and highlight how they shape the path toward business success. Let’s jump in and decode the world of FTEs and their powerful influence on businesses.

Several part-time employees can add up to one full-time employee. Confused? Here’s how FTE works

More importantly, many government support programs use FTE as a basis to decide how your company should be treated. And some state and federal employment laws only apply to companies who meet a certain threshold of FTE employees. In a 0.75 FTE position, an employee will typically work 75 percent of the hours of a full-time employee.

You typically would not include hours that owners or partners work within this calculation, but you can do so for your own accounting purposes if you want to include labor from ownership as part of your evaluation. Employers can use FTE to guide their hiring strategy and plan for a project, while governments often use the metric to determine program eligibility. Clockify is a time tracker and timesheet app that lets you track work hours across projects. To see your employees’ FTEs, you can view their daily/weekly/monthly assignments in Clockify. Within this method, the employee is credited with 40 hours for each week when payment was due (including PTO).

WorkforceHub takes care of business.

The ACA requires that employers add all the hours worked by part-time employees in a month and divide by 120. This means that although company ABC employs 4 workers, their combined hours are equivalent to 3 full-time employees. Completing a project is not only doing the project within a calculated budget and timeline. If a project manager has several projects at the same time plus several projects planned for the future, it becomes impossible to plan resources accurately without calculating FTEs.

fte employees meaning

FTE (full-time equivalent) is a measure of how many full-time employees a company has or how many part-time employees work the same amount of hours as a full-time employee. When you use FTEs, it’s simple to measure how well you’re doing at work, especially if you have part-time employees. You can contrast your staffing level with your competitors in your industry after converting part-time meters to FTEs. Additionally, FTE can benefit you in terms of making your work effort easier while calculating income, productivity, and profit per employee. If your employees put in 40 hours a week, it means they are employed full-time.

What Is the Difference Between FTE and Headcount?

FTEs are important for checking HR metrics and determining tax statuses for your business, but luckily they’re pretty easy to calculate on your own. Keep reading to find out everything you need to know about calculating FTEs and how to use them. In our example, the company gives all its workers the same four weeks off, but employees may have different benefits packages in some companies, which may change the FTE calculations. For instance, part-time employees may not receive as many days off as their full-time colleagues. In this example, your company has the equivalent of 5.24 full-time employees, or a 5.24 FTE. By this measurement, your four part-time workers amount to just less than one and one-quarter of a full-time equivalent employee.

  • The annual working hours of your workforce can be added up and divided by 2,080 to determine FTE.
  • In this article, we will explore the meaning of FTE from a U.S. perspective, how it is calculated and the purposes of doing so as an employer.
  • Suppose a company currently has 50 full-time employees on its payroll, along with 10 part-time employees.
  • By adding the full-time and part-time hours worked, we can calculate the total number of hours worked by all employees for the year as 109,000.
  • Full-time equivalent employees are people who work the entire workweek—eight hours per day, five days a week, totaling 2,800 hours per year.
  • The design phase might take 35 hours, the development phase might take 40 hours, and the testing phase might take 25 hours.

A recent project took 20 hours less than anticipated, so you need to adjust your staffing levels accordingly. You can calculate the FTEs required for the project by estimating how many hours each task will take and then adding them all up. FTE  refers to one full-time employee or the equivalent of a full-time employee. Yearly, a company generally considers an FTE to be valued at 2,080 hours.

Maximizing Your Time: The Power of Understanding FTE

Now determine the number of hours worked by full-time employees over a given period. Full-time employees are those who work a minimum of 30 and a maximum of 40 hours a week and more than 120 days a year. As you can see from the example above, you can easily calculate how many full-time equivalent employees you need to hire to successfully complete a project. All you need to do is enter how many hours of work are required to complete the whole project (estimated time), and then how many hours a day your employees will work on that specific project.

  • Because the number of employees says nothing about a company’s actual work performance.
  • To convert an employee’s full-time equivalency into standard hours, multiply their FTE rate by 40.
  • It will help you plan your project work, set deadlines, and work out your budget.
  • For a business to manage their business efficiently, they need to know they have enough manpower to carry out the work.
  • Conversely, consider a business that has two employees working 60 hours a week each.

In our hypothetical scenario, our company has the equivalent of 52.40 full-time employees. To determine your eligibility for the small-business tax credit, you’ll need to use a different system for counting FTEs. First, count the total number of employees who worked at your company at any time during the year, both full-time and part-time. First, it is necessary to determine the number of hours worked by part-time employees. Based on an FTE of 1.0, we calculate employees work 2,080 hours per year. Furthermore, this value is used only as a basis for calculating the annual FTE and reflects the hours of an employee who works 5 days a week, 8 hours a day.

Why Calculate the Full Time Equivalent?

Full Time Equivalent is frequently used to assess an employee’s workload and its contribution to a project, or to track cost savings in a company. The definition of Full Time Equivalent in salary is necessary for accounting, as well as calculating the company’s costs while compensating its employees. This is how a company, on average, calculates the average yearly number of hours that a full-time employee works. Next, divide the above number by the ideal number of work hours for a full-time employee per month.

  • No, people who own the organization or company cannot be counted in the FTE and average annual wage calculation.
  • If each of these workers works 40 hours per week, then you are already meeting the FTE requirement.
  • For example, if your full-time employee is obligated to work only 30 hours a week, you should use that number in your calculations instead of 40, as in our case.
  • If a project manager has several projects at the same time plus several projects planned for the future, it becomes impossible to plan resources accurately without calculating FTEs.
  • Our model will then instantly calculate the Full Time Equivalent for you.
  • These rates will depend on the PTO accrual rate policies of a company, organization, or institution.
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