Full Time Equivalent FTE Definition, How to Calculate, Importance

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what is fte

According to OECD statistics on average weekly hours worked on the main job from 2021, Denmark has an average of 33.7 hours per week compared to Columbia and its average of 47.8 hours during a workweek. The US falls somewhere in the middle when compared to other countries, with 38.8 hours of work time per week, on average. A full-time employee who works 40 hours per week is equal to one FTE, and a part-time employee working 20 hours per week is equal to 0.5 FTE. Three of them work full-time (40 hours per week respectively) and the rest work 10 and 5 hours in total. Full-time equivalent remains one of the most helpful HR metrics for businesses.

Calculating FTEs will also determine an employer’s duties under the shared responsibility provisions of the Affordable Care Act. Identifying which employees are FTEs is essential for a number of reasons ranging from workforce planning to adhere to employment laws under 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 calculations are also important when determining eligibility for certain federal programs and benefits. An explanation of how FTE is calculated and the various ways in which a business can use this metric when forecasting and budgeting.

How To Calculate FTE?

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. If an organization considers full-time to be a 40-hour working week then one full-time employee will count as 100% FTE. 100% FTE can also be achieved in several other ways, for example, through two part-time employees (who each work 20 hours per week) or four employees who work 10 hours per week.

Once you’ve calculated your employee FTE, you can see how many part-time employees it takes to complete the same workload as a full-time employee. It could be more beneficial in terms of finance when it comes to paying new part-timer employees for a project rather than overpaying already fte meaning existing full-time workers. EFT can help a company discover these kinds of budget-friendly solutions. Increased employee morale typically translates into increased productivity and performance, allowing a larger number of employees to complete the same amount of work with fewer FTEs.

Step 3: Sum Up All the Work Hours

Staffing levels can have a significant impact on workers’ happiness and health because fewer hours spent working and fewer worries about getting everything done may result. Staff expansion has the potential to improve teamwork and morale by making it simpler for employees to work together. 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. Of course, not every full-time employee works for 40 hours a week and 52 weeks a year because of sick leaves, vacations, holidays and time-offs.

What is a FTE employee?

The calculation of full-time equivalent (FTE) is an employee's scheduled hours divided by the employer's hours for a full-time workweek. When an employer has a 40-hour workweek, employees who are scheduled to work 40 hours per week are 1.0 FTEs. Employees scheduled to work 20 hours per week are 0.5 FTEs.

Depending on the size of your business, you may get by with just one or two people with very flexible schedules, while everyone else is primarily fixed. Once you’ve been in business for a while, you should have a good sense of seasonal highs and lows at your business. Depending on your needs, you can hire more employees or adjust hours for current employees to maintain an optimal ratio for that period.

What Is a Full-Time Equivalent (FTE)?

In this case, two part-time workers would count as 1.0 FTE, and four part-time workers would count as 2 FTE. Various combinations can be created depending on the needs of the business. Full-time equivalent, or FTE, measures the total amount of full-time employees working at any one organisation. It is a way of adding up the hours of full-time, part-time and various other types of employees into measurable ‘full-time’ units. You can also use an FTE calculation to determine the appropriate pay for part-time workers. To identify the FTE for a specific part-time position, just divide the number of hours worked by the employee by the number of hours considered for a full-time worker.

After a few weeks of business, one of your part-time workers quits, citing another opportunity. You decide to offer their hours to the highest-performing part-time employee, who accepts, becoming a full-time employee. You’re still paying out the same 7 FTE for non-managerial staff, but your exact proportion of hours within this framework is flexible. A typical full-time schedule is 40 hours per week, 52 weeks per year, which totals 2,080 hours. So, in this case, you would add up all employee hours for the year and divide by 2,080. If your company considers 35 hours full-time, then you would adjust your calculation accordingly.

What is Full Time Equivalent (FTE)?

It makes the life of every project manager easier by avoiding tons of manual work. Sign up to Wobbly, the time tracking software, for free, and you will test all the benefits of our tool. Managing employees, time tracking, overtime, and time-off data in disparate systems is complicated. Join us on this webinar case-study to see how Vimeo was able to leverage the BambooHR and Boomr integration to simplify their workforce management and streamline their processes.

  • Because with FTE, your determinant in the equation is the total full-time working hours.
  • To identify the FTE for a specific part-time position, just divide the number of hours worked by the employee by the number of hours considered for a full-time worker.
  • Through this, you can identify the needs and internal capabilities of your employees more easily, as well as exercise more strategic management.
  • For all intents and purposes, your business requires 4.25 employees to function.

The list should contain the names of your employees as well as the full number of work hours for a single week. Try to include employee leave (both paid and unpaid) in the overall number of work hours to make your results more accurate. A single full-time employee represents an FTE of 1, while part-time employees have a 0.5 FTE (or half that of a full-time worker). Just indicate how many employees work at your company, how many hours they work a week, and for how many weeks. Our model will then instantly calculate the Full Time Equivalent for you.

The PPP is an SBA program (Small Business Administration) that helps preserve a business in times of crisis. The total FTEs number is used to calculate the loan that borrowers are eligible for. To calculate the FTE metric, find the average number of FTEs per month from two different time periods (February 15, 2019, to June 30, 2019, or January 1, 2020, to February 29, 2020). The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours. Within this method, the employee is credited with 40 hours for each week when payment was due (including PTO).

what is fte

Full Time Equivalent (FTE) refers to the unit of measurement equivalent to an individual – worker or student – one unit of a work or school day, applicable in a variety of contexts. In most cases, full time equivalents measure an employee or student and/or their workload. To identify the FTE for part-time positions, divide the total number of part-time hours worked by the number of hours worked by one full-time worker. In our example, we will divide the total hours worked by Employees D and E by the number of hours worked by Employees A. Calculate the FTEs by determining the number of hours worked by full-time or part-time employees in a year. To do this, multiply the number of weeks in a year with the number of hours for a full-time position.

Independent contractors are not the same as employees, and the U.S. government has strict standards to reduce how many companies misuse contractors as laborers without paying the appropriate taxes and benefits. It is important to remember that this computation assumes that all FTEs work full-time hours with no overtime or extra hours. In this example, a person earning $50,000 per year and working 40 hours per week would have an FTE wage of $24 per hour. Increased accountability means being able to measure and keep track of how productive and efficient employees are.

  • It will help you plan your project work, set deadlines, and work out your budget.
  • The 109,000 total hours worked must be divided by the total number of available work hours in a year, or 2,080 hours.
  • Let’s say you have 100 employees, but 18 of those employees are part-time and only work 10 hours a week.
  • All the above-mentioned factors end up costing the company something and affecting its bottom line.
  • If a company considers 40 hours per week as the basis for a full-time position, then anyone working an amount of hours below this range is considered a part-time employee.